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!

Silicon Valley home buyers often “want a deal“, so they may consider purchasing a house, condominium or townhouse which is listed as a “short sale”.  What should you look for if you’re viewing one?

First, it is helpful to realize that the sellers cannot make any money at all from the sale, so often Los Gatos or San Jose area short sale sellers are unmotivated or depressed.  Sometimes they don’t even move themselves out of the way for showings.  A few months ago I saw one in which during a noontime previewing appointment in Willow Glen, two of the occupants were in bed (in two different rooms)!  Needless to say, I felt like I was imposing and left fast.  And I did not return with my buyer clients!

Second, with short sales, most often the sellers are truly distressed financially and the property may have been neglected or have deferred maintenance. Additionally, some sellers in this sad situation are emotionally upset or sad and they may not even keep the property clean. (When you go to see residential real estate, most often the sellers leave unless they are elderly or infirm.) (more…)

Silicon Valley home buyers who are looking for a good deal can’t help but notice that prices on short sales and bank owned homes are a bargain compared to regular sales in the San Jose area. But what exactly ARE they? What’s the difference between a short sale and a foreclosure? What are the risks involved in buying one of these in Santa Clara County? Today we’ll have a look at the various types of distressed properties and the risks associated with purchasing each.

What are short sales?

Short sales are when home owners need to sell their home but there’s not enough equity in the property to pay off the loans and closing costs.  So the only way they can sell is if the bank agrees to accept a “short payoff“.  The bank or banks get paid in short, hence short sale.

If you’re looking to buy a Los Gatos home, you may want to consider purchasing a short sale listing or bank owned property as they are usually more affordable, as real estate prices go, than “regular sales”.

There are a few caveats to buying distressed properties in Los Gatos, though. First, be aware that there are hardly any of these foreclosure or pre-foreclosures homes for sale at any given time in the Town of Los Gatos. At last count, it was about 12% of the real estate inventory altogether (both REOs and short sales combined).

How low will the short sale home seller go? Or the bank if it’s an REO property?

Second, there is some confusion about pricing and discounts. Just as with normal sales, if a short sale house, condo or townhouse is offered at a low price (or is reduced to become attractive) they will sell fast and very likely close to list price. Sometimes you can get a home for much less than list price, but you need to check the comps. In some cases, the home may be priced below a reasonable market value already and it may get bid up, especially if there are multiple offers.

Whoever bids first gets the house, right?

Third, a quick reminder that these sales are not like normal ones in which the first person in contract gets the house. With distressed sales there aren’t a lot of guarantees that the buyer will be able to close on the deal even after acceptance by the seller. With a short sale, remember that the bank or lending institution must approve the sale. If the lender thinks the price is too low, the sale won’t go through unless they buyer goes up in price. Other offers may still come in after yours is accepted, and the bank can simply not approve yours and instead decide, with the seller, to work with the higher offer.

When banks own the property, they want to sell to the highest bidder. You may get into contract only to have the bank find a better offer – and kick you out of escrow! This doesn’t happen in a regular sale, of course. (See also this post:  What is a “Kick Out” Clause? )

All disclaimers now made, below please browse the list of available REO listings and short sale listings in Los Gatos, CA.

Browse Los Gatos Short Sale Listings & Bank Owned Properties for Sale

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No, sorry, there aren’t a lot of distressed homes for sale in the Saratoga and Los Gatos areas.  Would be bargain hunters email me regularly, hoping to find lots and lots of short sales and bank owned (REO – real estate owned by the bank) houses for sale in high end west valley neighborhoods.

There just aren’t many of them!

As of today, in Los Gatos (95030 and 95032 zip codes) and Saratoga (95070) , there are 185 single family homes (houses, perhaps a few “duet homes”) for sale.  Of the 185, a mere 14 of them are distressed properties (6 bank owned, 8 short sale).  That is just 7.5%!  For those who want Los Gatos or Saratoga Schools (not Campbell, Union, or Cupertino), the odds are even worse.  Only two of those homes go to the Los Gatos-Saratoga High School District. (Prices of all distressed properties currently available in these areas range from $699,000 to about $3 million.)

