135 Fernwood Drive
The sale of the single-family 135 Fernwood Drive closed escrow on 12/30/09 with a reported contract price of $2,400,000 ($400 per square foot), asking $2,395,000.
The 6,000 square foot Monterey Heights property was purchased in December 2005 for $3,000,000 and then completely renovated and restored in 2007 (after which they were asking $4,285,000).
As a plugged-in reader added in August:

They made every mistake in the book with their pricing strategy – this would have sold for well north of $3M in 2007 (there was an offer around $3.75M), but rather than cut to what the market would bear the specuvestors rented it out for a time (starting in 12/2007) thinking the market would “come back”.

Perhaps they were the only ones in San Francisco who were (or are) thinking or advised that way. And hopefully nobody relied on that 2005 sale as a neighborhood comp.
From Full Financial Monty To Dropping The Drawers For 135 Fernwood [SocketSite]
The Full Plan Financial Monty For 135 Fernwood Drive [SocketSite]
The Full Plan Monty (135 Fernwood Drive) [SocketSite]

133 thoughts on “The Final Chapter For 135 Fernwood Drive (At Least For Now)”
  1. Wow, I wonder how much these guys lost on this one beyond the $600K statistics loss. They claim only $95K in work was done according to the 2007 permits. Yeah, right. The carry on this one couldn’t have been all that great either.

  2. At least it sold – now hopefully we’ll never have to see it again, and it’ll go back to just being a house for people to live in instead of a symbol of the mess we’re in.

  3. For those of you keeping track at home, it appears that this sale may have stabilized the owners’ finances as 155 San Anselmo, their primary residence, was withdrawn from the MLS. As you’ll recall, it received a NOD on November 13. Rumors of SFW’s demise have been greatly exaggerated? Stay tuned…
    On a sad note (just monetize, baby), you now need to subscribe to PS for their foreclosure sale listings (which took a turn for the worse about a month ago when duplicate listings began showing up).

  4. If this can’t get a comment out of satchel, nothing will. I must have missed the latest exit, was another return promised?

  5. ^No. Disappeared without a trace or any word when someone threatened him. I got the sense he was thinking of moving to Florida.

  6. Huge loss for SocketSite with Satchel/LMRiM and San FronziScheme missing. Would love to hear LMRiM’s analysis on a few things.

  7. Seems like it’s just as easy to say:
    fluj/anonn has nothing to offer but filtered CW and anecdotes about how awesome Bernal is.
    Anyway, agree that we could all use some more talk about money heaven.

  8. ^^^ Actually SFS brought the perspective of a mid-sized landlord here. Fortunately Former Apartment Broker also has similar experience to share.
    All of these guys have worthwhile things to say.

  9. Actually SFS brought the perspective of a mid-sized landlord here
    Oh, I’d say that I talk anything but CW as far as SS is concerned. And if I had a nickel for every time fronzi learned something by saying something totally incorrect, got corrected, and then took a position of authority on it three months later, well, I’d have at least $.35.

  10. I’ll second the thought on LMRIM.
    Unless he bought this place, he must be in Florida.
    There was a single posting an other thread by “Laughing My Ass Off In Florida” that I thought may have been him or a ahill of him.

  11. “And if I had a nickel for every time fronzi learned something by saying something totally incorrect, got corrected, and then took a position of authority on it three months later, well, I’d have at least $.35.”
    I feel like you’ve made this claim before, but I’d love to see you back it up. That’s not to imply that Fronzi is infallible, but the grandstanding here seems a little unnecessary.
    Satchel had some good analysis, even if he was a little too libertarian. 🙂

  12. Grandstanding? hardly. If you didn’t notice why he was a poseur then that speaks volumes by itself. Others saw it. One thing that springs to mind is recessed can lights. Another was drop ceilings. He didn’t know what they were. Flash forward a few months and the guy was offering up construction estimates. I think maybe another anon liked him and another two or three thought he was phony. Hard to keep it straight.

  13. Was that on the 3016 Pine thread? I remember that as one of the properties where people commented on the recessed lighting generally. But I just checked, and that was Laughing Non-Millionaire in Piedmont, not LMRiM:
    https://socketsite.com/archives/2009/04/an_apple_rather_than_cone_on_the_pine_street_tree_3016.htmlS
    No idea what drop ceiling comment you might be referring to, but you never seem to substantiate your comments here. I don’t buy your complaints, but even if what you said were true, isn’t it possible that LMRiM became informed about construction in those months? Not everyone’s relative is a contractor, you know…

  14. Um, I was talking about the fronz the whole time. Not LMRiM.
    LMRiM? he was a smug, conceited, boastful, California-bashing, liberal baiting libertarian. He loved to tell us how smart he was about gaming the system. Yet he sent his kids to public school in Marin and probably despised the education they were receiving. And of course, he routinely got all things SF r.e. wrong except for some parts of area 4 where he used to reside. But he was a sophisticated trader and had some interesting things to say about markets. He didn’t make things up all the time, like Fronzi.

  15. lmrim is a poseur bigtime. talking big about day trading from home (lol) and pretending to be michael lewis. if you have to boast about being a ‘millionaire’ its likely that you are not one.

  16. fronzi did not own any property here and would hardly qualify as a “mid sized landlord”.
    fluj is right-fronzi personified the old adage-“those who speak, don’t know. those who know, don’t speak”. he was the only poster more constantly erroneous than tipster.

  17. I’ll bet if Satchel & LR return, it won’t be as sockpuppets. And fortunately, the internet is forever so it is very easy to see who on this site turned out to be full of c***p (hint: it wasn’t the aforementioned two posters).

  18. anon@9:47 – yeah, SFS does not own anything right now, but he did before he cashed out. The experience persists though ya know. I was under the impression that he had somewhere in the range of 10-50 units which is mid-sized from my perspective.
    The real mystery is not where Satchel and SFS went, but rather why they blinked out of existence simultaneously.

  19. Who cares about SFS and LMRiR? This is the Internet where everyone can be anyone and where the loudest and most persistent can accomplish what they cannot in real life.
    I think LMRiR was truly the Hedge Fund wizard he said from his very detailed financial posts. SFS looked legit too as a Paris landlord learning into a new market. But who knows? If they were what they said they were, then I don’t see why they wasted their time here. Maybe they woke up and moved on. Maybe they’re sipping Mojitos with their windfalls intact laughing at us: bulls who want their 2005 back, and bears who want a 500K Noe vic. Maybe they became bulls.

