Some of the toughest deals to bring to completion are also the kinds of deals we see more and more of around town – short sales and REOs.
A short sale is always going to be tough because two parties ("owner" and buyer) are making a deal that will cost a third party – perhaps a fourth, too – some money. The lender has to agree to a haircut, assuming you can find the actual decision-maker holding the paper.
If this sounds simple, you're not paying attention.
REOs may be simpler in theory, with the bank "owner" closer to the situation, but they really do not relish these sales, either, and don't work overtime to run them smoothly.
Throw into this mix buyers who jump into transactions fishing for a steal who may not be prepared fully for the next steps.
Buyers will be confronted with a long timeframe, numerous hassles and roadblocks, days and weeks of utter silence from the decision-makers, and the occasional evening in which Mr. and Mrs. Buyer look at each other and ask, "Is this ever going to happen? Is it worth it?"
Should we be surprised that lots of shorties go into endless limbo, and many short sales and REOs fail?
Stretch out the timeline and add lots of chances for buyers to walk, and you're going to have fewer successful transactions.
But you will have some.
Here's a look at the fate of a few short sales and REOs in recent weeks and months.Recently Returned to Market
- 629 36th (4br/4ba, 3500 sq. ft.) hit the market at $1.399m early last November and had a buyer by Thanksgiving. You may have noted Memorial Day passing recently, nearly 6 months since someone signed the papers to buy this home.
Now it's back, $100k lighter and with the all-caps announcement: "APPROVED SHORT SALE!" Approved, but looking for a new buyer.
We don't know the details here but we've certainly heard of prior cases of buyers trying to run the marathon with the bank, only to collapse and quit after the finish line kept getting moved. It's something that happens with shorties.
- 2504 Poinsettia (4br/4ba, 3200 sq. ft.) is a new home in the Trees owned by the bank that fed the developers, and which drew specific mention the other day in our MB Market Update for 5/15/09 as one sale that had helped clear out inventory of speckies.
Turns out: not this time. The buyers appear to have walked rather quickly. The home is back at $1.659m.Recently Successful
- 465 30th (5br/5ba, 3350 sq. ft.) up on the plateau finally closes the books at $1.720m.
This saga began when the listing first hit in March 2008 at $2.799m – apparently a "rescue price" that might have cured whatever was going badly with the loans on the property.
Now, 14 months later, it closes nearly $1.1m lower and at $513/PSF, about $50-$70/PSF lower than recent sales up there. You can see how corrosive these sorts of sales can be to comps.
The markup and markdown are worth further mention. The closed price here was just +$190k/+12% above the Oct. 2003 acquisition price of $1.522m.
Meanwhile, the new buyer (new owner!) drove a much harder bargain than a previous buyer, who had struck a deal at $2.150m but walked when the bank took 5 months to reply. (See "The Trouble with Shorties.")
The property was listed at $1.999m when this buyer signed paper, but the buyer paid $430k less than the bank's previously approved price. Brutal, and beautiful. Bravo.
- 1608 Poinsettia (5br/4ba, 3625 sq. ft.) drew recent mention here at MBC in "Recent Closings." It's a 1990s build that was an as-is short sale, originally asking $1.799m starting last August, making one deal near $1.6m that failed and closing late in April for $1.530m. Wow, $422/PSF in the Trees.
Working It Out... ?
- 3413 Pacific (5br/6ba, 3400 sq. ft.) sold short for $1.687m earlier this month, the second Tree Section newbie to go for less than $500/PSF this year (for more, see "Can't Fight the Future No More").
We have less information on the status of a few other shorties and REOs that have been off the market a while. Since 543 24th
and 958 Rosecrans
just made deals (see "Two New REOs
"), there are no delays yet of concern.
- 1733 Elm (3br/2ba, 1325 sq. ft.) is a partially destroyed, er, "pre-remodeled," cottage in a nice location. (It got a nod, not a pic, in "Glam Dirt" back in January.) The basic story is that folks paid $1.050m in Oct. 2004 with plans to remodel, but that didn't work out. There was an attempt to sell at $1.349m in 2007. Last list: $850k, but there hasn't been much to say for months now since a new deal was struck.
- 4104 Highland (3br/3ba, 2550 sq. ft.) is a bank-owned property that also made a recent deal, last posted at $1.175m after a listing for the same property started up at $1.719m in 2007. Any sale price compares against a March 2005 purchase of $1.450m. There's a whole backstory here that's beyond our scope.
- 1410 Ardmore (3br/2ba, 1600 sq. ft.) is an average, but remodeled, little cottage on a busy part of Ardmore near downtown. It was listed short for $1.5m in July 2008 (see "A Shorty with a Story"), and seemed to make a deal within a week. But there's still no transaction posted.
There may well be legal wrangling behind the scenes we're not seeing. The home sold for $1.2m in March 2006, then $2.5m a year later, and suddenly wound up short just one more year later at $1.5m. That's not normal, even for a shortie, not around here.