Wednesday, February 3, 2010

The 3 Million Dollar Home for 1 Million - Or not

Earlier today, I attended a breakfast meeting and one of the highlights was a discussion about the deals that people can find in today's "market." In this case, this seasoned real estate professional shared with the group that a friend of hers recently "stole" a $3,000,000 ocean-front home in Charleston, SC for just $1,000,000. What a deal, right?

My comment was that her friend was now the proud owner of a $1,000,000 home, not a $3,000,000 one.

See, I don't understand the mentality (delusion) of some consumers (no offense, Louise). Isn't it like someone proclaiming to have purchased GM stock for 63 cents and stating that they just got a deal considering (at one time before electricity) it used to be $93 per share? Kind of. Meet the new owner of GM stock at 63 cents a share.

I have a great story that captures the true essence of my argument.

Two weeks ago, I sold a double-wide trailer. Don't let the mental imagery fool you. It was a NICE double-wide. It was actually used as a New Home Sales Center on a new construction site and it was no longer needed. I had invested close to $100,000 in upfitting the trailer - new roofing, siding, front porch, paint and furniture. Given the current market for double-wide sales trailers, I knew I couldn't get much more than $30,000.

Boy was I wrong.

I received one offer at $15,000. I took it. Cash deal. The story gets better.

The (proud) new owner was in the process of moving the trailer to his property when the trailer hauling the trailer jackkniffed. Disaster ensues. The trailer is demolished. Total loss. You can imagine my surprise when the new owner called me and calmly requested that we modify the sales agreement. You see, he was about ready to file an insurance claim for the total loss. His zaney idea was to increase the purchase price from $15,000 to $30,000. This way, he'd be able to purchase another trailer with the insurance company's money. After all, $15,000 doesn't get you too far in the way of trailers.

Here is someone who thinks he purchased a $30,000 trailer for $15,000. He didn't. He purchased a really nice, well appointed, first-class trailer for $15,000.

That's how the market works.

And no, I didn't acquiesce to his request.

2 comments:

  1. Great post Brock. I guess that's why the call it Market Value.

    A few years ago I had a friend living in Phoenix, AZ always talking about their 'million dollar' home. As a matter of fact, the entire neighborhood was made up of 'million dollar' homes. I had to jest because they weren't the 'million dollar' homes I was accustomed to seeing.

    Fast forward to 2009, those 'million dollar' homes are now $400,000 homes; and of course they unfortunately had to give it back to the bank because apparently they weren't 'million dollar' homes very long.

    The market is the market. Unless you're getting a deal from a friend or relative, the price you pay is the price it's worth:)

    Thanks for sharing Brock.

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