Big Bear Bummers

Address: 779 Villa Grove Ave, Big Bear City, CA 92314

Redfin: https://www.redfin.com/CA/Big-Bear-Lake/779-Villa-Grove-Ave-92315/home/4117951

Beds/Baths: 3 bed, 2 bath, 1,274 squares

Purchase Price (10/2021): $785,000 (OUCH)

Asking Price: $675,000 (DOUBLE OUCH)

Difference: -$110,000

Commission (3%): -$20,250

Total Loss: -$130,250

Oof, this is going to hurt.

I have to give them credit for admitting up front that a sale at this price is going to cost them dearly. It’s too bad they can’t just hang on until the market improves, but clearly they are having severe financial troubles if they are willing to light $130,000 on fire just to get rid of this place.

And it’s a nice place! Not much of a cabin vibe, but I dig the cool mid-century look.

Keep in mind their down payment was $157,000. If they drop the price to, say, $650,000, pretty much all of that money is gone. Poof. And if $625,000 is the magic number to close a sale, they will have to write a $25,000 check on top of that to avoid a short sale.

And these loss calculations assume they only have to pay their agent’s commission and there are no seller concessions. From where I’m sitting, the odds of them getting out of this mess with any of their down payment are slim and grim.

Speaking of grim, this part of the listing description caught my eye: “Home has been a very successful Airbnb but would make a great second or full time home.”

Remember, they are willing to eat ONE HUNDRED AND THIRTY THOUSAND DOLLARS to get out – clearly it wasn’t that successful as a short-term rental. So, if you’re planning to buy this place and supplement the mortgage with Airbnb income, keep in mind this dude couldn’t make it work. Do you think your experience will be any different with a nearly identical mortgage payment? Good luck with that.

And what does the monthly nut look like for a new buyer?

Asking price: $675,000

Down Payment (20%): $135,000

Monthly Payment: $4,476/mo (@7%)

Whether that’s a good deal is up to you, but $530 per square foot seems pretty dear given the steep competition in Moonridge.

For example, this property right down the street is only asking $525,000 and it’s pretty nice:

https://www.redfin.com/CA/Big-Bear-City/1070-Minton-Dr-92314/home/4118845

And this place, albeit a little rougher around the edges (the kitchen especially, woof), is struggling to get $489,998:

https://www.redfin.com/CA/Big-Bear-City/1065-Minton-Dr-92314/home/4118056

Sure, those two properties are down a bedroom and about 100 square feet, but our seller is asking $150,000 to $175,000 more!

What about three-bedroom homes? This $449,000 listing looks pretty crusty, but the $225,000 in savings would sure make for a nice renovation budget:

https://www.redfin.com/CA/Big-Bear-Lake/800-Plumas-Ct-92315/home/4118016

From a seller’s perspective, you never want to be the most expensive listing in the neighborhood. You have to constantly justify your price to increasingly picky buyers and convince them your premium is worth it. And highly payment-sensitive buyers can find any reason to conclude your price is a total rip off and move on.

But what choice do these sellers have? They overpaid at the top of a housing bubble. If they cut the price any more they’ll lose their entire down payment. If they need to discount any more than that, they’ll have to write a check at closing. And if the market demands even more cuts to be in line with nearby comps, they’ll have to beg the bank for a short sale or simply wave the white flag and hand the keys back.

It’s not a good situation.

Although I understand why they priced it the way they did, buyers don’t care how much you paid or how much you’ll lose – they only care about their monthly payment. And I don’t think there are too many buyers lining up to pay $4,500 a month for this place when there are much cheaper options right down the street.

I wish these sellers luck. There could be more price cuts and financial pain in their future.