REO Gap-Down

Address: 1320 Pearl - 90405

Details: 3 bed/1.75 bath 1,162 sq ft house, 5,080 sq ft lot, REO

Description: Bank-Owned Agents Please read the private remarks it will save you time a great starter home at a great value in desirable City of Santa Monica it is simply a gorgeous house with a huge separate guest room in the back Property is Tenant occupied and will be delivered occupied, due to the new ordinance Bank can not force the tenant out however the new purchaser can.. especially owner occupied.Information is not guaranteed buyer to investigate, verify& rely on their own findings including but not limited to permits if so choose. All offers must be presented w 3% copy deposit check, Proof of Funds, Pre Approval letter or there will be no response from the Seller.Please call my assistant Phone # in private remarks she will give you the info as to what the current rent is that is being collected as well as anything else you may need Please drive by with the buyer first no sign on the property the occupants are uncooperative please submit offers subject to viewing the inside at acceptance.

Previous Purchase: 4/28/06 - $1,270,000

Notice of Default: 4/9/08

Lender "Buyback": 11/2/09 - $1,250,786

REO Listing History: 6/23/10 - $889,900
Reduced down to - $739,900


SOLD: 11/29/10 - $735,000


This loss of $535,000 represents a rollback of 42%. This is abnormally high and is NOT representative of the market. With that said, we should ask ourselves why this huge rollback is taking place. The first place to look is the sale that just went through. I see absolutely no indication that there was any funny business considering the fact that this was listed on the MLS for quite some time (125 days before going into escrow). So this wasn't some insider kickback that went pending after zero days on market or anything. I think the price it sold for is a fair, market price.

So we are left to investigate the original purchase back in 2006 to try and decide what type of potential foul play there could be here. I did a quick search on the blog for the address and found the following comment left back in October 2007 from one of our esteemed readers, dwr:

1741 Maple and 1320 Pearl (both of which are currently being offered for sale by Klondike Investments' web "sight") were both purchased in 4/06 with zero down, financing by First Franklin. The owner of 1320 Pearl recently (on 10/10) had seven properties transferred to him from someone whose last name is the same as the owner of 1741 Maple, but with different first names. Probably just another extended family of wannabe Trumps who put none of their own money down and somehow "own" 15-20 properties, thanks to First Franklin et al.


So easy financing was abused and someone got a hold of a bunch of properties that they shouldn't have. Now is where you have to speculate because I don't have answers. Did they knowingly overpay and receive some type of kickbacks at the time of purchase? Or were they just stupid with no skin in the game and didn't care what price they paid because they had some type of neg-am loan where they would win by renting out the properties and making little to no mortgage payments?

I'm too lazy to do any more digging on the lowlife that owned this place and all the others, but I think the moral of the story is that examples like this show we are just now getting through all the (potential) fraud and market distortions brought on by the credit/housing bubble. The old sale looks way too high to be called "market", even by 2006 standards. The current sale looks fair. It is good news when we work through these situations. I think it will still take a few years to clear out all the rot.

OMG - They Finally Cut The Price!

I previously mentioned 907 22nd back in January as part of my "Bermuda Triangle" post.

Previous Purchase: 3/21/00 - $740,000

Old Listing History: 5/11/09 - $1,575,000
Reduced down to - $1,475,000


Re-Listed: 1/14/10 - $1,475,000
Reduced - 11/11/10 - down to $1,425,000


This listing has been the definition of "stale" as it sat for about 300 days with the same bloated price tag. The location is not bad and there is certainly demand for this type of property in this location, but not at the unrealistic price they were asking. I had also heard that they were unwilling to negotiate with potential buyers.

I think this price cut is not enough and it barely even accounts for the seasonal softness in prices in the winter. The bigger issue is that the price was originally too high and now they are even that much higher due to what I think is a likely decline in the market that is going on right now. So the big question here if you are a buyer is the following: is this price cut yet another case of being too little too late as was the case with the 2009 listing? Or is it a signal from the seller that they are finally ready to think about becoming more realistic and negotiate?

My guess is that they are still delusional and will still be stubborn since the price cut was so small and they are still a good ways away from asking a market price. One comp for the area would be 835 25th which sold back in the hot spring market for $1,385,000. It had the location flaw of being next to the school but had a little work done on the interior whereas the house on 22nd has not had work done. But again, the bigger issue is that the market was stronger fundamentally and stronger due to seasonality back in the spring.

2008 "New" Construction Finally Sells

Address: 714 14th - 90402

Details: 5 bed/6 bath 4,229 sq ft house, 7,500 sq ft lot, 2008 construction

Description: Completed in 2008 Spanish Colonial by Fernando Dizitti w/5bd, 5.5ba. North of Montana. Step down living room w/fireplace, elegant formal dining room & office. Kitchen w/Calcutta marble, waterworks fixtures, top-of-the-line appliances, butler's pantry w/wine closet & fridge. Bright family room w/fireplace opens to patio perfect for outdoor entertaining! Master suite w/ hi ceilings, balcony, bath w/limestone counters. Features walnut distressed hardwood, unique archways & wood-beamed ceilings, & exquisite detail thru-out. 2 systems for air/heat, wired for alarm & sound. Tenant occupied

Lot Purchase: 3/3/05 - $1,500,000

Listing History: 2/29/08 - $3,750,000
reduced and re-listed a few times until we get to the...


Current Listing History: 9/30/10 - $2,995,000

SOLD: 11/19/10 - $2,900,000


I recently featured another 90402 spec house on 24th which sold not too long ago. I estimated the cost net of the lot (i.e. the construction cost to the buyer) to be roughly $342/sq ft. I believe the quality of the construction for the 24th street house was pretty good.

