The life span of a typical short sale listing in Los Altos/Los Altos Hills goes as follows:

• The property is originally listed at a price very close to the debt on the property plus the transaction costs and maybe a little profit
• The property sits on the market for quite a looong time with no activity
• The Seller realizes that they are financially bleeding from every Orifice
• The property is re-listed at a below market value in an effort to induce offers
• The Seller receives multiple offers which are reviewed and submitted to the bank/investor(s)
• Everyone waits to see if a deal can be worked out.  Some are, but many aren’t

Below is a graph of short sale properties that are currently or have recently been on the market in Los Altos/Los Altos Hills.  I have included the original list price, current approximate debt and list price when the property ratified a purchase offer with the seller.

The actual numbers are below.

Sellers, a home’s value is not based on its loan balance.  Price it to the market and try to move on.

If you are thinking of buying a short sale property, check out the amount of debt on it and the number of lenders involved.  It may make sense to pass on it if there is too much debt or more than two lenders.

Yesterday I went down to 190 N. Market Street in San Jose to check on a property that was scheduled to be sold at a trustee’s sale. I came home with this video that shows how the process works.  The video is longer than I hoped for and won’t challenge Avatar for best picture, but I think it accurately details the trustee sale process.

Note: the house that I was checking out was postponed to another day. It was one of many properties where the trustee sale was either cancelled or postponed until another date.

Taking a quick look at the tax records on these properties, it is interesting to see how these properties and their owners got into financial difficulties.

Surprisingly, it appears as if only one of these homeowners used the property as an ATM. Six of the owners bought the properties as investments.  They remodeled the existing structure extensively or built a new home with the intent on selling and cashing out. It appears the last two “investors” ran out of money and/or the market turned sour before they could build.

Compared to two or three years ago, these properties are a solid investment because they will sell at about a 40% discount from their peak list price. 

However…

(1) These properties were clearly overpriced when they originally hit the market (otherwise they would have sold). They also provide an excellent example (worst case scenario) detailing what can happen when a seller over-prices his/her home and ends up chasing the real estate market down.

(2) With every upswing in the real estate market, there tends to be some sort of correction.  In the last 2 decades the upswings have generally outpaced the downswings and property has appreciated well.  A Los Altos home bought in 1995 for 500K is worth 1.2 million today.  However, that same home bought in 2007 for 1.5 million is worth 1.2 million today.  Unfortunately, our current market correction is much deeper and longer than most “experts” (and novices) believed could occur.

(3) Even though we are seeing some signs of recovery in our economy, we are unsure about the overall strength of the Los Altos real estate market. Therefore, it is tough to determine whether today’s “good buy” will be looked upon as such in the coming years.

Habitat for Humanity’s Neighborhood Revitalization Program is a partnership with the city of Menlo Park where bank-owned homes are acquired, rehabilitated and sold to Habitat’s partner families.  Click here for an overview of the program (PDF).  It appears to be a great program that addresses a multiple of issues; creating affordable housing, reducing the glut of foreclosure properties in East Menlo Park, and revitalizing blighted neighborhoods destabilized by the foreclosure crisis.

Our Menlo Park Build

There were 11 of us from the Coldwell Banker – Los Altos office that participated in working at three different home sites.  At one house, 4 of us disposed of the remnants of two structures and put the debris in a 40 foot dumpster.  The last 2 hours, we built a fence.  At the other two homes, installation of interior sheet rock (tape and texture) was done as well as one home’s exterior was painted.  As an office we put in about 40 man hours and had a blast doing it.

At break it was nice to talk with the “regulars” (retired folks who volunteer for a living).  I also had a good conversation with a fellow agent who had not volunteered before.  She really had a good time and assures me that she’ll do another. 

If you haven’t done a Habitat build, I highly recommend it.  It’s actually fun, you meet great people and you learn a little about construction as well.  Also, if you want to get more information, Habitat Silicon Valley is celebrating it’s 50th home built with a dedication on October 3rd.  Click here for details.

I’ve posted a couple photos form the day below.  Enjoy!

Our Habitat for Humanity build site.

Even I can build a fence.

Our office (well, most of them) volunteers.

First off, in 2008 there was only one short sale single family home listed for sale in the MLS.  January through August of 2009, there have been five single family homes listed as short sale listings.  That is a 500% gain, but it’s only 5 homes.  That’s less than 1.5 percent of the yearly average of homes that are sold in Los Altos.

One may ask why I’m writing about this?  Good Question.  I think consumers understand this, but it’s a point worth repeating, headlines are designed to get people to read articles and/or buy more newspapers. 

Secondly, it’s important to remember that national and even regional newspapers (or news sources) don’t necessarily report “the numbers” that are pertenant to our local market.  

In short, get facts from a reliable source that uses reliable local data.

For those of you who may want some local data.  Below are details on the five Los Altos short sales.  The information was taken from our local MLS and is deemed accurate but not guaranteed.

Los Altos Short Sale activity since January 2009:

720 Greenview Place: Sold.  On the market for 62 days.  Highest list price – $1,695,000.  Sales price – $1,549,000  Length of escrow was 44 days.

1831 Fallen Leaf Lane:  Listed at $1,325,000.  Bank took it back in foreclosure at $1,566,757.  Short sale was not successful.  House may come back on the market as an REO (bank owned property).

