Buyers Remorse in Top of World Part II

We've written about the sale of a home on Park Place and how the sale price of $1.62 million didn't compare favorably to some local homes that recently sold.

Well, hold on to your hats for what in my opinion could be a real estate disaster in the making, but first a little information on the Park Place neighborhood.

Park Place is a street of older homes in the family friendly Top of the World neighborhood in Laguna Beach. The homes were built in the 1980's and are well kept, but are hardly custom high end homes. Park Place is like a little slice of 1980's Irvine. If you are a higher end purchaser, this neighborhood will be disappointing. I'm not saying that is bad - I'm just sayin what's what.

Anyhow, back to the home on Park Place. We had earlier wondered why the buyer had paid so much for this home, given the low priced comps that were located very close by. Now, the buyer has put up the poles and ribbons that indicate a complete remodel. OMG, the buyer is putting MORE money into this home just like in the go go days of 2007!

Now, another close house on Park Place is for sale for $1.59 million. No big deal, right? Well, that home is 700 square feet bigger AND IT HAS A POOL. And it may not even sell for the listing price.  So that home on  Park Place is being offered at $457 per square foot. If you value the home sold on Park Place at that price, it is worth, gulp, only $1.295 million. And it doesn't have a pool. Subtract $100,000 for that, leaving you with a value of $1.195 million.

The buyer of the Park Place home took out a loan of $1,200,000 and therefore made a downpayment of $420,000. What happened to the value of the downpayment? Well, it's probably gone. Gone in 2 months. Close escrow on the house in April, gone in June. Be carefule and do your homework before you buy folks!!!!!

Oh yeah, the real estate agents have their commission payments.

Top of the World - Large Homes Sell at Less Than $400 Per Square Foot

Recent comps in the Laguna Beach Top of the World neighborhood indicate that the price per square foot for these larger family homes has dropped way below $400 per square foot.

3216 Tyrol - $358 sq/ft, sold on February 26, 2010
2556 Temple Hills Drive - $389 sq/ft, sold on April 16, 2010.
2255 Bridge Road - $358 sq/ft, sold on January 8, 2010.

Notably, only a few houses away from 3216 Tyrol is the above home on Park Place, which sold on April 9 for a whopping $571 sq/ft, a total of $1,620,000. There is virtually no difference in the non-ocean views between these two homes. If the Park Place home was valued even at $400 sq/ft, the price would have been $1,140,000. If that valuation is used, it is almost a $500,000 loss the very second the buyer took title to the house. Possibly, they are upside down right now, even before the housewarming party. I wonder if the new buyers were aware of these recent comps? They paid more than the house sold for in 2004, which can be used to judge value. LOL if they have to resell anytime in the coming years!

3216 Tyrol - Pricing difficulties up in Top of World

I noticed 3216 Tyrol in the MLS - it is a house with Irvine views (no ocean) up in the Top of the World neighborhood. I like this neighborhood because it seems to be family friendly and is flat. The Tyrol house has been for sale since 2007 at various prices, I think from above $3,000,000 to just below $2,000,000. Just like many other Laguna Beach home prices, this one should be treated with a lot of caution.

It is hidden pretty well in the online listings, but this home's prior sale price was about $2,000,000 in 2006 - a prime bubble year. Notably, the home's owners appear to be real estate agents and I wonder how the prior sale data has been kept out of the MLS (redfin) and Zillow databases? Suspicious. Now that home values in Laguna Beach have retreated, in my opinion, to 2003 or so, this home's asking price is WAY overstated. I'd take 20%-30% off of the $2,000,000 prior sale price to arrive at today's value. I don't think this attempted home flip is going to work very well for the owners.

I've been in the house and it has great Irvine (meaning everything that is non-ocean for miles and miles) views, but its a duplex - the interior is chopped up and it just feels like a small house. The kitchen is small for an expensive house and there is a narrow, one bedroom unit on the first floor that isn't really usable for much other than renting. On the other hand it has great deck space, a huge garage, but no pool.

Update: This home has been withdrawn from the market.
Thoughts?

Top Of The World 37% Price Reduction

Top of the World (TOW) is a great family neighborhood in Laguna Beach. It is located far up on coastal mountain adjacent to downtown Laguna Beach. It features its own sought-after elementary school located right in the neighborhood. Home values in TOW have been impacted in a big, big way.

Take 3241 Rimcrest Circle, Laguna Beach, for example. A 2400 square foot home in pretty good condition. Listed for sale at about $1,600,000, it sold for only $1,009,000! This is a huge 37% drop from the listing price to the sale price. Laguna Beach home prices continue to weaken in a big way, as evidenced by this sale - at only $420 per square foot.