Big Bear Bummers

Address: 42756 Castlewood Rd, Big Bear Lake, CA 92315

Link: https://www.zillow.com/homedetails/42756-Castlewood-Dr-Big-Bear-Lake-CA-92315/17390045_zpid/

Beds/baths: 5 bed, 3.5 bath, 3,665 squares

Purchase Price (7/2023): $1,145,000

Asking Price: $999,999

Difference: -$146,000

Commission (5%): -$49,950

Total Gain/Loss: -$195,950

Damn, this is going to hurt.

According to Zillow, our seller purchased exactly one year ago for a whopping $1,145,000. Less than three months later they tried to flip it for $1,270,000, a price that just so happened to cover sales commissions and carve out a nice little profit for all their “hard work.”

But after hearing crickets from buyers they embarked on an eight-month journey of chasing the market down…

$1,245,000

$1,200,000

$1,500,000

$1,099,999

$1,049,999

…each time hoping that would be the magic number to entice a buyer.

And today they’re begging for $999,000, representing a loss of nearly $200,000 – almost their entire 20% down payment.

The good news is, assuming this thing sells today they will be able to salvage about $30,000 of their down payment. So not a total loss, but still pretty excruciating.

But making matters worse is the appearance that our flipper spent a decent amount of money fixing this place up. At the very least it looks like new carpets, hardwood flooring, paint and possibly a new shower in the primary bathroom ($). I don’t know what all of that cost, but we can conservatively assume it’s in the tens of thousands of dollars.

They saved some cash by not springing for a refrigerator. I guess that’s the next owner’s problem?

They also saved a few bucks by reusing the outdated, almond-colored light switches and outlets.

The two-bedroom guest house is a major plus, and that kitchen even has a refrigerator!

_{Albeit one from 1989.}

I’m also loving those exposed fluorescent lights in the ceiling. Woof.

And sorry, there is no way this railless staircase meets code. I guess they’re making that the next owner’s problem too.

Speaking of the next owner, what kind of payment are they looking at?

Purchase price: $999,000

Down Payment (20%): $200,000

Monthly Payment: $6,793/mo (@7.3%)

Holy moly.

The market has made it clear that a million bucks for this place is not going to happen. So what happens if our seller has to drop the price to, say, $950,000 to find a buyer? Well, that would wipe out their entire down payment and they would have to cut a check for like 20 grand to avoid a short sale.

And if $950,000 won’t get the job done, then he’s left with only three unappealing options:

1. Keep eating shit on those hefty carrying costs (like $7,700 per month) in perpetuity until he can break even; or
2. Forfeit his entire down payment and improvement costs, ask the bank for a short sale to cover the rest, then pay taxes on the forgiven amount; or
3. Let it go into foreclosure and absolutely destroy his credit.

Notably, there is no option #4 where the Federal Reserve suddenly cuts interest rates, asset prices skyrocket again and every half-assed flip magically gets bailed out. I know that’s what lots of people are hoping for, but it ain’t happening.

There is no magic solution here. Recent buyers need to pick their pain.