REAL ESTATE: Richmond example

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And the walls, they came a tumbling down.

Tuesday, September 18, 2012
In our last post we brought you Richmond realtor James Wong’s September Real Estate Market Report.

Wong told us that: 

The lack of buying activities and large number of listings continues to exert pressure on home sellers to cut their prices in order to sell their homes. There are many more homes listed at or below their city assessment values. Homes that were sold were ones that aggressively cut their prices, or were sold by sellers who accepted low-ball offers.
Chilling news.
 
And if you had any doubts about the accuracy of Wong’s take on conditions, one has only to look at recent Richmond real estate transactions for confirmation.
 
Transactions like this one.

This is 7920 Shackleton Drive in Richmond which sold this past week (click on images to enlarge).

Billed as a 4 bedroom, 2.5 bathroom, family home, it’s 2000 sq ft plus floor plan was hailed as spacious and well kept.  High vaulted ceilings in the living room,  double car garage, good sized east facing backyard and it’s location close to Richmond dyke’s were all contributors to a property assessment by the BC Assessment Authority as a million dollar home.
 
Assessed value of $1,010,000 to be exact.
 
And how did this million dollar home fair in a milieu Realtor James Wong described as so dire that “the only way out of this market is to cut prices… not just 5%, but with much deeper cuts of 10% to 15%?
 
Exactly as he described.

Instead of asking above assessed value, the sellers recent ask price didn’t even come close to assessment value.

Here you can see this single family home being flogged for $849,000:

And with that discount not working, the asking price was slashed again… this time to $799,000.
As we said, 7920 Shackleton Drive sold this past week.

We are told the final price was $765,000 (hat tip VMD and gokou3 on VCI).

 
From an assessed value of $1,010,000 down to $765,000.
 
In the words of James Wong, “A real estate down cycle is already in motion. Even a small percentage of these sellers having to slash prices to sell will result in prices cascading downward. Early sellers would consider themselves the smart ones, cashing out long before others.”
 
That cascade has now begun.

The only question now is – how many will be smart enough to cash out before the crash begins to pick up speed in earnest?

The seller of this million dollar home might get $750,000 now… but in a few months they might well be lucky if they fetch much more than $650,000.

It’s all a question of how quick sellers will stampede for the exits? For in this game… holding out might mean you might only be able to get $550,000 by next Summer.

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COMMENT:
Good comments above.
(BTW this house is in West Richmond near # 1 RD and Blundell ).
The property has finally sold at a discount of approx. 25% from assessed value.
Now, did the sellers lose approx. $250,000 ? Potentially yes….but that is based on trying to time the market at the peak. However peak price is still based on a hot market and just enough supply…..or else if everyone sold then the market is flooded.
If one looks at the info, the 2,000 sq ft. house was built in 1986, and is on a 4,000 sq ft lot. That is not very big. The home is over 25 years old. However it has the original owner, which would imply that they bought it much cheaper at the time  so they can “afford” to cut the price.
BC Assessment is supposed to assess properties based on comparable sales, so it appears that people were recently paying over $1 Million for these small homes on small lots.
Now, the neighbours are probably upset, because the whole thing now unwinds. Neighbours will say now they have lost value…but the owner probably did the classic move of chase the market down. ie Take a bigger price cut to attract attention before you lose the chance and others start the same moves.
Also keep in mind there will, demographically, be a lot of people in the same situation,..a paid off home bought years ago, not speculators or investors,  and want to sell and cannot wait.
Even moreso, wait till we get our next Assessments in late December. I can imagine this will be an absolute nightmare with a collapsing market and trying to pin a value on a property,like trying to nail jello.Human nature is that in a rising market people accept it, but in a collapsing market, people will scream bloody murder re: the dollar losses. I had a strong feeling that BC Assessments 2012 evaluations would cause a Pig Out at City Hall re taxes….which occurred.
Boy, is this going to get interesting.
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