Big Bear Bummers

Address: 421 Oriole Dr, Big Bear Lake, CA 92315

Link: https://www.redfin.com/CA/Big-Bear-Lake/421-Oriole-Dr-92315/home/161221164

Beds/Baths: 3 bed, 2 bath, 1,424 squares

Purchase Price (2/2022): $807,000

Asking Price: $799,999

Difference: -$7,001

Commission (3%): -$24,000

Total Loss: -$30,001

Most sellers we feature are in total denial about just how bad the market is right now. In their obliviousness, they employ a variety of price themes that don’t reflect reality. Here’s a typical example of a seller’s journey from Abject Denial to Rueful Acceptance:

Today’s seller skipped the Wishing Price and Washing Price and jumped right into Only Fees.

In April 2022, these goobers saw the $770,000 asking price and decided overbidding by $37,000 was a smart move. Getting caught up in this bidding ward turned out to be a grave mistake, although it took them way too long to finally accept it.

Just a month after their purchase the Fed started jacking up interest rates, which rapidly cooled the market for second homes. In fact, the Big Bear market largely came to a screeching halt. But rather than listing in 2022, 2023, or even 2024 to salvage what they could of their down payment, these sellers waited (and waited) for “things to get better.”

Unfortunately, things only got worse and they finally listed this year for $799,999 – just $7,001 less than they paid roughly three years earlier. Assuming they can find a buyer at this stunningly optimistic price, they will eat a modest loss of $30,001 – which is mostly their realtor’s fees.

I give them credit for acknowledging up front that a profit is off the table, but I seriously doubt their losses will be limited to just sales commissions. To get a deal done they will most certainly have to give up a big chunk of their down payment as well.

The good news is this place looks pretty clean.

But is the current asking price reasonable? Let’s crunch some numbers:

Purchase price: $799,999
Down payment: $160,000
Monthly nut: $5,305/mo (@7%)

That is a pretty hefty payment and I have a feeling that asking price is going to have to come down considerably to attract a buyer. After all, this chump couldn’t make it work at $807,000 with a 4% rate, but wants to convince buyers that they can swing $799,999 at 7%.

Good luck with that, pal.

Look, I understand sellers’ psychological aversion to selling for less than they paid – it’s hard to admit you messed up. Especially after a decade of rampant price appreciation in almost all corners of real estate, it’s even more difficult to acknowledge that not only will you miss out on the big profits you were promised – you’ll actually lose a ton of money.

So underwater buyers stick with unrealistic prices to avoid the ego hit of having to admit they weren’t as smart as they thought they were.

Which is why we see so many properties languishing at “Washing Prices” – prices designed to let the seller essentially break even. For some reason many people don’t view sales commissions as “real” losses – just a transaction fee – so the asking price is such that they will ONLY come out of pocket for commissions, but extremely close to what they paid at the peak.