A House in My Neighborhood

Today, I went to check out a house ( MLS ID#: MC5308496) for sale in my neighborhood. No, don't worry I am not actually considering buying this house.



It is located in Silver Spring, MD which is an inner suburb of Washington, DC. Previously it was listed at 519,00 but had not sold for a month. Now it is listed at 489,000., which represents about a 6% price reduction. The house is located on a quite street in a desirable neighborhood. The schools are pretty decent, it is 1 mile from the Beltway and 4 blocks from the train station ( metro). It is the cheapest single family house (SFH) in the neighborhood. It features:

• "Charming Exterior and Interior""
• "Three Bedrooms"
• "One Bath (room for more)
• "Quiet Neighborhood"
• "Three level living"
• "Central Air Conditioning"
• "Original six panel wood doors interior"

The interior of the house is not "charming," in fact the walls are badly painted, the hardwood floor is damaged, the kitchen is outdated ( not granite), and the upstairs bedroom looks terrible.

So will it sell at this reduced price in a reasonable time frame? Possibly.

I ended up chatting with the realtor.

Conversation 1:

Me: "Well at 489,000 your monthly payments on a fixed 30yr loan would be about 3,000 a month."

Realtor: "A bit less maybe 2,800. Or you could take out a crazy ARM."

Conversation 2:

A Women "We have a friend who is looking to buy but is concerned that when she may sell in five years the price won't be good because of the bubble"

Realtor: "She'll do just fine if she holds for five years."

Conversation 3:

Realtor: "This house is cheap. I might make an offer on the house if it doesn't sell soon"

Me: "What would you do with it?"

Realtor: "Rent it out for a while"

Me: "But the rent would not cover the mortgage."

Realtor: "How much do you think I could rent it out for?"

Me: "About 1800 a month."

Realtor: "More. It used to be rent out at 1850 a month about 1.5 years ago."

Me: "Okay you could rent it out at 2000 a month. That still does not cover the mortgage, taxes and maintenance costs. You would be losing hundreds of dollars a month hoping for future price appreciation"

Realtor: "There are ways to make it work."

Me: "Like what?"

Realtor: "I could split it into two and rent out the basement."

Me: "Is that even legal?"

Realtor: "I probably could get a permit. Or perhaps I could get one of those 1% ARM loans."

Me: "But then it would be a negative amortization loan."

Realtor: "Perhaps. Maybe I could renovate it and sell it for more."

Me: "Well it does need major work."

We chatted about other things as well. A pleasant individual. Many potential buyers walked through, but there was very little interest in the house due to the high price for a house in a poor condition.