Distressed Properties

“Red flags” are clues that something is wrong or potentially wrong. They’re the hints that we need to investigate something further, the sign that we should be on alert.

Some parts of San Jose, and Silicon Valley generally, enjoy beautiful older homes with classic styling and beautiful finishing work.  These properties and neighborhoods are prized because they are not cookie cutter, not ranch, not too new.  They may be Victorian, Craftsman, Spanish, or any number of other interesting architectural styles.

One area of Santa Clara County that is well known for both charming historic homes and unfortunately also some stuctural issues among those older houses is the Willow Glen district of San Jose.

Willow Glen Foundation Red FladOn Saturday I showed some clients about a half dozen homes, all in Willow Glen, and we saw a lot of “red flags” which hinted of foundation problems, among others.  I thought I’d share a few pics I snapped at one of them with my treo camera here.  All of these were taken on the front porch of this house – all visible structural  “red flags” before we ever set foot into the house.
Continue reading

What is a kick out clauseA kick out clause refers to language in the contract which permits the seller, in some cases, to cancel the contract with the current buyer.  The current buyer is “kicked out” of contract.  Another expression for the same idea is a “release clause” – the seller can release the buyer under some situations.

This is a bit of a surprise to most Silicon Valley home buyers, who tend to think that they can walk away from a property during their contingency time frames, but a seller is stuck with them, no matter what.  That’s simply not true!

In the last few years, both the CAR and PRDS contract forms have been updated.  Both now include language that specifies the seller’s right to cancel the contract.  Both parties have rights and responsibilities. Failing to do what one has promised to do in the purchase agreement could potentially find that home buyer out of contract and without that home to buy.  There are many shades of gray, and few things are automatic.  If a seller is going to give a buyer the boot, there will be a “notice to perform” tendered first.

Let’s talk specifics.  When can the seller kick out or release the buyer? Continue reading

Many of the statistics quoted by news agencies and real estate information analysts refer to the “active” inventory as not just the homes which are truly available, but also those which are sale pending but with contingencies still in place (whether huge contingencies, such as bank approval on a short sale or the normal ones, such as property inspection and loan approval).  This often results in a more bloated look at what’s available than what is really the case, and it gives buyers the sense that it’s easier to purchase than it truly is. Let’s look at some statistics to see what’s happening over the last year, when it shifted from being a buyer’s market to a severe seller’s market for houses in Santa Clara County.

Normally there are more homes available (for sale, without a “sale pending” status attached) than there are closed sales each month.  But right now, the available properties are being gobbled up much faster than new ones are getting put onto the multiple listing.  Let’s view the graph to see the relationship between these two figures for houses listed and sold in Santa Clara County in 2012.

New listings vs sold throughout 2012 in Santa Clara County CA

At the beginning of 2012, please note that the new listings (the red line) outpaced the sold and closed properties (green line).   The delta between them shrinks over the course of the year, until in the fall they are nearly equal until closed sales far outstrip new listings.   That is a complete flip in the market, and it represents a shift in power from the buyer to the seller, too.  For those who prefer just the numbers, here they are: Continue reading

This evening I had a look at our multiple listing service, which for the Silicon Valley area is MLSListings.com, to get a sense of what’s happening with the short sale market here.

I was shocked at the low number of short sale houses, condos, and townhouses for sale in Santa Clara County.  Right now there are exactly 48 single family homes and condos/townhouses for sale (and not under contract or sale pending) in the county.  There are 362 pending and 154 which closed escrow in the last month. To get the absorption rate or months of inventory, we divide the solds in the last month by the for-sale number, so 154 divided by 48 and we get 3.12 months of inventory.  That is fast, but perhaps most shocking is just the low numbers involved at all.  Over the last year, there were 2372 closed short sales, on average a little under 200 per month.

This is a far cry from several years ago, where short sales seemed to be as contagious as the flu in winter.  What happened?

Lots.  First, we have a jobs recovery underway in the San Jose area, particularly in the high tech industries.  Second, we have low interest rates and improving faith that the market is recovering, and since about Feb 1 2012, we’ve had an increasingly deepening sellers real estate market in the South Bay.  That, in turn, has created rising prices and given back some equity to distressed, underwater home owners.  This third item is key: because home owners can see that the tide is turning, in many cases they also can see that if they hang on, eventually they will be in a position of equity again.  Not only that, but rents in many areas are rising rapidly too, making it possible in parts of the county to break even faster by renting out one’s home rather than parting with it for a loss.