  20. fronzi was small time. one building, maybe two units, and that was in france. he just talked about it alot. and laughable millionaire made his ‘money’ on the internet- by making up his persona on chat boards. sitting around in a 50’s track house rental blogging all day while it was sunny outside or taking his kid to mcdonalds, lol! sounds like a smart rich guy to me..not

  21. My language in the Caselli thread was “some” 5-K properties “can” command 900 a foot. Two or three already had on that street. One did a month later, a block away. Nice straw dork.

  22. Hee hee, yeah, some of the realtors who post here hated Satchel/LMRiM because he so effectively called their B.S. They were used to being able to simply spout made up stuff based on nothing more than “I’m a realtor and I say it is so.” That used to work but now there are too many ways to research and rebut such nonsense. It really doesn’t matter if LMRiM was a semi-retired hedge fund guy — his posts were brilliant.
    So let’s just pretend he was an unemployed plumber sitting in a tract (not track) home. Also, tipster does not run a business. Trip is not a law firm partner. FromerAptBroker was never in the real estate business. Ex SF-er is not a doctor. We can all just discount to zero everything not spouted by someone pretending to be a realtor pretending to assert “facts” premised on nothing.

  23. No, his posts about SF r.e. were not worth anything. Do a search. “This neighborhood (Eureka Valley) is about as nice as where I used to live (Westwood Highlands) so, blah blah blah …” — that was pretty typical. That you liked them is not surprising.

  24. otheranon has inspired me to come clean before I am outed – I actually have two eyes. It’s just that only one of them functions.
    There, I guess I feel better now.

  25. Funny, I saw this thread and my first thought was exactly what was said above, if this doesn’t bring Satchel out of retirement, nothing will.
    I for one think this board is much less appealing without him here, he was a great addition to the conversation and had a lot of interesting points of view, I would love him to chime in again.

  26. We can all just discount to zero everything not spouted by someone pretending to be a realtor pretending to assert “facts” premised on nothing
    Nice straw simp, simp.

  27. Of course, brilliant insights such as “Nice straw simp, simp” rival anything that Satchel/LMRiM was able to craft. Easy to see why annon’s input is so universally respected here!

  28. I guess I should come clean too. There are no dairy products in me. Just sugar, soy oil trans fats, and high fructose corn syrup.
    and I’m not depressed either.
    All that time I’ve been hiding behind my milk based cred.

  29. Did you like that one, anonsimp? Thanks. Don’t get me wrong. I’m happy that Satchel’s encyclopediaic misunderstanding of SF r.e. helped you to be a sardonic fence sitter on the internet. Good for you.

  30. “The real mystery is not where Satchel and SFS went, but rather why they blinked out of existence simultaneously.”
    Indeed, Milkshake. I found this particularly strange. Note that San FronziScheme pointed out the threats against Satchel/LMRiM before checking out.

  31. threats against Satchel/LMRiM
    I think that’s where he balanced a few facts:
    1 – How much time do you spend on SS?
    2 – Do you have more free time than your detractors?
    3 – How much fun are you getting from debunking the (supposedly) industry BS?
    4 – Are there potential negative implications in your real life?
    I think LMRiM/Satchel was basically right on the principles and that he’ll be right in the long term. Defining his posts as an “encyclopediaic [sic] misunderstanding of SF r.e.” is a bit short-sighted. The Government came to the rescue of the industry and that stretched this correction pretty damn far away into the future. If you thought this would be Japan redux, would you go on posting for 20 years?

  32. Yeah well he didn’t know anything about any neighborhoods other than the one he lived in and surrounding. Didn’t stop him from talking tho. That fact has nothing to do with Japan, government intervention, or anything macro.
    “We’ve strolled around that neighborhood once before, and …”
    “The cleaning woman who darns my socks lives over there.”
    “I’ve been in that Safeway before, and a friendlier group of peaons one is unlikely to encounter.”
    These are the sort of things he would say before launching into a boorish shpiel about how a SINGULAR property wouldn’t sell for as much as it then would sell for. The guy was good talking his book. Not so much when talking mine.

  33. I do miss Satchel’s posts but I don’t miss LMRiM’s elitist toxic smugness. The last straw for me on his posts was his insulting someone that worked at McDonalds in a reply trying to defend his insulting of someone that was unemployed.

  34. Well, your book seems to be from the bottom up. His was from the top down. Buyers are looking for something in between. Making some sense of all of this is challenging and that’s the value proposition of SS that no other site can offer.
    I get why you’re relentlessly debunking armchair economists, but SF seems like a pretty distorted market with rent-control and prop 13 welfare at the bottom and gazillionaires at the top. That’s the core of people’s frustrations.

  35. From a real buyer’s perspective, a buyer typically being someone who wants to put down roots, now-ish, a guy like LMRiM talking about how something should be 25% less than it is right now isn’t particularly helpful. Even less helpful to buyers were his wayward predictions based upon his own navel gazing.

  36. I miss LMRiM/Satchel as well…
    But about this house – it’s ironic that flujie-poo has taken this thread to rag on him.
    Looks like this seller of 135 Fernwood personified what Satchel said would happen. 20% under the pre-renovation price, entire down payment ($600K) in money heaven, renovations cost at least $300K++ if they cost a nickel (look at the plans – pretty extensive). All that carry cost gone too…..
    Seller’s primary residence doesn’t look too good either. 155 Anselmo purchased for $3M in 5/2004 – zillow pegs it as worth $2.17M today (about $600psf – probably not too far off market).
    In the spirit of our departed friend, it looks like these suckers are getting a good lesson here! 5-10% off peak, eh?

  37. Totally disagree Fluj, I was/am a real buyer, and Satchel’s take helped me immensely not to make a poor decision. I am confident I will save 200k by not buying when I was looking to, in early 2008. There is no decent argument to be made that it would have been better for someone to buy then as opposed to now. It may not have been as catastrophic as some predicted, but significant money was saved for those who waited.

  38. In the spirit of our departed friend, it looks like these suckers are getting a good lesson here! 5-10% off peak, eh
    You’re welcome to take one speculative, huge house in a small, relatively nonrepresentative part of the city and make a larger statement from it. I don’t.*
    *It’s all micro, bro.