But looking at this house on 14th, I think the buyer didn't get that great of a deal. If we use the early 2005 lot value purchase as a rough estimate of lot value today, then the buyer just paid $1,400,000 for the construction. What does that work out to? Well, about $331/sq ft. This is less than the $342/sq ft for the 24th street house, but I think it should be even lower given that I had heard multiple reports that the construction on the 14th street house was not nearly as high quality as many other high end specs in the area. Additionally, the house on 14th has been rented out and lived in by someone else! So while it was completed in early 2008, it isn't really "new" anymore and should deserve a bit of a discount relative to a real "new" house.

Stale in 90403 *Update 1*

Just after my last post earlier this month on 2620 Washington, the price was cut.

Listing History:  6/3/10 - $1,387,000
Reduced down to - $1,299,000

Reduced again down to - $1,269,900

I think this is a poor listing strategy. The cuts are too small, too late. The best listing strategy is to list at a more attractive price and try to generate excitement over the listing. You might even get some silly buyers to bid it up then.

Junk REO

I last featured 1308 26th back in March 2009.

Details: 2 bed/1 bath 855 sq ft house, 4,948 sq ft lot, "tastefully remodeled in 2006"


This property is in a very poor location and the rollback is thus deeper than average, but indicative of the direction of the market right now.

Previous Purchase: 4/15/04 - $698,000 (100% financing)


The last listing back in 2009 was a short sale and the price got down to $680,000 but it ended up expiring with the following description: 3 diferent lenders, seller BK last min. of close escrow. Property under investigation.


Finally it is back as a foreclosure

REO Listing History: 11/11/10 - $669,900

This is going to be a big rollback when it eventually sells as I don't think there is any way that it sells for close to the list price.

Thanks to Facts and Feelings for the heads up on this listing.

No Reason To "Hurry" *Update 1*

I last featured 2507 California back in August. I then mentioned it in my "Stale in 90403" post just last week.

I have said all along that it is overpriced.

Looks like they are throwing in the towel for this year and adding it to the shadow/pent up inventory.

Previous Purchase: 7/9/03 - $1,000,000


2008 Listing History: 11/12/08 - $1,599,000
Expired after 106 days on market

2009 Listing History: 10/30/09 - $1,375,000

 Expired after 26 days on market

2010 Listing History: 8/9/10 - $1,499,000

Withdrawn after 86 days on market

This is almost comical. Overpriced in 2008 and let it expire. Reduced the price in 2009 and still didn't price it low enough and let it expire again. Now, in 2010 they list it at a higher price to take into account the fact that they put some money into the house, but they are still too high -- for the third time and the third year in a row.

This is called chasing the market down. The irony is that the market seems to be weakening a bit here. See you next year.

18.7% Prime Lot Value Rollback in GRS 90402

Address: 365 24th - 90402

Details: Tear-down on a prime, 8,700 sq ft lot

Description: Teardown /Major Fixer on Prime 8700 Sq ft lot well positioned on the blk on one of the Most beautiful tree lined Street N of Montana. Restore this original Spanish or start anew either way you look at you will end up a great house in a fabulous location!!! Please see private remarks for further instruction for showings/presenting offers.

Previous Purchase: 5/3/06 - $2,337,500

Listing History: 5/4/10 - $2,500,000

SOLD: 11/4/10 - $1,900,000


This is a case where some old holder nearly top-ticked the market and sold a tear-down to either a spec builder or someone who wanted to build a house for themselves. We now see a decline of nearly 19% for what I think is unquestionably a very well located, zero location discount lot.

Good luck to the new buyer. I wonder if spec builders are out there in the market starting to buy lots again for projects to work on over the next few years. I would personally favor someone buying the lot for themselves and building something unique but whatever.

Stale in 90403

Address: 2620 Washington - 90403

Details: 2 bed/2 bath 1,380 sq ft house, 6,807 sq ft lot, "recently updated"

Description: Located North of Wilshire in the Franklin School District, this Charming 2 bedroom, 2 bathroom home has been recently updated. Brand new kitchen features granite counter tops and stainless steel appliances. Step down living room with fireplace and formal dining. Newly remodeled bathrooms and all new double pane windows. Bonus room off garage with bath and laundry room. Spacious grassy backyard. Also for lease at $4,600/month.

Listing History: 6/3/10 - $1,387,000
Reduced down to - $1,299,000


As you can see from the description, this house is also available for rent at a price of $4,600/month. You can also see that they have put a bit of money into the house with some upgrading.

The problem here is that they are asking too much money for a non-pristine location and a somewhat smaller lot. This house is on Washington just 4 lots from the traffic circle on 26th and the lot size is just 6,800 sq ft.

Compare that with 838 25th which sold earlier this year for $1.385mm. 838 25th was a slightly larger house, but also 2 bedroom and somewhat upgraded. However, it was in a more prime location and the lot size was significantly larger at 8,000 sq ft. You can go ahead and build a real mansion on 8,000 sq ft and when you are in a more prime location. For the Washington house, the economics of future building don't work quite as well.

This Washington house is now looking stale as it sits at 152 days on market with just a minimal price cut. They need to get serious and bring a healthy sized cut.

Also, another stale listing in 90403 that I haven't mentioned in a while is 2507 California. You will remember that I titled the post "no reason to hurry" because I said it needed price cuts. As it stands, it is now at 85 days on market with no price cuts. It is materially overpriced and the sellers are doing themselves a serious disservice by letting the listing get stale like this.