LA Digs - Northeast LA Real Estate Blog

We just closed escrow on this short sale in the hills of Highland Park.  Perched on a hill in Highland Park, 5318 Raber Street has the privacy, views and potential to make a fantastic hideaway in the city.

We brought this sweet 1926-cottage on the market in March, and after receiving multiple offers, put it right into escrow.  It took four months to navigate the short sale process.  We received short sale approval in July and were able to complete the escrow process with a final sales price of $290,000.  We look forward to seeing how the new homeowners transform this house!

If you would like more information on short sales and how they work, email us or give us a call.

If you’ve been sitting on the fence about whether to proceed with selling your house as a short sale, you should read this article by Lew Sichelman.

A short sale is a transaction in which the homeowner owes more on the home than they can sell it for. What is owed includes the mortgage debt owed to the lender as well as the closing costs they will incur when they sell, such as commissions, title and escrow fees, taxes, etc. The property can’t be transferred unless the lender agrees to take less than they are owed because the lender has a recorded lien against the property that has to be satisfied before the title can be transferred to the new owner. Of course, a lender isn’t going to forgive the debt unless there is no hope of having it paid in full, and that’s where the homeowner’s distressed financial situation has to be evaluated. Also, there is a penalty to be paid which has been both a big black mark on the homeowner’s credit score and a tax penalty by the government for what is called “debt relief.” This tax penalty has been lifted for the last 5 years because of the severity of the economic downturn.

As the article points out, this 2007 tax relief law expires at the end of 2012, but short sales and foreclosures can take several months to complete. If you have been hanging on to your house, hoping for the market to return to 2007 levels so you can sell it, you may want to reconsider your strategy. In our market area of Northeast Los Angeles, Pasadena and surrounding communities, the average sales prices are mostly still down 20% to 30% from 2007 levels.

There are buyers looking for properties to buy now. Mortgage interest rates are still very low. Inventory is very low. These conditions make it a perfect time to put your house on the market–if you can sell it for what the market will bring you. We are experiencing the best time in the last four years to sell a home. Some homeowners have had the pleasant experience of thinking they would have to short sell their home and finding that it sold for enough to be a regular sale! We would be happy to meet with you confidentially to discuss your own situation.

Tracy King 626-827-9795 This email address is being protected from spambots. You need JavaScript enabled to view it. DRE#01048877

Keely Myres 323-243-1234 This email address is being protected from spambots. You need JavaScript enabled to view it. DRE#01834633

If you’ve been sitting on the fence about whether to proceed with selling your house as a short sale, you should read the column by Lew Sichelman printed in the Los Angeles Times last week.

A short sale is a transaction in which the homeowner owes more on the home than they can sell it for on the open market. What is owed includes the mortgage debt owed to the lender as well as the closing costs they will incur when they sell, such as commissions, title and escrow fees, taxes, etc. The property can’t be transferred unless the lender agrees to take less than they are owed.

As the article points out, the 2007 tax relief law expires at the end of 2012, but short sales and foreclosures can take several months to complete. If you have been hanging on to your house, hoping for the market to return to 2007 levels so you can sell it, you may want to reconsider your strategy. In our market area of Northeast Los Angeles, Pasadena and surrounding communities, the average sales prices are mostly still down 20% to 30% from 2007 levels.

There are buyers looking for properties to buy now.  Mortgage interest rates are still very low. Inventory is very low. These conditions make it a perfect time to put your house on the market--if you can sell it for what the market will bring you.

Did you know that many buyers look at Super Bowl Sunday as the beginning of the Spring buying season? Now is the time to make it happen!

After 5 months and two different buyers, we have successfully closed escrow on this Tudor-style short sale in Eagle Rock. We brought this 2 bedroom, 1 bath home on the market at the end of August in 2011 and received multiple offers. After a couple of months we got short sale approval from the lenders but the buyer backed out of the sale. Luckily, we had a buyer who couldn't get this home off his mind and he quickly put an offer in. We went through the short sale approval process a second time and finally closed escrow!

Features of this home include eastern views over Eagle Rock, vaulted living room ceiling, original light fixtures, hardwood floors, a terraced back yard, and character throughout. Congratulations to our seller, and we welcome the new home owner into the neighborhood!