580 Camellia Way:  Sale Pending.  On market for 35 days.  Highest list price – $1,888,000.  Current list price – $1,700,000.   9 days into a 4 month escrow.

1725 Miller Avenue:  Sale Pending.  On market for 12 days at its current list price of $1,500,000.  Home sold in 2004 for $1,925,000.   3 months into a 4 month escrow.

860 S El Monte Avenue:  Available.  On market for 30 days at original list price of $1,500,000.

688 Lincoln Avenue:  Sale Pending.  On market for 3 days at original list price of $799,000.  Sold in 2004 for $850,000.

It will be interesting to see if any of these short sale properties that are under contract will actually close escrow.  Stay tuned!

The South Bay area has seen a huge uptick in short sale activity.  I’ve recently spent a fair amount of time with various clients looking at short sale real estate listings in Mountain View, Santa Clara and San Jose.

Buying a short sale property can be an excellent opportunity, but the process is full of headaches and there is a lot of competition.  Below are 5 reasons that buyers and their agent’s hate the short sale buying process.

(1)  Access to the property can be difficult.  If the homeowner is still living in the property, they sometimesalways make it inconvenient for a potential buyer to see the home.  Last week, I had pre-set appointments to show several homes and yet we were unable to get into seven of them.  The success ratio was about 1 in 3. 

Reasons for not gaining entry into these homes ranged from: the listing agent forgot to put the lock box out, the house key wasn’t in the lock box, the homeowner must be present during the appointment (however, they apparently forgot that they had set up appointments with 3 sets of buyers).  And a personal favorite, the home already has an offer approved by the bank.   Apparently, changing the MLS data to reflect the property sale wasn’t a good idea.

(2)  No interior photos of the home.  Like buyers of non-short sale properties, buyers of short sale properties want to preview homes online before driving out to take a look at them.  Is it asking to much for the agent, his/her assistant, his/her 12 year nephew to go out and take several interior shots of the home.  Show the good and the bad of the house.  You may get less showings, but I bet you’ll have a higher sales ratio.

Unofficially, I would say that over half of the short sale properties in San Jose do not have interior photos of the home.  Buyers especially like it when there are some creatively/artfully taken interior shots that somehow omit the plethora of problems with the home.  Problems like holes in the walls, missing/broken fixtures, broken windows and large piles of pungent dog droppings.  It seems that the bathrooms in short sale properties have become especially shy when it comes to real estate photography.

(3)  Lack of availability of the listing agent.  Apparently, once a listing agent has put a short sale property on the Multiple Listing Service with the obligatory “fax offers w/short sale addendum, pre-approval letter, and verification of funds,” the agent goes “Dark Ops,” never to be seen or heard from until the bank approves (if it is approved) the short sale.  One might have better odds at winning the lottery than getting a call back from a listing agent on a short sale property, especially on a home that is in demand. 

Short sale properties are in demand because the seller must price them below market in order to get an offer (s).  Without an offer (s), the bank won’t speak with the troubled homeowner about a short sale..

At least I can understand why the listing agent is so difficult to get in contact with (just a little).  There are many more buyers (for short sale properties) than there are properties and the agent may be in over their head.  The agent may have several properties and no assistance.  Over worked and underpaid.  However, agents clean out your cell and office voice mail and at least allow buyers/agents to leave a message.  Once you have the message, return the phone call.  That’s good business sense and that’s your job!

(4)  Web sites that purport to detail the status of a short sale properties are pitiful.  Many agents who “specialize” in marketing short sale properties think it is a good idea to create a web site that shows the status of a given short sale property. 

At first glance, this isn’t a bad idea.  Give potential buyers detailed instructions on how to submit an offer and “status updates” on where the home is in the sales process.  However, the information is only as good as the person who updates it.  If it is updated in real time, fabulous.  But most are updated every few days.  Information that is a few days old is worthless.  It makes you want to call the listing agent to get the pertinent information!  Now were back to problem of trying to get a hold of the listing agent.  It’s a vicious cycle!

(5)  Have a strategy for presenting offers and advise everyone about it.  Normally, the seller and their agent will look at all offers and choose the best one and then submit the best offer to the bank for approval.  However, I have found that there are no normal situations when it comes to offers on short sale properties.   

First off, many short sale properties hit the market as “sale pending.”  So much for that long drawn out sales process that everyone talks about.  Many agents submit offers to the bank as they come in.  Some may set a date and not accept any offers after that date.  The MLS instructions will read, ”Note: all offers have been submitted to the bank for review.  At this time, we are not accepting any other offers.”  I’m not too sure that this method doesn’t violate an agent’s duty to present “any and all” offers.  

Two things may happen when buyers get frustrated with the process of buying short sale properties:

(1) They walk away and don’t buy.

(2) Buyers submit offers on multiple properties, site unseen, hoping that they get one.  If the bank approves an offer, buyers will take their first look at the property.  There is a decent probability that the home will fall out of contract.  The end result may be that the seller may lose the house to foreclosure and the buyer moves on.  Not a good result for anyone involved. 

If the process were better, properties may sell for more and more properties would actually close escrow.  Instead, people are scrambling.

These homes are:

18840 Newsom Avenue, Cupertino

18900 Newsom Avenue, Cupertino

10210 Johnson Avenue, Cupertino

10187 Byrne Avenue, Cupertino

These homes are:

13119 Estralita Place, Los Altos Hills

15411 Vista Serena, Los Altos Hills