  39. Putting down roots? Sure. But not at any cost.
    A buyer also wants to know if he’s not overpaying. A 30-Y mortgage is a cruel beast. You don’t pay much principal in the first 10 years which is likely a longer time span than what first time buyers expect to keep the place for. If the market tanks 10% or more that can be devastating to your prospects of moving up.
    Someone who plans to keep a place 30 years also wants to know if he is not going to pay more than he should. A mortgage too high can mean less money in a college fund or IRA. A few 100s a month don’t look like much. Compound the different scenarios and 30 years from now this will add up to a difference in the 100,000s. This is a very big deal for most of us.
    Having a top-down prospective helps understand if this is a good enough time to buy. It’s something that people would have needed in 2005.

  40. Was LMRiM right about anything?
    He had interesting insight on how Wall Street really worked, but other than that I don’t think he really added that much value.
    I guess his posts were well written and entertaining, I agree with that. But more than any other poster he spread FUD during the time when the correct information would have been the opposite. I wonder how many were frightened by his doom and gloom predictions and sold all their stocks at the bottom?

  41. “From a real buyer’s perspective, a buyer typically being someone who wants to put down roots, now-ish”
    so “real buyer” = someone who believes realtor platitudes?
    I’d rather take the guy who’s telling me about asset valuation…

  42. I could poke that sentiment full of holes if I wanted, the Bunk. But if you’re happy to have waited, then good for you.

  43. “Was LMRiM right about anything?”
    Time will tell, as you yourself have said numerous times, NVJ. (e.g. your predictions of nominally flat + real drop due to inflation)

  44. so “real buyer” = someone who believes realtor platitudes
    I’m not sure why you think a pithy little generaliztion is an acceptable way to counter what you call platitude.
    Rare is the five year plus hold that has displayed a negative result on Socketsite. The property above is one. But the endgame for this one was not well reasoned, IMO.

  45. “Rare is the five year plus hold that has displayed a negative result on Socketsite.”
    Sure, but if SocketSite was around from 1994-1996, we probably would have seen a few then. Give it some time.

  46. Well, give the notion that the average buyer who sticks around for the better part of a decade might see at least a modest gain some credibility, then.

  47. “Rare is the five year plus hold that has displayed a negative result on Socketsite.”
    Noe: https://socketsite.com/archives/2009/12/bank_owned_in_noe_is_there_another_doctor_in_the_house.html
    Bernal: https://socketsite.com/archives/2009/11/into_the_bernal_heights_apple_cart_for_82_ellsworth.html
    Mount Davidson: https://socketsite.com/archives/2009/10/whos_the_comp_now_160_westgate_closes_escrow.html
    All single family apples over the past few months, but who would want to live in those neighborhoods…

  48. Love him or hate him, Satchel never gave any evidence of him not being who he said he was.
    An up from the bootstraps overachiever like he appeared to be typically doesn’t settle easily into early retirement. One must be a tad bit lazier by nature to fully enjoy the fruits of early retirement. Satchel seemed to recognize this and looked to be itching for something to do when his kids were in school full time. Maybe he has satisfied that itch in some swampy, bug infested, bankrupt, low tax “paradise”.
    With all this (unwanted?) leisure time, SS seemed to give Satchel a forum which allowed him to exhibit his financial smarts and, perhaps more crucially, allowed him to receive kudos for his (more often than not) smart financial analyses. If he had continued to work, he would have been doing the financial stuff for his job, and the kudos would have come not in verbal form but in cash.
    For a person who put so much emphasis on the “individualism” of his particular rise, the lack of recognition for one’s individual “talents” or “skills” out of the academic and professional arenas must have been extremely dispiriting. SS probably filled the void to some minor extent, but, with no disrespect to SS (or wannabe but much much less brilliant financial experts sitting in cafes in “the Mish”), an anonymous blog is a pathetic place to fulfill that kind of gratification.
    When he veered away from financial analysis and into social and political philosophy, Satchel’s brilliance waned. While utterly pragmatic in the financial, he was an ideologue in the socio-political.
    Robert (who was perhaps the most brilliant poster ever at SS) once surmised that Satchel used a rigid ideological framework in order to find inconsistencies to exploit. While plausible, it appeared instead that Satchel was a staunch libertarian because in its strictest form, that ideology most justified and aggrandized the value of his personal “up from the bootstraps” rise.
    Any deviation from the core ideology would have been a diminishing of the “value” of his personal rise and self image. (Remember that Satchel was defiantly proud of his rise and held on to many class resentments. Most people in his situation would have been trying much harder to assimilate into a higher social class.) As a result, the intellectual rigor and argument he brought to all things financial disappeared a bit when discussing things political.
    Following up on the “strangeness” of Satchel’s and SFS’s departures, the poster I always found “strange” was that “Laughing Non-Millionaire in Piedmont” dude. He would very coincidentally pop up at like 4 am Italian time to very coincidentally start ruminating with Satchel about obscure banjos or something of the sort (of which roughly 47 people in the entire world would have their geeky knowledge). This seemed to happen when Satchel wanted out of a discussion. 😉

  49. The Noe, Hoffman, one not only wasn’t five years. It also apparently suffered some water damage during the last five years.
    The Ellsworth, Bernal one wasn’t five years either.
    Even the Mount Davidson one wasn’t five years.
    Whatever, man. I picked five years because the market really shifted north in late 2004, and on.
    You can say that people who are buying houses for the long haul will lose out, and that another market shift won’t begin occurring sometime over the next five years, or what have you. I don’t know how or why you can say that, tho.
    What I do know is when I say “five years,” you countering me with four year holds isn’t worth anything.

  50. Well, give the notion that the average buyer who sticks around for the better part of a decade might see at least a modest gain some credibility, then.
    Agreed. Not a sure thing, but a good enough bet. As long as you’re in market price. It’s all local, of course 😉 I doubt 2006 buyers in D10 will ever sell for a profit before 2015 at least. But someone buying in D4 in 2004 should be fine at any time in the future. Same thing for someone who buys today. You might see lower prices in the next few years, but over 10+ years that won’t matter much.