Property Details:
Listed for $399,000
Sold for $457,600
2 bedrooms, 1 bath
1,117 sq. ft. on a 7,800 sq. ft. lot
Built in 1924

We represented the buyers on the sale of this charming short sale in Glendale. Originally listed for $599,000, there were multiple offers as potential buyers clamored over the location and character of this Tudor-style home. Our buyers were successful and we just closed escrow yesterday at a final sales price of $665,000. The short sale process took 3 months from accepted offer to short sale approval to close of escrow. Not too long in the short sale world! Features of this home include Batchelder-tile fireplace, coved ceilings, remodeled baths, separate family room, and back yard with patio and pool. Congratulations to the new home owners!

Property Details:
Listed for $599,000
Sold for $665,000
3 bedrooms, 2 baths
1,921 sq. ft. on a 9,420 sq. ft. lot
Built in 1926

Listing and photos courtesy of Kendyl Young, Teles Properties

Just last month, C.A.R. (California Association of Realtors) placed an open letter advertisement in California’s seven largest daily newspapers, calling on lenders and industry regulators to streamline and improve the short sale process.

To dovetail off that effort, today C.A.R. is launching a California Short Sales website (www.shortsalescalifornia.org) -- a new website to keep realtors and consumers up to date on all the latest news and insider tips regarding the ever-changing short sale process.

With information for both consumers and REALTORS®, the website is full of need-to-know resources about short sales, and provides up-to-the-moment news, legislative information, legal tips, and lender requirements.

The Consumer section, geared for distressed home owners, provides helpful tips if they are on the brink of losing their home.  They can  learn about government-sponsored programs to assist distressed buyers, access a glossary of commonly used distressed real estate terms, and learn how to avoid short sale scams.

If you need more information on the short sale process works and what is involved, give us a call at 626.844.2256.  Keely is a Certified Distressed Property Expert, and we are involved in several short sales in the area.

How did Eagle Rock do with distressed property sales this year? It’s interesting. In 2009, there were 118 sales of which 17 were short sales (15%) and 45 were foreclosures (38%); so a total of 53% of all sales were distressed. The average sales price was $446,000.

In 2010, we had 22% short sales (28) and only 12% (16) foreclosures of the 130 sales recorded (according to the itech Multiple Listing Service).  So 34% of all sales were distressed properties. The average sales price was $468,000. It’s good to see an improvement, but we certainly haven’t “bounced back” as many hoped that we would.

A big difference is that there were a lot more foreclosure sales in 2009 than in 2010. I credit the increase in short sales and resultant decrease in foreclosure sales to the change in lenders policies toward short sales. They became much more amenable to granting short sales.  I closed more short sales this year (3) than the year before (0), all of them listings.

It looks like we are doing a bit better in 2010 with somewhat more sales and higher average sales prices as well as fewer distressed properties sold overall. Another way to say it is that 66% of sales in 2010 were “regular” sales as opposed to 47% in 2009. It’s interesting to note, however, that the highest sales price in 2009 was over $200,000 higher than the highest in 2010. In my opinion, the reason there were more distressed sales in 2009 than regular sales was more because “regular” sellers wanted to wait out the downturn and sell later when the market recovered.  This year, some of those people either couldn’t or decided not to wait any longer to sell. Price is of key importance, as well as the perceived desirability of the property for sale.  Buyers are not as reluctant to make offers much lower than the asking price today, which is helpful when they are sincere offers that can be negotiated up. One of my sales this year started off with a $165,000 difference in offer vs. list price, and we eventually ended up at $65,000 less than asking.  With no predictions or indications of a quick return to prosperity in 2011, it will be interesting to see how sellers and buyers deal with that. I have noticed that the uptick in interest rates has encouraged an end-of-the-year flurry of business.

Here are some resources:

From the website www.YouWalkAway.com: Strategic default, also known as voluntary foreclosure is when the borrower decides to stop paying a mortgage even though they can still afford the payment. For many people who are upside down on their mortgage, the decision to strategically default is one that is difficult, but often times is the first step to financial freedom.