Not everyone has it so good!  Today I had a tradesperson at my house doing some post-flood repair work.  He lives in Los Banos, where home values are down more than 80% from the peak.  We have not really seen this in Santa Clara, San Jose and nearby areas – seldom were prices down as much as half!  In Los Banos, it’s questionable whether home prices will ever catch up to the peak.  In Cupertino, Palo Alto, Sunnyvale, Mountain View and similar parts of Santa Clara County, though, home values are at or close to the peak already. Continue reading

Mini update for Santa Clara County as a whole as of September 17, 2012 for houses in SCC:

Actives = 1295

Regular sales for sale = 1157 (89%

Short sales for sale = 95 (7%)

Bank owned houses for sale = 43 (3%)

Sold in the last 30 days = 859

Regular sales closed in last 30 days = 675 (79%)

Short sales closed in last 30 days = 151 (18%)

Bank owned houses sold in last 30 days = 33 (4%)

It seems that although short sales are in increasingly smaller part of the inventory of available homes, they are highly desirable and are showing up in the solds at twice their ratio of actives. Put another way, the absorption rate looks to be higher.  Let’s check the math on the moths of inventory:

All houses in SCC:  1295/859 = 1.51 months of inventory

Regular sales in the county: 1157/675 = 1.71

Short sales in SCC: 95/151 = .63 moi (63% of one month!)

Bank owned homes: 43/33 = 1.3

All of these numbers are low, low, low – but the short sales are the lowest of all!

-mph

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POST FROM APRIL 22, 2011:
Yesterday we looked at the types of home sales around Silicon Valley by price point.  Not terribly surprising, most of the short sales and bank owned homes were in the lowest price ranges.  Today we’ll look at this type of information not by pricing tier but instead by geography – in other words, by either town, city or district of San Jose (area).  This post will not cover every area but will be a sampling a few communities, mostly on the west side of the valley (since that’s primarily where I work). Santa Clara County, houses for sale categorized by sale type (regular, short sale, REO)

By way of reminder, the small image to the left reflects Santa Clara County’s houses for sale as a whole – all areas and all price points. (You can see the full sized image by clicking on it.) The green area represents “regular home sales” and the brick red and light orange signify distressed  properties listed on the MLS for sale (red is short sales and orange is bank owned or REOs). Next let’s see a few regions within the county to see how things are faring geographically.

1. Almaden Valley area of San Jose – homes listed for sale by type – very few distressed properties on the market!

Almaden Valley houses for sale - shown by "sale type" (distressed or regular sales)Almaden is a lovely southwest San Jose suburban community (zip code 95120) that grew up initially with the cinnabar or mercury mining activity.  Today it’s an upscale area of more expensive homes than most of the county, it enjoys really good schools and scenic views of the coastal range as well as the Santa Teresa Foothills.  Housing here is costly but residents love the quality of life. Since the cost of homes for sale here is high, it’s not super surprising, after seeing yesterday’s post, that there are very few distressed homes on the market here. Next we’ll check the other extreme…. Continue reading

Closing date or number of days to closing?Silicon Valley home buyers (and sellers) are faced with a myriad of questions and choices when completing or reviewing residential real estate contracts to purchase the property.  One of them, early on, is whether or not a particular day is chosen for closing escrow or if instead it’s a number of days from contract formation (acceptance) to closing.

Which is better?

The are pros and cons to each approach, of course.  Many buyers want to be able to plan, without any ambiguity, when they will move in to their new home.  (For some this can be a matter of feng shui, astrology or a sense that some days are more fortuitous than others.)  This can work if negotiations are not protracted.

With distressed sales, though – bank owned properties (REOs) and short sales – and sometimes with multiple offers, the negotiations time frame can be hard to predict and if you pick one particular date, you may well have to change it later or find that you don’t really have enough time because a week or more gotten “eaten up” with counter offers, waiting for a bank or seller to respond or other delays. In those cases you may want to have the flexibility of writing in the length of escrow (number of days) rather than picking a certain date.

As always, talk with your professional real estate licensee for guidance as each case may be different.

 

Consider thisThis week I was emailed about a home mentioned on Trulia which seemed “too good to be true”.  It was a distressed property and the reader thought it was for sale for about $650,000 but it is in an extremely upscale suburb on the Peninsula and she could not find the home for sale on our MLS.  She didn’t want to pay to find out if this was a hoax or what, so she asked me to please have a look.

I clicked on her link and saw that it was a feed into Trulia from one of the companies which provides foreclosure information to consumers by paid subscription.  No where did it say the home was for sale, but instead it indicated that $650,000 was the home owner’s loan amount – and that the property had a Notice of Default filed against it.  The house wasn’t worth anywhere near $650,000, of course – instead it’s valued at more than $2,000,000.  (So this would NOT be a short sale – there’s tons of equity in this property.)