  51. “So let’s just pretend he was an unemployed plumber sitting in a tract (not track) home. Also, tipster does not run a business. Trip is not a law firm partner. FromerAptBroker was never in the real estate business. Ex SF-er is not a doctor…”
    Otheranon: I think you’re being a little naive. This is an anonymous blog. Don’t discount the BS factor.

  52. “I could poke that sentiment full of holes if I wanted…”
    Yes, any good salesperson knows how to counter a potential buyer’s objections. The hope of course is that the buyer doesn’t know the market well enough to see the holes in the salesperson’s argument. Most buyers are amateurs and many will buckle under their hired salesperson’s arguments.
    You can count me as another who’s glad to have waited. I would have paid at least $100K more in 2007.
    “…zillow pegs…”
    I think we have a new oxymoron 🙂

  53. I’m selling none of you anything. How about you explain where Bunk got his 200K figure from. Or what your 100K will sit in six years time. Please.

  54. anonn – I didn’t mean that you were trying to sell to any readers here and do recognize your integrity in that regard. But lets not ignore fact that you are in a sales profession and good salespeople do know how to counter objections and diminish FUD.
    As for my $100k+ saved, I had cashed out enough stock for a 20% down payment in 2005. Stupid me, not realizing that the days of 20% down were history. The money has been in very low risk liquid investments ever since. That cashout was blind luck on my part.
    Once again, I would like to thank everyone who outbid me during the peak.

  55. What I’ll say to that is good for you for not overbidding, doing nothing to improve the property, and selling within four and a half years. You might very well have had your property featured on Socketsite.

  56. Those who overbid in SF in 2003, did nothing to improve the property, and sold within four and a half years made a mint.
    Those who bought that same place in 2007 are taking a bath.

  57. Yes. Upswings. Downswings. Both real. Taking a bath on paper when you have no plans to sell any time soon, is that real?

  58. “Taking a bath on paper when you have no plans to sell any time soon, is that real?”
    Of course not. There are no foreclosures or short sales. Nobody has to sell unexpectedly because of unemployment, a job offer out of the area, illness, or any other reason. Nobody saves less for retirement or kids’ college because of their higher mortgage payments.

  59. You can be fascecious about exception versus rule or what was already planned and accounted for by hypothetical people, or not, if you like. I don’t want to.

  60. Let me guess, anonn became a realtor and started advising clients and investing in San Francisco real estate during the bubble and has never worked through a downswing or normal market? If I’m right it explains a lot.

  61. I became a realtor before the big runup in late 2004. I started buying, rehabilitating, and selling in SF in 1997. So I guess the answer to your guess is “no.” One thing I never do is talk to clients about potential appreciation. I’ll talk neighborhood trends and what I see happening to the area. Appreciation? No. I leave that to hacks like you who obviously couldn’t cut it, “exaAgent.”

  62. “Well, give the notion that the average buyer who sticks around for the better part of a decade might see at least a modest gain some credibility, then.”
    Sure, that’s often true, but that’s also the kind of thing some people say about the stock market. I don’t think the S&P is the end-all of investment by any means, but the performance over recently terminating 10-year periods hasn’t necessarily been so hot. You could always look at Japanese real estate or maybe Houston real estate as an example of what could happen too.
    How did SF real estate do from 1989 to 1999 when you include inflation? I’d imagine not as well as people think.
    In any case, I’m not sure what point you’re trying to make. If it’s that real estate typically results in nominal increases in value in 7-10 year periods, I’m not sure that people will necessarily disagree with you. But Satchel/LMRiM was just trying to keep people from losing money off the bat based on the current housing market. Given how much government stimulus has done to keep us from hitting bottom, I’m not sure he had the wrong idea.

  63. Wish I had a dime each time Kenny hit his refresh button on this thread so that he could knock out those sub-15 minute responses to others posts. That’s gotta be worth at least a round of cappuccinos for everyone here. Slow Wednesday?

  64. Dum da da dummm, MIkey tha Trollllllllllllllll. (read like FOzzzy Beaaaaaaar) wakka wakka wakka
    Just followed up with a client looking to buy in Tahoe, Mikey. You think there are some bank owned properties in SF? take a look at second home markets around the country.

  65. Poke away Fluj. You don’t even know where I was looking to buy, so your response speaks volumes. I find it pretty funny that for a guy that has been saying all this time that RE is about micro markets, for you to “poke holes” in my 200k savings theory, wouldn’t you have to know where exactly I was looking to buy and what kind of property I was looking for? But no, you just say you can “poke holes” in it. Just shows where you are coming from, an honest broker would have asked some questions before thinking about poking holes.

  66. “Let me guess, anonn became a realtor and started advising clients and investing in San Francisco real estate during the bubble….”
    “I became a realtor before the big runup in late 2004.”
    CA DRE records show that der fluj got his license on October 27, 2003. And it’s only the low level salesperson license, not a full broker license. So the original guess was pretty right on target.

  67. Buddy, don’t read your own realtor bash agenda into what I said. Talk about speaking volumes. You came right out and said it, easy.
    Any poking would have been along the lines of “200K lost right away.” How? Were you planning to turn around and sell the next day? Or were you planning to stay a while? Do you know what the future would have brought if you had chosen to buy a house you liked, and stayed for a long while?
    A lot of you think you can time the market. Some of you might be able to do it. I don’t know.

  68. I didn’t say I lost 200k, I say I saved 200k (yes that is a squishy number, but more or less accurate). One thing that is just so clear, but for some reason you just don’t want to admit, is that virtually every single buyer that waited to buy instead of pulling the trigger in late 2007 or early 2008 came out ahead. So yes, market successfully timed by the fence sitters. Wasn’t that hard either, just had to listen to people like Satchel and not people like you.

  69. I didn’t tell you to do anything.
    You don’t know what that 200K might have brought you. You only know it was withheld.

  70. Sigh . . . a rather typical thread that illustrates how this site has gone downhill. It primarily consists of anonn — who apparently doesn’t have any of his dad’s homes to sell right now — providing 40% of the posts and contributing nothing but childish insults and other blather.
    At least ex SF-er still chimes in from time to time, who always provides a great read. And a few others. If I wanted to waste my time on the flujblog I could go to any of the dozen-odd worthless SF realtor sites.
    [Editor’s Note: We’ll challenge you to lead to example rather than stoop to the levels of others.]

