Questions on Selling FSBO condo in Northern CA

[honobob]

I do think this real estate environment is unprecedented... never have we seen such high valuations relative to inflation. There's no historical precedent for the kind of prices we're seeing, so no reason to think it will go "like it has worked in the past".

free4now I had to respond to this. I'm about 25 miles from SF and bought early 1986. My home doubled in value in 2 years in the 80's. Doubled again from 97 to 99 and doubled again between 2002-2006. Prop 13 voted on in 1978 was the result of fantastic appreciation in the 70's. I've averaged 11% increase each year in the 20 years I've owned.

My Honolulu property bought in 1978 averages 9% appreciation (even with a good 10 year flat period) and properties I bought in Hono 2003 & 2004 have appreciated 25% each year! I expect them to level out at 9% and possibly do better as I believe the world conditions are going to make Hawaii even more desirable for American vacationers.

I have friends who sold in the Bay Area in the 90's who now wish they never sold because they cannot afford to return. Most equity immigrants know that they can never afford the Bay Area again.

Guessing you paid $250K with 20% down and probably would rent with about $5K negative a year you would still be earning about 80% a year on your money! And the state of CA is giving you a $3-4K property tax break a year. If you pull out $300K on the sale the interest on that would barely cover the rent on a studio in the City.

I am contemplating moving into the City if I decide not to retire soon but I realize I may not like the weather/noise/lack of parking/street people. I would suggest renting your place for at least a year to decide if the City is for you. It sounds like you have the ability to deal with tenants since you have a roommate. Why not just get him another roommate?

Just my 2 cents.

You've gotten some great advice from other posters. If you're determined to sell now I'd definitely use the best Realtor you can find. Prior to that I would see if any of your neighbors are looking to be better located in the complex if you really think your place is more desirable. My neighbor used to own my house but bought next door because it has a larger yard and I know alot of movement happens in desirable condos between neighbors. Plus I would reccomend "pergo" style floors (really cheap now and easy to install)instead of carpets and possibly having your wall to wall cut down and bound as area rugs if you could get some nice pieces out of them and include them in the sale.

Good luck!

 

[tryan]

"pergo" style floors

Good call over concrete. By armstrong makes a better product ... pergo seams lift when exposed to water.

 

[cute fuzzy bunny]

Yep, consumer reports rated the expensive brand name pergo dead last in one of the recent tests I saw.

Its a good idea to seal the concrete with a latex concrete primer before putting the pergo down, even if its got the foam cushion thats allegedly a 'vapor barrier'.

Costco and sams club have a pretty inexpensive variety, a little over a buck a square foot. At that price you can replace it 3 times for the cost of one install of the more expensive faux wood.

 

[Brat]

Check out Lumber Liquidators, if they are available to you. The offer both laminate and solid wood flooring, pre-finished. The have a nice bamboo that is laminated vertically. Frankly the bamboo would be the best choice for your situation.

I agree that the concrete needs to be sealed. Also the concrete slab cracks/crazing needs to be filled to stop ants and moisture coming in from below before sealing. Sealing does no good if the crazing/cracks aren't fixed first.

 

[tryan]

I did a cork floor over concrete (after sealing with Tompson's Water Seal). Been great so far ($4-5/sq ft though).

 

[cute fuzzy bunny]

Your other option would be to seal the cracks, grind any high spots off with a concrete wet grinder (looks like one of those big floor buffing tools and you can rent them), and lay a 1/4" plywood sub floor. It'd cost you a bit but then you could put any flooring you wanted down over the plywood sub floor.

I saw some really cool sub flooring material 2 years ago when I was doing my wifes old house. Interlocking plywood squares with a rubber backing and a whole bunch of rubber 'dots' on it. Supposedly superior insulating and water resistance capabilities and it makes a 'soft' floor to walk on, even if you face it with tile.

 

[free4now]

Funny just today an realtor I had over suggested pergo for the kitchen where the concrete crack is spreading the tiles. That's a definite possibility but I can't do it until the HOA deals with the crack. I'm beginning to wonder if it would be kosher for me to just fill the crack myself... technically it's the HOA that owns the concrete so I suppose they could sue me for vandalizing community property, but that doesn't seem very likely. And the likelihood of the HOA getting the crack resolved in a timely manner is incredibly low.

