Preforeclosure on Chelsea

There have been three active houses on Chelsea (all next door to each other) over the past year or so.

The first is the northernmost house at 1020 Chelsea (photo credit: Westside Bubble). This house was on the market in the middle of 2007 asking $1.399M. It is an 1,100 sq ft tear down on a 6,100 sq ft lot.

It subsequently sold for over asking price on 8/24/07. They somehow managed to find a sucker willing to pay $1,478,000!!!


The second house we will talk about is the southernmost of this trio located at 1030 Chelsea (photo on the right). We first featured it in August 2008 when it was asking $1.4M. It is very similar to 1020 Chelsea as it is a 1,300 sq ft tear down quality bungalow on a 6,100 sq ft lot.

We did an update post in September when it cut its price by $100K and it is still currently on the market asking $1.3M.



Finally, we come to the house located between 1020 Chelsea and 1030 Chelsea. Thanks to a comment recently left on this blog, we found out that 1024 Chelsea (no photo available) has something interesting going on with it. A Craigslist ad speaks of a $700K foreclosure opportunity. Well, here is the scoop:

A notice of default has been filed on a second lien which currently has roughly $685K outstanding on it. The first lien has roughly $550K outstanding and is current (i.e. there has been no default). The trustee sale is scheduled for sometime in January on the defaulted note -- I'm not an expert on how a shark would play this situation, but my guess is that you could either come in and assume all the debt (total of $1.235M) or you could pay off the delinquent note and assume the first mortgage as well. Either way, you would be into the property for roughly $1.235M.

Looking at the details on 1024 Chelsea, we see yet another old, tear down type bungalow on a 6,100 sq ft lot. Except 1024 is slightly larger at almost 1,800 sq ft and has a permitted 1/1 unit in the back. However, none of this really matters as the lot size and location are what matter here. All three of these old bungalows are basically in the exact location on exactly the same size lots. We couldn't ask for a better "apples to apples" type situation if we tried.

A thinking man would then say, "wait a minute, if I can essentially buy 1024 Chelsea for $1.235M, why would anyone want to pay $1.3M for the currently on market 1030 Chelsea?". I would imagine that since 1030 Chelsea hasn't sold even at a reduced asking price of $1.3M, it will need to end up accepting a lower offer if it is to sell.

Going further, one might see that since 1020 Chelsea sold last year for $1.478M, it has clearly declined in value by at least $178K if we use the current asking price of 1030 Chelsea. If we think values are now lower (because of the preforeclosure at 1024 Chelsea), 1020 Chelsea has then declined by roughly $250K. That would represent a decline of roughly 17% in a little more than a year.

This is what this whole blog is all about. One of the major reasons that I started this blog is because I wanted to cut through the typical bullish BS and all too common real estate agent lies. I wanted to warn people that material declines were imminent in Santa Monica...even in single family homes, even north of Wilshire, etc. I sincerely hope that I have helped some readers avoid making a premature purchase which would have cost them many 10's or 100's of thousands of dollars.

My one piece of advice to those who bought too early -- go out and have your property re-appraised by the tax man so that your property taxes can be lowered. There should be enough evidence by now to save yourself a good chunk of change.