  71. Still waiting for a hole to be poked Fluj, and I do know what that 200k would have bought me, I was in the market then. I also know what it would buy me now. Hence my belief I could have a like home now for about 200k less than I would have bought it for back then.

  72. The Bunk,
    If you’re talking condos, then you’re probably right. They’re the same. If you’re talking about SFRs, then I’d have to see where, and when, and look at what you’re comparing.
    I said “Good for you,” in the first place guy. You wanted to keep on talking at me.
    But you know, “people like me,” unlike an AWESOME guy like Satchel, we’re all out to do you harm.
    Whatever. The trolls are out. See ya.

  73. “I said “Good for you,” in the first place guy. You wanted to keep on talking at me.”
    Nice try, but apparently someone missed his own comment at 1:34PM. Oh, the irony of calling other people trolls…

  74. It pales next to the irony of misusing irony in something you misquoted, surely. Who was talking to whom, there? You’re too stupid to go toe to toe with me. Go away.

  75. “I could poke that sentiment full of holes if I wanted”. Yet, you have not been able to. Your statement was revealing, without knowing what I was in the market for, it was a ridiculous thing to say.

  76. In what will probably be a fruitless attempt to move back to this house:
    What does this sale, among some of the others, say about improving housing stock in SF? Given that housing is a consumable, and that in SF many of the older houses have been highly consumed, how much do results like this lower the incentive to buy a fixer?
    More concretely, what percentage of renovation costs can be attributed to foundation work, other structural work, bringing up to code, and repair as opposed to enlargement (including adding levels) and furnishings? Sparky?

  77. I thought we were speaking in hypotheticals, Bunk. In fact, we were. If you want to share what you were specifically looking at, that’s great. Otherwise, my point was that you equate withholding with saving. You equate someone else’s paper loss with a real loss you might not even have experienced had you gone forward. The fact is somebody might have spent that extra 200K on a house that will perform better in the long run than a house the fence sitter will wind up buying. No one can say. They’re clearly not all the same. And let’s face it, the really good ones are not 200K less nowadays anyway.
    And ed., thanks for not deleting the personal attacks while delivering admonishments about being the bigger person. Good lookin’ out, broseph.
    anon, my dad has been I think 2 or 3 out of 70 or 80 at this point. Thanks for always caring so personally, tho.

  78. “..how much do results like this lower the incentive to buy a fixer?”
    I don’t know how much it lowers the incentive, but I hope that this lowers the market value of a fixer since that’s one of my target niches.
    During the run-up the value of a fixer as seen by the a developer or flipper (who were buying the vast majority of fixers) was in terms of speculated profit :
    speculatedProfit = salesPrice – costs
    where salesPrice was :
    salesPrice = marketAppreciationDuringHold + financeCost + blingFactorOfRemodel
    Now we have seen that marketAppreciationDuringHold went from double digit positive, to zero, and now appears to be negative. financeCost is probably roughly the same due to goverment meddling though that will obviously need to rise some time in the future. I’m not sure what is happening to blingFactorOfRemodel though. Might be the same.
    Buyers on fixers figured in speculatedProfit into their bids. How else could Noe teardowns sell for $1M? Obviously speculatedProfit is down for all but the most optimistic buyers. So I think that the price of a fixer should be falling. And when loan costs rise, this will further reduce sale prices of everything, fixers and turnkeys.

  79. It is really not all the complicated, I have said now twice I am not talking about “losing” money, I am talking about “saving” money. There is a fundamental difference. When comps go south as they have where I am looking, then you really just don’t have a credible argument, sans that I may have just purchased that one outlier house that did not move directionally with the market. Of course that is possible, but unlikely.
    I was and will soon be again looking for 4 bedroom homes in Lamorinda. I know you don’t know the area so you will not have much to say as to specifics, but I track sales house by house here, and have for almost 3 years. I saved about 200k by not buying in early 2008, there are no holes to poke in that assumption.

  80. This particular neighborhood is not one where you want to buy an enormous fixer for spec. Talking about a fixer here versus, say, the fixer that went pending on Pacific yesterday is apples and oranges.

  81. Oops – I made a math error above. finaceCost should be a component of costs, not salesPrice. I also left out basis.
    to correct :
    speculatedProfit = salesPrice – costs
    where salesPrice was :
    salesPrice = marketAppreciationDuringHold + basis + blingFactorOfRemodel
    cost = financeCost + otherCosts
    where otherCosts are construction, tax, marketing, etc. and are roughly stable.
    sorry about the brain fart

  82. sfrenegade,
    This place is not an example of buying a fixer, I don’t know what this is an example of but buying a fixer ($3M in Monterey Heights) it is not. These people bought a perfectly nice place and tried to add lots of basement square footage to that and make a profit. That was never going to work. So, I don’t think this place says anything about the fixer market.
    I have actively been the market to buy a place for a while and there are not any deals out there still. The ones that look good are gone before you can even get to see them. I went to a fixer a few weeks back, the first brokers tour, I was the first person there and the agent told me to get something to her fast if I was interested because they already had 2 offers. But, I also think it the deeper pocket pros who are buying stuff up because construction money is really tight, and income property loans need lots of money down. My hope is that there is also a lot less inventory come sale time for these fixers as well.
    As far as the cost of foundations to the whole thing, that’s a tough one as you would rarely have foundations alone. You will have foundation, with excavation, with shoring and new framing, and new plumbing all tied together.

  83. Milkshake of Despair and sparky, thanks for the repsonses.
    Sure — $3M in Monterey Hts is not the typical “fixer.” Bad segue on my part, but I was trying to get the discussion re-focused on construction at least instead of whatever was happening before.
    “As far as the cost of foundations to the whole thing, that’s a tough one as you would rarely have foundations alone. You will have foundation, with excavation, with shoring and new framing, and new plumbing all tied together.”
    Of course, that’s why I’m asking foundations + structural + repairs + bringing up to code, etc. as opposed to the furnishings (as Milkshake of Despair called it — the bling). The idea is to separate out the necessities when rejuvenating old housing stock.
    Presumably, you would install new plumbing/electrical while you’re in there (cf. replacing a water pump while doing belts), so I would include that as more on the structural/necessity side in terms of costs vs. furnishings where you can customize to your heart’s desire.
    Also, if you’re not a developer-type, you could do the structural/necessity-type work first, and do the sweat equity blingification later (e.g. if you’re a DIYer). Is this worth it? Or are the costs too high because the old houses need so much structural/necessity-type work?
    I think someone once asked a similar question on the construction of luxury condos — how much is the cost of constructing the building vs. the furnishings inside — in asking whether such buildings can pencil out without being called “luxury.”

