Are buyers getting deals on foreclosed properties, or are they getting on an elevator headed down?
6122 Shelly sold $16,100 above asking. Photo by Mark Martinez
I’m tracking 10 bank-owned properties in Huntington Beach, and four have sold. Here’s the breakdown:
- A four-bedroom house at 6002 Rosemont Dr. sold for $525,000, or $99,900 below its asking price.
- A five-bedroom at 6122 Shelly Dr. sold for $546,000, or $16,100 above the asking price.
- A two-bedroom at 1112 Acacia Ave. sold for $525,000, or $74,900 below its asking price.
- A five-bedroom at 5722 Ocean Vista Dr. sold for $1,649,000, or $100,000 below its asking price.
Ken Dixon of Re/Max, the selling agent on Shelly Dr., said buyers were attracted to a five-bedroom house at close to $500,000 and made multiple offers.
The buyer paid all cash, according to Dixon and the buyer’s agent, Gonzalo Gonzalez of First Legacy.
Gonzalez said his clients are often small business owners who pay all cash as often as one in every five deals he brokers. The reason is simple mathematics, if one has the cash, he said. It doesn’t make sense to get a 4% yield on a CD and pay a 6% mortgage, he said. It doesn’t pay to hold cash.
Most of his buyers plan to occupy the homes they are purchasing, he said. In the case of Shelly Dr., the all-cash buyer purchased it for relatives to live in, Gonzalez said.
If not paying all cash, his clients usually put down 20% or more to qualify for a mortgage, he said.
Gonzalez said Shelly sold above asking because it was in a good location. Other foreclosures may sell for less than asking.
That’s certainly the case with 6002 Rosemont, which sold for nearly $100,000 less than the original asking price. It is located at the end of Rosemont on a busy cross street (Springdale) and needed some sprucing up, said listing agent Jerry Jervis of Century 21 Jervis & Associates.
And Rosemont was listed in April when banks and loan servicers were still being optimistic on pricing, Jervis said. Now they are more realistic, he said.
“We are selling all of our stuff really quickly, and most of the time for more than we are asking,” Jervis said.
Jervis’ biggest clients are Washington Mutual/JPMorgan and Litton Loan Servicing.
In any case, sales are pending on five of the other properties I am tracking, leaving only 525 15th Street in limbo. Stay tuned to see if those six close escrow.
View a full page of info on each property by clicking on the addresses below:
- 1112 Acacia Ave.
- 15401 Shasta Ln.
- 19841 Inverness Ln.
- 525 15th St.
- 5501 Serene Dr.
- 5722 Ocean Vista Dr.
- 5971 Meadowlark Dr.
- 6002 Rosemont Dr.
- 6122 Shelly Dr.
- 6531 Lennox Dr.
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I have to admit these are selling faster than I would have expected…And for a lot more money.
While I agree that paying cash for real estate would be better than a 4% CD over the long run (especially after taxes), if they put 20% down and invested in stocks right now, they would likely do extremely well over the next 5 years. A good real estate investment depends on a good entry price, which these folks may not have gotten. They probably could buy these same homes one year from now for 10-15% less.
Agree with Liar Loan. Paying 2% a year for the option of investing or using that cash for other needs does not seem that steep in this environment. Especially if you consider the possiblity that prices could fall much lower in a really nasty recession.
Looks like only the creme of the crops are getting lots of bids and the rest are just sitting out there. This trend is going to go on for a few more years. I’ve been following the trend and this is happenning all over the nation.
Sources: http://www.homepricetrend.com
I just bought and REO for 75K less than the asking in a good area…. and its well kept…
Easy answer: PRICE
Don’t forget the write-off one gets on the interest of the loan. Why tie up 100% of your money into the home? Use a mortgage to write off the interest as a deduction, and invest the rest of the money.
It’s all about location. The property on Shelly Dr is quite close to the Viet community on Bolsa. It’s most likely that the buyer is Viet.
You definitely need to check out each deal and do some leg work to get the best deals.
All of these homes will be in the 400’s soon if they aren’t already.
It seems to me that people are actually buying a home to live in it for a considerable amount of time now. The days of buying a house so that you could move up in a few years are gone. If you can’t see yourself in a house for at least 10 years, you probably shouldn’t buy it. If you can’t see yourself living in the house without doing $100,000 worth of renovations using your equity, you probably shouldn’t buy it. The idea of rapid equity is disappearing and the cream of the crop selling is the consequence. It doesn’t matter how low the price is, if you don’t want to actually live there.
I don’t know if I completely get it on the reasoning.
4% yield on a CD is better than a depreciating asset (the house), that is if I were just looking for a place to invest my money.
If you were really intending to live in the house, then getting the tax break from paying the mortgage interest would be a good reason to buy with a mortgage.
UNLESS of course, the buyer believes that the house if underpriced and will go up in value.
In my opinion, people who are buying with cash are very likely investors looking for a return in several years. This is just my guess.