I found some carpeting for $2.50/square feet that looks quite decent, so I'll probably just use that for the living room, dining room, and bedrooms.

I've had two realtors over so far, one a discount but full service broker from help-u-sell who would do it for a 4.2% commission, and one from Cashin (a local RE brokerage) who would do it for 5% commission. They both will reduce their fees by 1% if they represent both the buyer and the seller. The Cashin realtor did have that bulldog mentality that I want... when she heard about the crack she was getting ready to bully the HOA herself.

At this point my plan is to get the place looking really nice by mid to late March. Then for a few weeks do a final round of RE agent interviews while I see if I can get anyone to buy it FSBO.

 

[free4now]

free4now I had to respond to this. I'm about 25 miles from SF and bought early 1986. My home doubled in value in 2 years in the 80's. Doubled again from 97 to 99 and doubled again between 2002-2006. Prop 13 voted on in 1978 was the result of fantastic appreciation in the 70's. I've averaged 11% increase each year in the 20 years I've owned.

No question history has been good to CA property owners. But I think anyone expecting anything near 11% yearly compound appreciation going forward is going to be sorely disappointed.

Guessing you paid $250K with 20% down and probably would rent with about $5K negative a year you would still be earning about 80% a year on your money! And the state of CA is giving you a $3-4K property tax break a year. If you pull out $300K on the sale the interest on that would barely cover the rent on a studio in the City.

I have no idea what you mean by earning 80% a year on my money by renting the place out. And my original mortgage is not relevant to the rent/sell decision. Here's a simple cash flow analysis of the rent/sell decision:

If I were to take out a 6% 30 year fixed mortgage on the full value of the property, my mortgage payments would be roughly $3300/month. Add $300 in prop taxes, $360 for HOA dues, and $300 for maintenance, and the monthly carrying cost is $4260. The market rent is roughly $1900/month, and so to account for vacancy periods and rental marketing costs lets say I could clear $1660/month from the rent. That means I would lose $2600/month by renting. I'd have to count on 6% appreciation per year to break even, and would need more to actually get some profit. And I'd have to take on the risk of the property declining in value.

 

[tryan]

Yup ... when rentals can be had for HALF the carrying costs of ownership, something has to give.

Put your seat belts on!

 

[honobob]

No question history has been good to CA property owners. But I think anyone expecting anything near 11% yearly compound appreciation going forward is going to be sorely disappointed.

Exactly what people said in the late 80's. 90's and mid 00's! Wrong, wrong and again wrong. What is going to happen that will negate decades of actual returns? Now even I questioned in the early 80's if people would ever pay $250K for a 1 bedroom condo. If you think the market is tanking try to buy a 1 bedroom in the City for under $700K





I have no idea what you mean by earning 80% a year on my money by renting the place out. And my original mortgage is not relevant to the rent/sell decision.



I guesstimated a 50K downpayment and 5K negative rents, conservative appreciation of 8% on $550K value gets you a 80% return.


If I were to take out a 6% 30 year fixed mortgage on the full value of the property, my mortgage payments would be roughly $3300/month. Add $300 in prop taxes, $360 for HOA dues, and $300 for maintenance, and the monthly carrying cost is $4260. The market rent is roughly $1900/month, and so to account for vacancy periods and rental marketing costs lets say I could clear $1660/month from the rent. That means I would lose $2600/month by renting.



From earlier posts you said you had $270K mortgage balance. 6% Pi is $1618+280t+15i+380HOA equals $2293minus 1900rent. So you're negative $393mo /4716yr. My guess of 5K was pretty close. I think $300mo for maintenance for a condo is extremely high and everything in my area rents immediately so I think your vacancy amount is high also. I think in an earlier post you also said you were paying down principle of over $400 month so you're actually ahead!

If you sell: $550-30selling costs-270mort=$250K cash in hand at 6.25% is $15,625 immediately losing ground to inflation.

Since you are so young, staying in the area, and don't seem to need the cash now I do not see any financial advantage in selling now! I would say you are throwing money away unless you truly believe your property is going to suffer a decline of the magnitude that probably has never happened since 1906.

Again just my 2 cents. And I do realize that there are non financial reasons why people sell.