  84. sfrenegade – If the house is so in disrepair that it needs full foundation replacement then it makes more sense to plan the project as a whole and just get it over with. Clearly that is beyond most DIYers (though one of my neighbors is on year 12 of such a one-man remodel. Aack !)
    The reason I think that you want to get it done all at once is for two reasons :
    1. minimize down-time hold costs
    2. often placement of finishing details will affect the substructure and you want to know what is going where before the studs start getting moved around.
    The DIYer can still handle some of the project aspects (painting, plumbing, electrical, sheetrock, etc.) depending on their skills so long as they can keep up the pace with the GC. That sweat equity could cut costs.
    If I was interested in such a home that needed huge work, I’d get a trusted and experienced contractor in there to estimate costs and timeframes before placing a bid.

  85. “I don’t know what this is an example of ”
    I would point to it as an example of why it’s important to have a Satchel-like understanding of markets and asset valuation models.
    Under the model of looking at comps and predicting the future by looking at the past and drawing a straight line through it this was a guaranteed money maker.

  86. why does anyone bother with flujanonn? he is just talking his book. doesn’t make any money unless people are buying and bought a place in bernal in 2006.

  87. You’re too stupid to go toe to toe with me. Go away.
    Seriously, I appreciate some of your posts. But you do not have to fight all these fights. Look where you landed.
    What makes you claim a higher ground than anon?
    Do you have a few personal examples of great market timing that you could share? I mean not clients or family, because everyone here knows someone who struck gold. You, personally.
    If not, then you’re just one among many of us who are making their best possible guesses and the only extra knowledge you have is micro which only goes that far. It makes for nice arguments but doesn’t sink in very deep, don’t you think?
    Who on this board can claim he timed the market anyway? There are more wannabes than real wizards on this blog. Satchel said he timed the market in his profession. So did SFS with his 10 or so houses in Europe. They gave from-the-trenches insight to their flamboyant success which is why I believe them.
    Too bad they stayed anonymous but in this day and age of cyber-loonies privacy is more important than proving strangers yours is bigger. LMRiM bailed out when there was a hint his identity could be exposed by whatever ploy. Once it’s out you cannot take it back.

  88. wow,
    I didn’t buy into the Noe frenzy when it got high, I bought my last Noe fixer in ’05 and sold it in ’07. I didn’t buy again until early ’09 which I deemed to be the bottom, we’ll see how that worked out.
    sfrenegade,
    I would answer your question about “is it worth it” to do the upgrades to a total fixer the same way. It isn’t when the cost of a fixer gets too high but most of the time it is. You can get a finished house comparable to a remodeled for sale- the developer profit- the agents and closing. You also have started the ticker on your primary residence earlier and at a lower basis so when you sell the money you make is tax free.
    That being said there aren’t any deals on fixers right now. A permitted fixer for $1.3M is on the market in Noe. So is a $1M fixer on Hoffman that won’t recoup the cost. I my opinion the fixer market still has to come down, but you can find a deal you just have to move quick when you see it.
    Milkshake,
    per your math, the cost of construction financing is up a bunch.

  89. “the cost of construction financing is up a bunch”
    sparky — how’s the cost of construction itself doing right now?

  90. Um, say something that isn’t groupthink/CW. Have six or more people disagree, and address you directly.
    Then try to say one comment only to sum everything up.
    Pretty tough.
    But yeah, I posted too much yesterday. When I see the likes of mean anon, stupid anon, micheal, and mikey all talking to me, I know I’ve erred.
    As far as this property, you can look at past comps and from that understand precisely why it was a bad idea. Since when does adding lowest level square footage translate to big bucks? Never. LOL at diemos invoking satchmo, there.
    As far as sharing success stories on here, wow, my hands are tied. There are two going right now, and there will soon be a third, that you will all be impressed by but my clients would be pissed off if I mentioned them. Understandably so.
    The 23rd st property looks decent for 765K. I’ve been following it for some time. The owner, or trustee, had actually put it on craigslist some time ago. That’s pretty unusua considering it actually requires court confirmation and the auction isn’t until the second week of February. I think it will get bid up. But yeah. If you can get a fixer in the 700s or less in Noe you’re probably sitting pretty.

  91. Anonn: “Taking a bath on paper when you have no plans to sell any time soon, is that real?”
    As someone that bought in 2007 and has no plans to sell any time soon let me tell you, YES IT IS REAL! You are really showing your lack of understanding when you try to imply that just because someone may not have plans to sell anytime soon that they have not suffered a REAL loss.
    I really wish I had waited. If I had I could buy a 3bd/2ba unit in my same complex for the same amount of money as I bought my 2bd/1ba unit. So yes, even though I bought and have no plans to move I have suffered because of my “paper” loss. I have lost the opportunity to buy a better place for the same amount of money.

  92. I’m not displaying any lack of understanding. In fact I myself bought in 2007, so I put my money where my mouth is.
    But I qualified what I said, with regard to condos, above @ 4:08 yesterday. I wouldn’t call what is going on in that market a paper loss. If you want to talk about condos with me then do it in a thread anchored by condos. This thread is about an SFR, and therefore I talked SFR.

  93. I’ve defended your distinctions between condos and SFR’s in the past but that distinction has no bearing on the statement that paper losses are not real if you plan to stay for a while.
    You have a habit of trying to split hairs and distract the towards tangents when you say things that are wrong.
    Your lack of understanding is in regards to the fact that “paper” losses are “real” losses. What does condo’s versus SFR’s have to do with that? Is a paper loss on a condo a real loss but a paper loss on a SFR not? If so why?

  94. That’s your opinion. I draw a distinction between the exact same product being had for less versus the considerably more variable factors at play with regard to SFRs. Not to mention the supply versus demand metric.
    Why not? Sameness.

  95. Also, to back up, a paper loss is a paper loss. It’ll only be a loss when you sell. Is your potential gain changed by a superior unit being now available for less? yes, it is. But that doesn’t change the fact that you haven’t suffered a loss on the investment yet.
    Look. We can go back and forth about this all day. You’re a respectful poster to exchange ideas with, and if you want to talk about this offline, feel free to shoot me an email. I’ve talked too much in this thread as it is.