Wikipedia has an interesting discussion of the ethical issues at play http://en.wikipedia.org/wiki/Strategic_default. One notation from an ethicist states that the economy is essentially amoral.

http://www.city-journal.org/2010/forum0427.html. A really well-considered discussion with good ideas about how the banking industry could take some responsibility for helping to fix the problem:  “Zingales and Posner propose that lenders be required to give underwater homeowners the option of resetting their mortgages to the current value of their houses in exchange for giving the lender 50 percent of the house’s future appreciation. Enough with guilt-tripping underwater homeowners into holding on to their homes. Instead, let’s focus on equitable and practical solutions to the negative-equity crisis. The Zingales/Posner proposal would be a great start.”

http://www.strategicdefault.org/  Free advice.

My thoughts: The question “can they afford to make their payment?” is key. For example, it would obviously be a strategic default if you bought a house with 20% down, a good 30 year fixed loan at say, 5.5% interest, and you still have the same job, your family is fine, you have $20,000 in savings and nothing has changed except your $500,000 house is now worth maybe $400,000. You may not like that fact that your house is now worth less, but you can clearly continue to pay for it.

But say the same situation has one change: you were laid off from your job and the best new job you could find pays 60% what your last one did. You are spending some of your savings—not a lot, every month just to pay the bills. You could change your spending habits and squeak by. Do you bail?

Or try this: Same issue with your job, but you could take on an extra job and be fine, or save yourself the time and trouble and walk away.

Think about these scenarios within this same situation:

There are 5 other families on your street that are experiencing similar issues

There are 3 foreclosures on your block that are boarded up and overgrown with weeds

At what point do you draw the line?

Remember when Alan Greenspan, former chair of the Federal Reserve, talked about the irrational exuberance in the stock market? You might not, because the quote is from a speech he gave all the way back in 1996!

remember that these are figures for the entire state, not your local market.

It seems like I'm always saying that here at last is the straight story on the real estate market, but it's always true! Last year, 2009, there were 121 sales in Eagle Rock, zip code 90041. Here's the interesting part: 60% of the sales were distress sales, that is, either short sales or bank-owned properties. Now, in 2010, we had 9 sales in the first month and 55% of those were short sales or REOs (bank-owned). While the foreclosures were scattered out fairly evenly over the last year, I noticed that the short sales that actually closed escrow tended to happen later in the year, and in January, 5 of the 6 distress sales were short sales. This is in line with the government's efforts to help people avoid foreclosure, modify their loans and then approve a short sale if the loan modification didn't work out.

What you can't tell from the Multiple Listing Service is that a lot of the normal sales were under duress as well. I know personally of several divorce sales and a few properties that had to be sold quickly before the owners were unable to make any more payments due to job losses or failed businesses.

 

In other words, very few people who didn't have to sell did sell. But look at the graph and table for the year from 12/08 through 12/09: it's obvious that we did reach a bottom in the first quarter.I think the dip in November was not another bottom, just an example of my point about distress sales. Notice on the table how few properties were selling at the end of the year--because of holidays, because of perception of the market. If you take the dip in November out, the market was steadily higher than earlier in the year. And note that the year over year prices were up, which is much more meaningful than the dramatic 1-month changes around November.

What's going to happen this year? My crystal ball is still on backorder, but so far this year I have talked to a lot of people who want to sell and many who want to buy. From the energy I'm feeling, I'd say the first quarter of the year should be very active. In most years past, the first quarter is sluggish with sellers talking a lot about going on the market in the spring, but not getting around to going on the market until May or June. Buyers want to take advantage of the federal tax credit programs with their April 30 deadlines, and more and more sellers are saying they are ready to sell even if they can't make what they might have in 2007. This promises good things to come.

This is the first of my end-of-year reflections on where we are and where we’ve been and why do we do this anyway?
I have lots of caveats about the following statistics. Note that the source is called Trend Graphics. These are generalizations, trends, an overview of what the market has done over a period of time.

