Eric Helmuth, who contributes to Boston.com’s Boston Real Estate Blog Now Blog, recently closed on his purchase of a home in Arlington.

Coincidently, Arlington was the focus of a Boston Globe article on pockets of strength in the local real estate market.

Welcome to Arlington, which is enjoying its own housing bubble while many other communities in Eastern Massachusetts struggle with declining sales and prices. Despite spiking foreclosures and subprime sorrows nationwide, real estate in this suburb northwest of Boston remains freakishly hot. Prices are stable, activity is brisk, and frenzied behavior not seen since the boom years – deliberate underpricing to fuel bidding wars, multiple offers over asking price, tight deadlines for submitting offers – is often routine.

According to Mr Helmuth, he encountered this phenomenon when he and his partner were out, house hunting.

Overpaying is still dangerous. We also saw deliberate underpricing going on here, and in fact lost one house to buyers who paid about $20,000 over what the house was likely worth.

But, not everyone is weathering the housing market so well.

For instance, [A]sk the lovely people who sold our house to us. They took a $25,000 loss from what they paid for the place in early 2006. That’s a lot of money to owe the bank at closing, and we felt for them.

Yes, they did. The public record shows the previous owner paid $615,000 for the single-family home in March, 2006. The current owner closed for $590,000 in August, 2007.

Add in the commission the seller probably paid, almost $30,000, and the seller ended up losing $55,000 on the deal.

Now, two things.

First, the previous owners only closed on the purchase of this house, a year ago. While we would all hope (and/or, wrongly assume?) that real estate prices would increase every year from now until Armageddon, in reality, it’s just not so (was it ever?). We might more rightly expect an increase at the rate of inflation, which unfortunately was not the case, here. (It’s not clear where the buyers found the property or under what conditions the owners decided to sell; were they in a rush? Did they take the first offer that came along? Were they working without representation, which may have lowered the amount they ended up getting for the home but increasing the net proceeds?)

Second, the previous owners paid $615,000 a year ago, but put down $315,000, taking out a mortgage for $300,000.

So, while they lost $55,000, $55,000 of real money, they still have $245,000 to put toward their next home.

(** It appears that the old owners refinanced twice during the 16 months they owned the property (?!), so it’s unclear how much they owed on the property, when they sold.)

Or they can wait and put it down on RED at the Suffolk Downs International Hotel & Casino, sometime next summer.

Source: Arlington: the rules still apply – By Eric Helmuth, Boston.com

Also: Arlington is hottest place in Eastern Mass. – By Sacha Pfeiffer, The Boston Globe

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Updated: 1st Q 2018

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