  96. “It’ll only be a loss when you sell.”
    This is true only if one defines “loss” so narrowly as to mean “the difference between the selling price and the purchase price.” Your realized/unrealized distinction is not valid in the real world of homeownership. In the real world, those who bought at the peak have suffered a real loss, paying thousands more each month in real mortgage payments than they would be paying if they had not bought at the peak.

  97. The “paper loss” goes back to one of my original arguments: overpaying (or picking the wrong time to buy, however one want to call it) HAS an impact on your finances.
    Buy the same property 600K in 2007 or 550K in 2009. 8% is not a big deal, right?
    20% downpayment, same interest rate (5.25% 30Y fixed). Scenario #2 will save you $221/month in morgage, $50 in property taxes.
    These $271/month don’t look like much. For a family socking away 2K/month in retirement with a conservative 4% return, after 30 years, your investments are worth:
    -1.378M for scenario #1, $1.565 for scenario #2
    Had the buyer waited 2009 to buy the same house, he’d be better prepared come retirement.
    Another idea: if the buyer had used his saved $2000/month towards a bigger downpayment for the 2 years he kept on renting, he could have saved an extra $265/month in mortgage or $535/month in total. Compounded into his retirement savings, he’d be at $1.746 or $368K more than Scenario #1 and still living in the same house.
    What a difference 2 years make.
    I agree this is not a real life scenario. Most people will simply buy more house for the money…

  98. Agree with wow. Calling it merely a paper loss seems as misleading as the putting down roots thing. There are real costs to having made a decision to buy an overpriced house, and wow has detailed some of the financial ones. There are other things that can happen too — life changes, job changes, etc. that a paper loss can make more difficult.
    Too many people don’t realize that tacking on a higher principal can be a problem because you’re dealing with the principal for a long time. That’s why I always highly recommend that people don’t do listing price tricks (e.g. buying at a higher price for a higher loan value, and getting cash back — they’ll be paying that principal off for a long time!).
    Furthermore, people are better off in the long-term with higher interest rates and much lower housing prices than with the reverse, as we have now due to heavy government stimulus. I’d much rather buy a $600K house at an 8% interest rate than an $800K house at 6%, even though both have roughly similar initial payments.

  99. There are a lot of variables. What amount was financed, for example. How does a 200K “loss” fit into that? Of course you don’t know but you feel free to criticize me. Whatevs.

  100. “I agree this is not a real life scenario. Most people will simply buy more house for the money…”
    But wow, that is specifically a real life scenario. If you consider that people might move-up at some point after buying the smaller house for more money (especially since a large number of people have 5-7 year hold periods), then buying more house for the money makes sense. You still get to save money on what could have been a move-up.

  101. Anonn, the magnitude of paper losses may well be different for condos and SFR’s but that has no bearing on if those losses are real or not, which is why I said that the distinction between the type of place is a distraction/tangent. While my opinion is certainly effected by the fact that it is easier to see the opportunity costs of my transaction because of similarity in units in my condo complex, the economic principle holds for SFR’s as well. Again there is likely a difference in the loss based on all those variables you mention but paper losses are real losses.
    I too have said all I need to say on this specific issue. I think we can agree that we have different opinions of this issue.

  102. That’s where we differed. You’re talking opportunity cost.
    Then you had these guys in and ascribe hypothetical interest rates and whatnot. In reality, depending upon the size of your loan, you probably got a better interest rate than what’s available now. Talk about neither here nor there.
    But yeah, I agree to disagree.

  103. Rillion, I feel I have to commend you. I think you’re the only person to ever admit on this blog that they bought at the wrong time and should have waited. That takes guts – very big of you.
    Regarding the loss, fact is that a loss in value has occurred regardless of whether the homeowner chooses to accept it or not. It’s either an unrealized loss or can become a realized loss if you sell, but it’s still a loss.

  104. In reality, depending upon the size of your loan, you probably got a better interest rate than what’s available now.
    Actually, for 30Y fixed that’s not the case. In 2007 rates were roughly between 6 and 7%. Today rates are around 5.25%.
    http://mortgage-x.com/x/ratesweekly.asp
    I should correct my math right now. It was far off: a 6.25% Mortgage will cost you $300/month more than a 5.25%. The $300/month less in savings will crush your nest egg down to $1.171M as opposed to $1.746M for the 2009 purchase scenario.
    A $575K difference. I was very conservative. I assumed an 8% drop from 2007. I also assumed an average 4% earned on your savings over 30 years.

  105. Opportunity cost as in it cost me the opportunity to buy a bigger place for the same money. Not the pure economic definition of “opportunity costs” which is a little closer to what wow is trying to calculate.
    ***
    As for my loan, I’m not the theorhetical socketsite average reader, so it is not a jumbo, and I live in a neighborhood that some would say most socketsite readers wouldn’t live in (western addition, the part that can’t be carved out with some niche marketing name like NOPA, Lower Pacific Heights, or Alamo Square). I could probably get a lower interest rate today but unless I got some HFA financing deal I wouldn’t have been able to get the place with just 5% down. So on the plus side is if the market continues to fall my paper losses have already been capped and the rest of the paper losses are the banks (Chase & Wells Fargo).
    Now I just look at it like I bought a ten year Call Option on the place for 5% of the purchase price and currently my option is below its strike price

  106. Anon E. Mouse,
    The cost of construction is a little bit better. Not as much as you would think based on the overall economy. Some of the cost is offset by the ever increasing permit costs.
    wow,
    I still think it can be a good business in Noe. We are still seeing sales in the high $2M’s and although there will be less buyers for this going forward there will also be a smaller amount of places to compete with. But, you need to be able to buy for the right price and most fixer sellers have not adjusted to the new reality yet.