Sign of the times:
5603 Sea View Dr. Malibu CA 90265
List Price: $3,900,000
MLS # P679808 ** Buyer backed out- Short sale- Lender is ready**

Panoramic sunset views and great surf at the world famous Zuma Beach. This spectacular home is situated in the exclusive gated community of "Sea View Estates". It features great whitewater views from the infinity gym pool area (5mile/h) to the terrace and from many rooms inside the house. Security camera. highend upgrades. 7,260 sqft.
But if you’d like to make an offer, call me, I would be happy to represent you!

Wow, short sales have gotten such a bad reputation that Redfin has put this notice on their website:
"This home is flagged as a short sale. We're sorry, we don't tour or write offers on short sales because of the slim chance that you'll get the home."

For those new to the real estate purchasing game, a short sale is one where the sales price isn't enough to pay off the loan so the homeowner has to get the lender's permission to pay less than what they are owed. Click here to find out more about short sales. I have to say that one listing agent I know who specializes in doing short sales says he closes most of the ones he lists. So if you are a seller who might be short sale material, call me and I will refer you to him. He is one in a hundred, so it doesn't change my theory.

So if even a Redfin (read discount) agent won't show you a short sale listing, then these are not generally viable listings (which I've been saying for a long time). Therefore, if you look at the number of active listings on the market today in, say, Eagle Rock, and you subtract the number of short sales, you get a very low number, which helps explain why well-priced homes are selling with multiple offers. Today, of the 38 listings on the market including condos, single family homes and units, 8 are short sales and 9 are foreclosures. That means that 20% or 1/5 of all the listings are short sales. Another fifth are foreclosures, so 3/5 of the listings in Eagle Rock are normal sales, only 21 properties. That is not very many listings to choose from. Even if you add the foreclosures back in since it is actually possible to purchase a foreclosure if you are really determined, this buyers' market is over. The sellers' market is here. Now we have to convince lenders that they need to stop writing down values because of the fiction of a declining market. And again, go online and sign the petition regarding the Home Valuation Code of Conduct travesty (http://www.hvccpetition.com).

However, to sellers I say: don't think that because we are in a fairly hot market right now that you can go back to your 2005 or 2006 fantasy price. That is not realistic. If prices have come down 20% since 2006 in, say, Eagle Rock, which is a rough but not unrealistic number for general purposes, that means that if your home was worth $500,000 in 2006, it's worth $400,000 today. Yikes, that's painful! Let's give Eagle Rock a break and say that prices have only come down 10%. That is still $50,000 on a $500,000 property. Jumping back up to the $500,000 is not happening. However, if you price your home artfully and present it properly, you will get top dollar, whatever that is today. That, by the way, was a little shameless self-promotion, if you didn't notice.

Every Tuesday, the Coldwell Banker offices and a couple of MLS organizations have Broker caravans where we look at the latest listings to come on the market. I thought I'd share the news with you, as several I saw today are really good deals! If you want to make an offer, call me! I would love to represent you.

1575 N. Los Robles, Pasadena, only $384,900! Near Howard St in NW Pasadena, this is a 1905 Craftsman, over 1200 sqft with really high ceilings, 3 bedrooms, a big lot (8841 sqft), and a super price! It's a bank-owned, sold as-is, but has copper plumbing, central air & heat, and still some character touches.

278 W Altadena Dr, Altadena, $449,000. Another bank-owned, this one is 3 bedrooms, 2 baths, a Janes Cottage on a 8612 sqft lot.

4577 Jessica Dr, Mt. Washington, $538,000. Cape Cod style cottage with 3 BR, 1.5 baths, nestled under the trees and in Mt. Washington Elementary area.

>

5315 Buchanan St, Highland Park, $499,000. A former bank-owned that was rehabbed extensively into a surprisingly nice 5 BR, 3 bath home with entirely new systems and interior. It's not a high-end neighborhood, but this is a real deal for someone who needs this much space.

4840 Hartwick St, Eagle Rock, $699,000. This is all about the backyard. If you want a kid's paradise where they can play as if they lived out in the country all in your own backyard, this is your dream come true. First, sit out on the deck overlooking it with a lovely south-facing view. It's a good house, too, with 4 bedrooms, 2 bathrooms, in good condition. Located at the end of a culdesac in the heart of Eagle Rock.

