Can An REO Fail?

By Dave Fratello | June 2nd, 2011
All efforts to sell 217 Seaview (3br/2ba, 1400 sq. ft.) after a flipper's 2005 remodel have failed.

A standard sale failed in 2006, a "lease option" sale failed in 2007-08 and then a short sale failed in 2010. (A detailed history of the listings and various asking prices is in "A Lease-Option Flop, Now a Shortie.")

The bank took back this troubled property last December. (Apparently, that didn't fail.)

Now it's up as an REO, and we're forced to ask: Can an REO sale fail, too?

They're getting off to a good start if they're going to fail.

Recall that the property was purchased as a duplex in poor condition in Nov. 2004 for $945k. After some rejiggering and modernizing, the property was offered several times around $1.5m. At one point in 2009, it was closer to $1.3m.

Last year's attempted short sale had the come-on price of $849k. That drew interest within days, and the property posted in escrow in late August 2010.

There was interest at that price, obviously, but the lender didn't want to take such a big loss.

Now the bank is offering Seaview for $924,900, a markup of $75k over what drew notice last year.

They're also trying a little too hard to talk up the property's charms. The listing touts a "fabulous floor plan," a meaningless phrase for a pretty standard, smallish 2-story on a half lot, and a phrase that also doesn't tell you that the 2 downstairs bedrooms are, as we once said here, "impossibly small."

The listing speaks of "a phenomenal view of the ocean," whereas we had more forthrightly described that view as "a peek at the ocean down the alley." This pic from the listing seems more in line with MBC's take, doesn't it?

If the bank gets their $925k, then nixing the short sale last year might wind up being the right call.

And if the market isn't there at $925k?

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