Big Bear Bummers

Hey thanks for sweeping up! It’s not like you’re asking half a million bucks for this place.

Address: 864 Elm St, Big Bear Lake, CA 92315

Link: https://www.redfin.com/CA/Big-Bear-Lake/864-Elm-St-92315/home/4115080

Beds/Baths: 1 bed, 1 bath, 620 squares

Purchase Price (7/2023): $515,000

Asking Price: $499,000

Difference: -$16,000

Commission (5%): -$24,950

Total Loss: -$40,950

Imagine being the sucker who paid $515,000 for a one-bedroom, 620 square-foot cabin last year. Oof.

By July 2023 mortgage interest rates were already in the sevens and sales in Big Bear had slowed considerably – what possessed them to pull the trigger at that exact moment in time? There must have been some serious FOMO (Fear of Missing Out) going on because $830 per square foot made no sense whatsoever.

Anyway, our seller pretty quickly realized their mistake and just nine months later listed their albatross for, you guessed it, $515,000.

“Surely my cabin hasn’t lost any value since I purchased! I have it on good authority that real estate only goes up!”

Man, that initial asking price was a sign of some deep denial.

It took three long months for them to finally swallow their pride and make the first price cut, and even then it was a measly 16 grand. And now they wait for a magical buyer to come along and bail them out of their unenviable situation.

Assuming someone with more money than sense comes along and pays full price, our seller will eat about $41,000 for their little cosplay experiment as “real estate investors.” A ruthless and expensive life lesson.

This part of the listing caught my eye:

“As an added bonus, there is an additional adjoining lot of 2,500 sq ft with its own parcel number and address…”

Oh wow! Now the $499,000 asking price doesn’t sound like such a rip off!

“..available for purchase, making this a 7,500 sq ft lot.”

Wait, it’s only “available for purchase.” And from whom? The seller? Some rando down the street? The listing description is silent on this, but I have to assume the seller owns the adjacent lot otherwise it would be very odd to mention it.

“The adjoining lot provides an opportunity for expansion or customization, making it a valuable investment.”

If the seller does own the other lot, then it makes me wonder why they didn’t take advantage of this “valuable investment” opportunity themselves.

The listing description is weird in that it is written as if this cabin is some stunning gem the seller isn’t desperately trying to offload for a major loss.

“This exquisite and turnkey home is not just a dwelling but a retreat from the everyday hustle, but also a profitable vacation rental.”

If this was such a “profitable vacation rental,” why on earth would they get rid of this incredible money printing machine?

Answer: Because with just one bedroom it makes for a remarkably unattractive short-term rental and they know it. They couldn’t make short-term rentals work but now they’re bullshitting you about your ability to do it despite carrying a similar monthly nut.

Speaking of the monthly nut, here are the basics for a new buyer:

Purchase price: $499,000

Down Payment: $100,000

Approx. Payment: $3,423/mo (@7.4%)

This price is just not going to happen. I get that it has “only” been listed for 94 days, but there is a ton of competition in this little pocket of lower Moonridge – 23 homes to be exact.

I want you to close your eyes and think about the neighborhood you live in. Now picture TWENTY THREE HOUSES FOR SALE NEARBY. That would seem crazy.

Now imagine 23 properties for sale in an area covering LESS THAN A SQUARE MILE…that is straight up armageddon! These fools have no idea how bad things are going to get.

Each of the sellers on that map are just as deluded as the next, praying to the Price Discovery gods that they’ll get top dollar before an equity-rich, longtime owner cuts bait and sets a new, devastatingly low comp.

So as a recent buyer do you discount the price quickly and take a big loss just to end the misery, or do you slow roll your price cuts for months while dreaming about a miracle buyer, only to risk taking an even bigger loss down the road?

I’m sure that difficult decision is keeping lots of sellers up at night.