2059 Windover Rd, Pasadena, $1,100,000. A midcentury on a huge lot, great style but potential to be really stunning.

Out in Pasadena's West, that is, west of the Arroyo and south of the 210 Freeway, is a lovely area that includes the San Rafael Hills. Most of the homes were built in the 50s, they've been well maintained, have great views, and it's a convenient location to both Pasadena's Old Town and downtown Los Angeles. I noticed some odd real estate happening over there last year when I had a listing that never sold that had appraised at $850,000, thanks to a couple of sales that seemed unusually high for the time. So here's my investigative report:

As of today, August 3, 2008, of the under $1 million market, if you look at the gross numbers it looks like there are 19 homes currently on the market, 19 have sold so far this year and 3 are in escrow. At this rate there are over 7 months of inventory. Since over 4 or 5 months' supply qualifies as a buyer's market, it looks like it's slow in the San Rafael Hills. It is truly slow, since we only have 3 properties in escrow.

Of the 19 homes currently on the market listed for $1,000,000 or less, 8 are short sales and 3 are REOs. Of the 19 properties that have sold so far this year, 2 were REOs, 3 were probate or trust sales and none were short sales. Of the 3 properties currently in escrow, 1 is a shortsale and 1 is an REO. Of the 11 expired or withdrawn properties, 4 were short sales and 1 is now on the market as an REO.

The current real estate commentary you read in the paper says that there is a lot of inventory on the market which is bringing the prices and the demand down. But if you remove the short sales from the equation, we now have 11 active listings or an inventory of about 4 months, which is closer to a normal or even a seller's market.

In my educated opinion which is verified by bankruptcy attorneys and many Realtors who specialize in short sales, most short sales will not be approved. Why? There are many reasons, mostly stemming from the fact that most people don't understand how they work and they advertise their property as a short sale with no idea whether they qualify for one. And Realtors take them on with the same ignorance. Of the 8 short sales now on the market, I'll bet you not one sells until they go through the foreclosure process and come back into the market as an REO, or bank-owned sale. What does this mean to you?

If you own a house in the San Rafael Hills and want to sell it, you are competing with some "fantasy" listings as well as some really bargain priced REOs. The 2 cheapest properties on the market are REOs. Unfortunately for you, you can't disregard them because the buyers and the appraisers are looking at them, and believe me, these properties will sell and sell quickly. So if you don't have to sell, you probably won't.

If you're a buyer, how can you take advantage of some of the really great deals that do appear, like those 2 REOs? First, can you pay cash? Or do you have such a large down payment that your loan can be under $417,000? You are in good shape. If you already own a home that you have to sell in order to buy another, you need to put it on the market and sell it for whatever you can and be willing to rent until you find the deal you want. It's not that difficult, there are lots of rentals out there right now. And when you're ready, don't be confused by the short sales you see on the market. Just ignore them and look at the homes that you have some chance of actually purchasing.

Well, I'll tell you one thing that's not real is a short sale. Those are properties where the sales price won't be enough to cover the loan and closing costs, so the bank has to agree to take less than they are owed to make the deal work. Guess what? They almost never agree to take less! They don't care that they may make less eventually when they have to sell it as a foreclosure. They want to make an example of these irresponsible sellers and make them suffer for getting themselves into such a financial pickle. If you are such a seller and need to sell, you had better be in real financial trouble or your short sale will not be approved. That means you can't have any other assets, or if you do, you have to give them to the bank. They'll transfer what you owe to another property, or they'll take a promissory note if you don't own any other real estate. And you almost always have to already be in default on your loan, so your credit is trashed regardless

So, you the prospective buyer say, what's the harm in looking at short sales? Here's the problem: you are wasting your time. Not just by looking at unlikely properties, but what if you fall in love and make an offer? What if it's actually accepted, pending lender approval, of course? Then you waste even more time waiting weeks, even months to find, 95% of the time, that the lender turned the deal down and foreclosed on the property yesterday. Not only is that really frustrating, but you have a huge loss in missed opportunities. That cute little foreclosure on the next street that sold in a day. That regular sale that sold in multiple offers last week. Oh, yes, and even though the paper says that the prices are dropping, now that you're back in the market it seems like anything that's any good is $20,000 higher than you thought you were going to pay with the short sale.