Buyers Remorse Part III - Another Recent Crystal Cove Buyer Burned

[bluemove]

From  my Bluemove blog:

Lets say you just bought a nice home on 20 Timor Sea in Crystal Cove in July 2010 for about $5,500,000.

So far, so good, if you can afford to buy at that price. But read on and you'll discover how to lose over $400,000. Per month.

Anyhow, back to our history. July turns into August as months go by and sales slow even more in Crystal Cove.

Then your uphill neighbor, with a much bigger mansionesqe Crystal Cove home on 11 Currents, sells in October of 2010 for only $5,000,000. This is less than this home sold for in 2006.

Gulp. The 11 Currents sale is about 25% less on a per square foot basis compared to what was paid for 20 Timor Sea. That house on 20 Timor Sea is not looking so good now. A 25% decrease in value from $5.5 million is a loss of $1,375,000. In about 3 months. That's over a $400,000 loss per month. This is more evidence that the high end is declining........and that buyers need to be really careful - after the agents collect their commissions, it is the home owner that has to live with the transaction.
www.bluemove.blogspot.com

 

[bluemove]

Hang on to your hats because 16 Archipelago just sold for $3,650,000. 

16 Archipelago is a 5000 square foot, 5 bedroom home with a pool and breathtaking coastline views.  20 Timor Sea is a 5000 square foot, 4 bedroom home with a pool and breathtaking coastline views.  You can look at the listings and make your own conclusions, but these homes look darn similar to me.  This does not bode well for the value of the 20 Timor Sea home, in my opinion.....Dare I ask our real estate agent friends if 20 Timor Sea is now worth $3,650,000, a shocking $1,850,000 less than its purchase price of a few months ago???? 

 

[irvinehomeowner]

I wonder if people who can afford $5mil homes really worry too much about $2mil drop in value?

Did they buy cash... do they have a mortgage? Either way... it would seem they can afford it... unless they are financially troubled Hollywood stars (cue morekaos!).

 

[Talyssa]

well, most people in the position to buy 5million dollar homes don't get where they are because they don't care about spending money wisely.... then again thereare sone  people who get money handed down to them or high paying careers handed down to them (like every child-of-a-politician that starts their own lobbyist firm) and celebrities who got money via talent or willingness to take their clothes off or something and not through any particular business sense.... and I think those people don't care if they lose 1.5 million or well, actually, i doubt they have any idea what the house nearby sold for because they already have a house, why would they go look at that one?

 

[mogul]

@Talyssa: Exactly, have you seen Entourage?

 

[Talyssa]

nope, I watch very little television due to being unwilling to pay for cable or satellite.  So we only watch shows we are interested enough to seek out dvds/netflix/downloads for.

 

[bluemove]

I think most people would care about the money.

The real question is why aren't people talking about the real estate agents who "represented" buyers who paid too much?  Isn't the credibility of the buyer's agent fairly called into question?

 

[Talyssa]

I think most people would care about the money.

And you would be wrong - people buying at that level are a different breed, they probably SHOULD care but for the most part it really isn't as big of a concern.

The real question is why aren't people talking about the real estate agents who "represented" buyers who paid too much?  Isn't the credibility of the buyer's agent fairly called into question?

It is your agents job to help you buy what you want to buy.  It is not your agents job to give you financial advice.  Many of them are not qualified or knowledgable in that area anyway.  Do I think the agent should have said "you know this seems overpriced"?  Yes.  But you have no idea if they said that and the buyer said "thats ok, I want this property anyway".  Or of the buyer said "ok send them an offer you think is appropriate" and the agent did, and the seller countered wiht this amount, and the buyer went "thats okay, I'm willing to pay that amount and I can afford that."

In any kind of market, price for something is driven by the WILLINGNESS and ABILITY to pay for it and the ability to provide the thing at that price.  I honestly don't think its your agent's job to tell you NOT to buy something.  A *good* agent will tell you the downsides of making certain purchases ("the repairs will cost way more htan you think" "this is overpriced" "the market is still crashing and you will lose money on this purchase") but you have no idea in this case whether or not the agent told them those things or not.  All you know is that the buyer said "help me negotiate with the seller to buy this" and the agent said "aye aye captain".