There are some good deals to be found in addition to this very small pool of bank owned properties and short sale listings in Saratoga and Los Gatos.  Often the best deals are found among homes which have been on the market a long time but aren’t selling due to cosmetic issues.  Homes which need changes such as fresh carpet, paint, or “easy” updating and remodeling (like new countertops, light fixtures, etc.) can be the best bargains around, particularly if the seller is truly motivated.  So don’t lose heart – just broaden your strategy a little and you’ll be far more able to locate a suitable home.

Be careful what you wish for. The news stories make it sound so attractive – get a home for 10% less than market value. That may happen. Sometimes. The national average for short sales actually closing is extremely low, by some counts as low as 10 or 11 percent.

What about San Jose area short sales? Lets start with the lay of the land in Santa Clara County specifically (Silicon Valley includes Santa Clara County and a bit of Alameda, Santa Cruz, and San Mateo Counties). Some areas are loaded with short sale listings, others have few, if any. The ˜best deals, in terms of low pricing, are going to be in areas with a lot of the short sales because they sell for less and pull property values down, making them more and more affordable. Those are the areas with lower priced homes, generally, the entry level areas.

In places like South San Jose, the south county areas, and Blossom Valley, for instance, most of the entry level homes are short sales. Values are plummeting there.

In places like Cupertino, Saratoga, and Los Gatos, there are hardly any short sales. Virtually none. And home values are rising.

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Which part of the Santa Clara Valley
is seeing all of this foreclosure and pre-foreclosure activity?

Depending on where you live in Santa Clara County, you may be seeing a whole lot of distressed properties on the market – or you may be seeing none at all. This is part of our current “bifurcated market” situation.

Generally, the more expensive areas of Silicon Valley (Palo Alto, Cupertino, Saratoga, Monte Sereno, Los Gatos, Almaden Valley and Silver Creek) are not suffering from a huge number of listings in which the sellers are in financial straits.  There are some, though.

It is the less wealthy areas in San Jose (including parts of downtown, the east side, south San Jose, Santa Teresa, Blossom Valley) and the south county cities of Morgan Hill and Gilroy) where there is an inundation with short sales – in the lower price ranges especially.

Generally speaking, most short sales, preforeclosures and bank owned homes are priced below $600,000.

How can you tell if a home is in pre-foreclosure?

Homes listed for sale in your neighborhood of San Jose, Saratoga or Los Gatos that are in pre-foreclosure may look like any others available. They may have granite in the kitchen, beautiful baseboard and crown molding, new dual pane windows, and on and on. The sellers may have borrowed and borrowed to improve the property, be unable to make the payments due to job loss, divorce, or other problems, and now be in default on a loan, heading toward foreclosure.

This status usually doesn’t “show” unless you have access to the county records or have a subscription to a service that lets you know the status (and those services are no where near 100% reliable, by the way). Your real estate agent, who should have a subscription to the MLS with full information, can see a report at no cost that shows the foreclosure history.  (Not all pre-foreclosures are short sales.)

What’s a short sale? Being in “pre-foreclosure” means that the seller has missed payments on a loan in which the real estate owned is used as collateral, or security. Let’s say a home is worth $1 million, but the amount in default is a small loan, perhaps of $25,000. If the home is sold, it can pay off the debt in full.

Sometimes, though, a distressed seller bought higher than the home is now worth. When prices fall (and if the owner bought the home with a low down payment especially), selling the home will not be enough to pay off the loan. So again let’s imagine that a house is worth $1 million, but the owners owe $1.1 million on it (and to sell they have to worry about closing costs to boot). By selling the home, foreclosure can be averted – but to do so, the bank will have to agree to not being repaid 100%. This is a “short sale”. (Not all short sales are in preforeclosure, though, as not all home owners of these properties have missed payments on their mortgage.)

We’re seeing a lot of short sales in the entry level markets. In these cases, current owners bought their properties a year or two ago – for 10% or 20% more than those houses are now worth.

In the higher-priced regions of Silicon Valley, it’s less common to see a short sale than it is a straight pre-foreclosure because someone just can’t make the loan payment (due to some new problem like divorce or job loss, or because the adjustable loan went up and the payments are now untenable).

See also:
So you think you want to buy a Silicon Valley short sale?

Short sales sell but often don’t close: why?

Browse Short Sale Listings & Bank Owned Properties for Sale in Los Gatos