Sunday, September 11, 2005

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of the house is not "charming," in fact the walls are badly painted, the hardwood floor is damaged, the kitchen is outdated ( not granite), and the upstairs bedroom looks terrible.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


  1. That house is a POS. I can't believe it is even more than 250K.

  2. Using the historically standard 28% of income for housing costs this small, outdated POS would require a household income of almost TRIPLE the national average....It will never cease to amaze me, what are people thinking.

  3. I'd have to agree with both posters - half a million bucks for that house is unreal!

    As a matter of interest, what would you consider a realistic price of this house to be, bearing in mind its location from the Beltway, etc.

    Enjoy reading your blog, David. I like your writing style, creativity and flair.

  4. There have been a lot of houses in that area of the neighborhood purchased by contractors and had new larger homes built on the plots of land and were sold even with the asking prices of 600K or more.

    That will probably happen to this house, whenever the price drops low enough - not that I know what that price is. The land is worth a lot since it is so close to DC, Metro, 495, etc. and the area is flurishing with new fancy stores. With the right kind of house built on the land a contractor can recoup the money spent and make a profit.

  5. Thanks for the compliment. Anon is right, an investor may very well come in and buy the house. Put in 70K of work and then try and sell it for 650K. It might work.

    A realistic price would be 440K. If they lower the price to that amount they should be able to sell the house relatively shortly.

  6. skytrekker,

    Not far off. "Year Built: 1943"

  7. That is a great story. Thanks so much for sharing.

  8. I pulled the listing, and sadly, there is no virtual tour so I can't see the crappy interior for myself.

    The original price, per the listing, is $545,000 which means it's reduced just over 10%.