Well, the good news is they avoided a short sale and can finally move on. The bad news is the seller had to light nearly their entire down payment on fire.
Assuming they only had to pay their agent’s commission of 3% (unlikely, but let’s go with the best-case scenario) this sale cost them a gut-wrenching -$71,400. They put down $88,000 in January 2022, so at least they walked away with something.
But man, that is one expensive mistake. Things just keep getting worse for 2022 and 2023 buyers.
And what about 2024 buyers? Is the new owner catching a falling knife? Considering they talked the seller down another $20,000 from their most recent asking price of $399,000, I’d say they gave themselves quite a bit of cushion for future declines.
But I have a weird feeling that the bottom is approaching. I don’t have any data to back it up – just a very strong sense after covering this market so intensely.
Either way, congrats to the new owners. Wishing them the best with their new mountain home.
************ORIGINAL POST BELOW************
Address: 40254 Mahanoy Ln, Big Bear Lake, CA 92315
Beds/Baths: 3 bed, 1 bath, 768 squares
Purchase Price (1/2022): $440,000
Asking Price: $399,000
Difference: -$41,000
Commission (5%): -$19,950
Total Loss: -$60,950
Eating $61,000 after just two-and-a-half years of ownership has to hurt. I feel bad for the seller and the position they’ve found themselves in, but I’m pulling for them because I deeply respect their decision to (eventually) accept reality. At this point they have emerged from the fog of denial and acknowledge this is going to hurt.
Our seller purchased in January 2022 for full asking price ($440,000) then in September 2023 tried to cash in for $495,000. But by then interest rates had already exploded to 7+ percent and the buying pool for second homes had largely dried up.
To the seller’s credit they quickly starting cutting the price, first to $455,000 then to $425,000. In February 2024 they pulled the listing and in July re-listed for $399,000, representing a loss of $61,000.
They are praying that’s enough of a financial sacrifice to nab a sale because they don’t have much more room to cut. Notably, if they reduced the price by just five percent to $379,000, their entire down payment would be blown to smithereens. That’s the floor, and the only pricing bullet left in the chamber.
And if $379,000 won’t get the job done and they have to cut even more to attract a buyer, then they’re in short sale territory and in an entirely different mess. But sadly I think that’s where they’re headed. I’m not convinced that a 768-square-foot cabin with just one bathroom can command $520 per square foot.
The kitchen, although clean, really highlights how cramped this place is.
Everything else looks pretty tidy.
A $60,000 loss after just 2.5 years of ownership is absolutely brutal. You could do a lot with that kind of scratch. In fact, not too long ago that kind of money could have bought you a cabin in Big Bear.
Specifically, this cabin.
That’s right: in 2014 this cabin was purchased for just 60 grand. Even if you account for inflation and convert that into today’s dollars, we’re still talking about $78,000.
Sure, back in 2014 it probably wasn’t as nice and didn’t have the updated bathrooms and kitchen, but the fact is that just a decade ago you could buy a tiny Big Bear cabin for under 100K. That’s just what they used to cost before rates dropped into the twos and vacation homes were considered “investments” and “small businesses.”
Obviously this place is worth more than $100,000 today, but how do you determine fair market value to protect yourself from catching a falling knife?
Frankly, you don’t. In the next few years you might be able to buy this same place for $250,000, OR maybe we’ve already hit the bottom and values will only go up from here. We won’t be able to pinpoint the bottom until years after the fact.
Which is why the most important thing is whether the new buyer thinks it’s a good value and they can comfortably afford the payments no matter what happens in the broader economy.
Here are the particulars:
Purchase price: $399,000
Down Payment (20%): $88,000
Monthly Payment: $2,732/mo (@7.4%)
If a new buyer has $2,700 a month to spare and is able to weather unpredictable economic shocks and further price declines, then they can just sit back and enjoy their micro cabin until values eventually continue their upward trajectory. No worries.
But if the new buyer loses their job, short-term-rental revenues unexpectedly decline, rising insurance costs become untenable or they simply can no longer afford a vacation home, they might also find themselves trying to sell in a declining market.
Smart buyers know this and are making offers accordingly. The problem is too many sellers are in deep denial about how bad things are, and how bad it could get in the future.
Big Bear Bummers 
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