Big Bear Bummers

I keep warning sellers that waiting around for a miracle is a dangerous game. While recent buyers are understandably sensitive about pricing as they desperately try to minimize their losses, long-time owners with tons of equity don’t give a hickory-smoked shit.

And those are the people setting the comps.

In this case, the sellers of Unit #10 just let theirs go for $435,000 – a huge discount from their initial asking price of $500,000. But since they bought in 1988 for just $225,000 they could easily afford to take that kind of a haircut. It’s all gravy anyway so who cares?

Unfortunately, now the other desperate Viking Estates sellers have to contend with a comp in the low $400,000s. For anyone still on the market in that building it must be like a bomb went off.

And where does that leave our featured seller in Unit #26? Up a creek without a paddle. Still begging for $510,000, they now have to explain to every potential buyer why their place is worth $75,000 more than the last comp.

I’m sure some would point out that Unit #10 is in pretty much original condition and doesn’t show as well as our featured seller’s condo. And that’s a fair point. But keep in mind that 75 grand can buy a whooooooole lot of carpet and countertops.

Again, if recent buyers want to sit around and wait for their unicorn buyer to come along or the Fed to suddenly slash interest rates, that’s their prerogative. But they need to be aware of the very real dangers of a neighbor who has the headroom to undercut you to make a deal.

******************ORIGINAL POST******************

Address: 39802 Lakeview Dr #26, Big Bear Lake, CA 92315

Redfin: https://www.redfin.com/CA/Big-Bear-Lake/39802-Lakeview-Dr-92315/unit-26/home/3490702

Beds/Baths: 2 bed, 2.5 bath, 1,574 squares

Purchase Price (8/2022): $560,000

Asking Price: $510,000

Difference: -$50,000

Commission (5%): -$25,500

Total Gain/Loss: -$75,500

I need to reiterate how much I LOATHE when people rip out perfectly good kitchen cabinets in favor of open-air shelving.  Setting aside the absolute hell it would be to deal with constant dust issues, aesthetically it just looks cheap and ugly. 

Speaking of dodgy choices, I am shocked that massive hole next to the stairs passed the city inspection for rentals. 

But I have to say this place looks really tidy with nice updates.  I wish I could give the sellers credit, but it appears the previous owner did the majority of the work.  Looking at the 2022 listing photos you can barely see a difference, down to the furniture (probably bought it from the previous owner, which was smart). 

2022 Listing:

2024 listing:

They even kept the same framed artwork on the fireplace mantle!

The 2022 listing also shows our seller put a little mustard on his offer to close the deal at $560,000.  Although they only overpaid by a modest $10,100, it shows how irrational exuberance was still alive and well in Big Bear at that time.  Sadly for sellers, those days of paying over ask are long gone.

Since the seller didn’t invest much of their own cash into fixing the place up, that will lessen the pain when they finally find a buyer. 

Speaking of that, we need to give the seller credit for admitting there is no way they will get out of their “investment” without a significant financial hit.  Staring down a $75,000 loss right off the bat is pretty brutal but at least they will get some of their $112,000 down payment back.  Enough to buy a base model Corolla? 

But as always there is one big assumption built into my loss calculation – that the property sells today for full asking price.  I hope for their sake they get lucky, but it’s not looking good.

With inventory from other pandemic-era buyers piling up, this seller needs to get aggressive NOW if they want to avoid incinerating their entire down payment.  Frankly, I think they need to cut the price by five percent today and keep cutting until they get reasonable offers.  But if they are following the Pandemic Purchase Playbook (PPP) that means they will stick to their guns and dole out the occasional 1-2% price reductions to keep the listing fresh on the Redfin and Zillow feeds, hoping for a unicorn buyer to swoop in and minimize their losses. 

Unfortunately, by the time they realize they should have been cutting early and often, the Super Summer Selling Season^TM will be upon them with even more sellers competing to get rid of their Big Bear Bummers.  As it stands, it looks like their entire down payment will vanish unless they get super lucky and find a buyer today willing to pay full ask.

Are you that interested buyer?  Here is what you are looking at:

Purchase price: $510,000

Down Payment (20%): $102,000

Monthly Payment: $4,168/mo (@7.5%)

The good news is that hefty monthly nut includes the $650 HOA fee, which likely covers most of your insurance.  And you can always reduce your monthly expenses by renting it out on AirBnB – it certainly looks ready to go. 

But if your rental income assumptions are too high then you’ll end up like this poor schmuck trying to offload to a greater fool when your brilliant plan doesn’t work out.

I actually really like this place and am hoping they see the light and cut the price very soon.  Yes, it will suck to lose their entire $115,000 down payment after less than two years of ownership, but it sure beats having to write a check for tens of thousands of dollars on top of that.