  107. I didn’t buy into the Noe frenzy when it got high, I bought my last Noe fixer in ’05 and sold it in ’07.
    I almost did a spit take on my monitor when I saw the numbers from that effort. I imagine that was a personal best?! Congrats on catching the exponential upswing (and peak?).
    Now I just look at it like I bought a ten year Call Option on the place for 5% of the purchase price and currently my option is below its strike price.
    I believe you misspoke and meant Put option. Don’t forget that the put will lose some value at the end of 2012. This is a good example that hints at why FHA jumbo conforming limits provide (for now) a good price floor. Almost makes me want to get in the game (I did say almost…)

  108. “I believe you misspoke and meant Put option”
    Nope. A Put option gives the buyer of the option the right to SELL the underlying asset at a fixed price in the future, I don’t have that option. In the future if I want to sell my place I have to take whatever the market price is currently at.
    But I will have to pay off my mortgages before I can transfer the title to the new buyer (which is in effect buying the condo from the bank first). The amount I have to pay to buy the place outright from the bank is fixed. That sounds like a call option, I have the ability to buy the property from the bank at a fixed price anytime in the future. I used a ten year period for the option since that is the amount of time both loans are interest only.
    My loan interest and r/e taxes are actually pretty close to what I would pay to rent a similar place. So I don’t consider them to be a cost of the option. In 7 more years when I have to decide if I want to start paying principal I’ll take a look at what the value of the condo is and decide if I want to extend the option by making the principal payments or let it expire.
    This is how you make mental financial lemonade out of lemons. 🙂

  109. I was thinking a put option as well — because you could force the banksters to buy it back for the amount of the note by handing them the keys.

  110. Rillion, smart way to think about it, and if you are paying roughly rent equivalent then the deal is not tragic. Also, the fact that they were handing out 10-year i/o loans in 2007 illustrates why the SF downturn is going to take a looooong time to turn around, as distressed homes will not be shaken out of the system for another 5-7 years yet.

  111. EBGuy, are you referring to a specific event for 2012 as to why the put option loses value?
    Don’t 1099 Me, Bro (aka The Mortgage Forgiveness Debt Relief Act) expires at the end of 2012. However, the more I read IRS Pub. 4681 (see Chapter 1), I’ve become convinced that a foreclosure on a non-recourse (purchase money in CA) loan is never a taxable event with regards to debt cancellation (there is none). So the put option never expires as long as you don’t refinance.
    IANAL (or Accountant for that matter).
    A Put option gives the buyer of the option the right to SELL the underlying asset at a fixed price in the future, I don’t have that option. In the future if I want to sell my place I have to take whatever the market price is currently at.
    You can “sell” the house back to the bank at any point point in the future for the outstanding balance of your loan (deed in lieu or foreclosure), regardless of whether the market value of your home has fallen. The most you can lose, as you’ve pointed out, is the 5% downpayment (cost of implied put option). Hey, I’m assuming you OWN the underlying asset (your condo, highly leveraged), but I get your point about looking at it from a call option perspective. At any rate, the end result is upside potential with fixed downside risk (don’t forget the blown credit score).

  112. To quote from Options, Essential Concepts and Trading Strategies by the CBOE (page 92): “Indeed, a long put, long stock position is the same as a long call option position.”

  113. “Hey, I’m assuming you OWN the underlying asset (your condo, highly leveraged), but I get your point about looking at it from a call option perspective.”
    Heh, okay I see the difference we had, you assumed I owned the underlying asset, I’ve already gone with the assumption that I am renting it from the bank. It is much easier to sleep at night if I think of it that way. 🙂

  114. ” if you are paying roughly rent equivalent then the deal is not tragic.”
    Before I bought I was renting a 2bd/1ba condo for $2.58 per square foot a month, no parking and limited street parking in south of market. After taxes (I do my own taxes so the numbers are good), and adjusting for a deeded parking space ($150 month estimate), I pay $2.61 per square foot a month for a 2bd/1ba condo in the western addition. The total $ are more but I’ve got almost 200 sq. ft. more space and besides having a deeded parking spot there is ample street parking on my block.
    So even though I’ve lost my downpayment and closing costs, as you note, it isn’t tragic.

  115. 230 Westgate makes the WSJ after being listed for 30 days — article notes they bought a large house in monterey, wonder if it was our fernwood fave

  116. it appears that this sale may have stabilized the owners’ finances as 155 San Anselmo, their primary residence, was withdrawn from the MLS. As you’ll recall, it received a NOD on November 13.
    Then again, maybe not… a NOTS was filed for 155 San Anselmo on February 16. RealtyTrac is showing a 4/9 date at the courthouse steps. Stay tuned…

  117. So even though I’ve lost my downpayment and closing costs, as you note, it isn’t tragic.
    Well, not tragic. But symptomatic of current expectations. Someone’s spending 5 years saving for a downpayment to see it go up in smoke in 2 or 3 years. That has a lot of folks thinking about that RE “sure thing”.
    Renting incurs no risk of loss of any capital apart from your own rent, whereas owning has a non-negligible risk, especially after the 1997-2007 run-up.
    Making fence-sitters jump into owning will require more than the “I’m not paying much more in mortgage than I would in rent” rationale. As long as the risk of a double-dip stays there (prices are currently subsidized by the USofA nationwide), many regular folks will sit on their hands.

  118. lol,
    whoever said real estate was a sure thing? seriously? that’s the rationale long term renters use for feeling better about missing out on the big run-up. all the rent that was paid over the last decade could instead be equity in your home sweet home. altho, admittedly that is not the case if you came late to the party…

  119. If you actually look at a mortgage amortization table, you would see that, on a 6% 30-year fixed mortgage, you would pay 55+% of the principal value just on interest in 10 years and you would only have paid 16.3% in principal in those 10 years. Total payments in 10 years = over 70% of principal.
    And if you had an IO loan, who knows…

  120. Yes, equity built on standard amortization is ridiculously low the first 20 years. Your are renting from the bank, at least you are renting the amount the bank lent you.
    About “missing out on the big run-up”, we are getting somewhere totally different. This is called speculation. Speculation on RE has strings attached: emotional, fiscal, plus you have to maintain RE ,you have some degree of liability, you have to insure your “investment” which is not liquid at all.
    I’ll keep my 3-years-old GLD and AAPL shares that do not provide any sort of shelter but that I can sell in about 12 seconds for a $7 fee (it beats 5%!), thank you;)

  121. You are getting way off topic, the question is how much money do I need to bring to the court house steps on the 9th?

  122. sparky-b, These larger ones have a habit of getting delayed; I’ll post if it makes it to PropertyShark’s auction list (even then, PS no longer lists the amount owed — the estimate is $2.2million).

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