Monday, March 24, 2008

House Hunt Retrospective: THE DOOZIE

I first wrote about this house on the L.A. Times blog, LA LAND, and also here. But there's been some recent noteworthy activity. Namely: a short pay.

4507 VARNA AVENUE, Sherman Oaks, CA 91423
MLS# F1743246
Cyberhomes™ estimate $685,992
Bedrooms: 2
Baths: 1.5
Square Feet: 1,598
Lot Size: 8,100 Sq. Ft.
Year Built: 1949
Listing Date: 11/11/07
Price Reduced: 12/16/07 -- $869k to $839k
Price Reduced: 03/14/08 -- $839k to $790k (Short Pay)

Last Sale: 07/13/07
Sales Price: $789,909

Shall we all count down to foreclosure together? I give 'em another month.


Anonymous said...

Wow, so these goobers wanted to flip this property without doing *anything* in 5 months for a $80K profit? They'll be lucky to get $790K -- I think the first knife catcher should buy at $400 sq/ft for $640. This is NORTH of the Blvd, not south of it.

Anonymous said...

It doesn't matter what they list it at. Nobody is offering listing price anyway. All these flippers are getting offers that are 25% less than asking anyway, Let them continue to pay the mortgage for a few more months and then they they will take the loss they all deserve.

Anonymous said...

What's a "short pay?"

l.a.guy said...

What's a "short pay?"

Basically an attempt by the owner to save their ass. If an owner can't make the payments on a property they can try to work out something with the bank and in essence say "We can't afford the $500K mortgage, if we can find someone to pay $450K would you accept it?" If the bank agrees then the owners will lose any money they had put into the house, but at least they'll walk away with their credit intact.

From the bank's perspective it may be worth it because it saves them the trouble of foreclosing and having to sale the property.

I've been looking at condos in Orange County (which has been pretty much destroyed by the mortgage mess) and the broker I'm dealing with recommended staying away from short sales because the banks can take months to decide. I think buying foreclosed and short sale properties can be risky for most people because they're always going to be "as is" sales and you could be buying a real nightmare.

kate said...

Anon The First:

These flippers actually did some work on the house. They refinished the kitchen, the 1/2 bath, and the 3/4 bath. This home does not have a full bath (the half is just a toilet and sink, the three-quarter bath has a shower but no tub). They also did some painting and took out a very large dead tree from the backyard.

I would guess that they spent between $25k and $50k on repairs after they purchased it.

So add that figure to the purchase price, plus carrying costs for each month they owned, plus 6% of sale price for commissions and you can see how far in the hole they are.

Anonymous said...

Kate, Anon the First here. Thanks for the correction. They certainly didn't do $80K of work, or it'd be noticeable. But they probably would have had to do $150K in changes to gain $80K in value. The kitchen and the bathrooms are worthwhile upgrades (the only types of remodeling that actually pay off well), but the painting and the tree are mostly irrelevant to value. You're right though -- they're way in the hole already.

Anonymous said...

Kate -- not relevant to this post necessarily, but did you see that there were 4 foreclosures for every 5 sales in the Valley? The "Valley" was defined as Calabasas to Glendale:

Kate said...

Anon @ 11:45,

Yeah, I saw that article and it was an interesting read. So far, we aren't seeing that kind of damage in the SE Valley yet -- but we may.

Also, check out this fascinating Bloomberg article that says the ARM resets may not be so devastating because LIBOR is down:

I'm not so sure that the reduced resets will really make a difference though. I think people will still walk away from their upside down assets -- whether they can afford the mortgage or not.