Some consumers think that if a home has a NOD, it is for sale.  That is simply not true.  Many homeowners (including some of my clients) have at times missed a payment and then found themselves scrambling a little to get caught up.  It’s not easy but it can and does happen sometimes. Continue reading

In Silicon Valley, it seems the more expensive the neighborhood, the less likely it is that you’ll find a bargain. Saratoga CA home buyers who are working hard to get their feet in the door during this opportunity in the market (with low prices and even lower interest rates) are scrambling to find a creative way to make their budget line up with this high end enclave’s real estate prices.

One solution is to attempt to buy a distressed property in Saratoga – namely foreclosure or a bank owned (REO – real estate owned by the bank) house, condo or townhouse or a pre-foreclosure or short sale listing.

There aren’t many of them to choose from, which makes the few that do come available very prized by motivated buyers.

Below please find a list of all available distressed properties for sale in Saratoga, CA. This city has several school districts so if you are looking for one in particular, please contact me and we can chat about finding you that perfect home.

Note: some of the homes which have a “Saratoga mailing address” with a Saratoga, CA 95070 address actually belong to a neighboring city (or the county), such as Campbell. So you may see some homes in the list below which say Campbell, for instance. Want to read more about Saratoga and its neighborhoods? (I grew up there and graduated from Saratoga High many years ago…) Please also check out this article on my popehandy.com website: Saratoga Real Estate and Saratoga Homes for Sale”. Also check out the Saratoga California real estate market update post on this blog.

Check back frequently – this list is updated automatically!

Frequently I’m asked if I (or another real estate licensee or agent) can help a consumer to purchase a foreclosure.  There are some nuances to this answer, but in short, it depends.

There are several stages in the foreclosure related sales in California.  Often, homes somewhere in this quagmire are listed on our Silicon Valley area MLS or multiple listing service.  If a property is listed in the MLS, then yes, we Realtors can help home buyers with a distressed sale purchase.

  1. Pre-foreclosure (where payments have been missed and a Notice of Default or NOD has been filed – often, but not always, these homes are on the market and included in the MLS.  If they’re in the MLS, I can help.  Often these are short sales (but short sales are not always in pre-foreclosure – they may not have missed any payments).
  2. Trustee’s sale, or actual foreclosure on the courthouse steps.  No role for a real estate agent here.  There are some big caveats and warnings! First,  often what’s owed against the home is more than it’s worth and the only way to purchase a home here is to pay off all the debts (so it may not be much of a deal!).  Second, if you buy here, you get NO inspection contingency and must pay cash for the house.  End of story – no backing out.  Worse, you cannot inspect it ahead of time!
  3. Bank owned or REO.  These are usually listed on the MLS and if so, I can help you with it.  Sometimes banks hold onto them between the trustee’s sale and prior to listing them with a broker.  Often this is only for a month or two but sometimes it’s longer.  If it’s not on the MLS, it’s very very hard, or maybe impossible, to buy it.

While it’s not hard to locate homes where owners have missed some payments, it should not be assumed that these houses are either for sale or that the owners have any intention of selling them.  In my opinion, it would be harassment if consumers showed up on their doorsteps trying to purchase a house where a payment has been missed.  Most, maybe all, of the residents there would be offended.  They may be trying to get a loan modification (a friend of mine got one approved last week!) or have family & friends helping them to get back on track. If it is not listed in the MLS (which you can find at www.MLSListings.com – the public portal of our agent multiple listing service), the odds are overwhelmingly against it being available to you.

Normally I don’t publish press releases, but this one is important – and has some consequences that I think should be mentioned lest weary, distressed home owners think that they are now out of the woods with short sales in California.

First, though, the press release from the California Association of Realtors (a trade group to which I belong).  Afterward, I’ll mention (some of) the negative impact and discuss why I see short sale lawsuits looming on the horizon in Silicon Valley and why this change may add one more reason for litigation.

CALIFORNIA ASSOCIATION OF REALTORS® applauds Gov. Brown on signing SB 458 into law

LOS ANGELES (July 15) – The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) applauds Gov. Jerry Brown on signing SB 458 (Corbett) into law.   SB 458 extends the protections of SB 931 (2010), to ensure that any lender that agrees to a short sale must accept the agreed upon short sale payment as payment in full of the outstanding balance of all loans. Continue reading

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Mary Pope-Handy
Realtor
ABR, CIPS, CRS, SRES
Sereno Group Real Estate
214 Los Gatos-Saratoga Rd
Los Gatos, CA 95030
408 204-7673
Mary (at) PopeHandy.com
License# 01153805


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