Why is everybody talking about a short sale? Why is it called short anyway? All that means is that the property is no longer worth what is owed on the property and so the lender, even if paid all the proceeds of the sale, would be “short” some funds. I don’t know if that’s the actual derivation of the term but it is how I like to think about it. Lenders, not being charitable institutions, don’t like to accept less than what is owed to them. But these days a lot of them will. It may take a long time and involve sending in the same paperwork multiple times to multiple people. It will definitely take a hardship letter because banks don’t do this just because your house is no longer worth what is owed. You have to show that you can no longer afford the loans due to hardship. This could be loss of a job, divorce, death, etc. So, why does that matter in La Canada? I promise I’ll tell you why.
Let’s backtrack. There are actually five active short sales in La Canada. Strangely enough three of them are on the same street. Hilldale Drive.
Hilldale Drive is the bane of the La Canada realtor. Why? Because it is on probably the narrowest street in town, on the side of a hill, and you can’t see around the corners, and you can only park on one side. So if you want to caravan or show property on the street you are already risking your fenders, your side mirror and perhaps your actual life. So my car only grudgingly goes up there. I don’t know where they got the “dale” part of this street but I surely get the hill.
This street does have an amazing view. But because it is also near the freeway and in back of a mall, it has some of the lowest-priced real estate in La Canada. The street even has a vacant lot! See left.
Here are the three properties listed for sale on Hilldale.
1. 1920 Hilldale. It is listed at $544,500. A first loan and then a second, totalling $675,000, were taken out against the property. At 1536 square feet and 3 bedrooms, 2 baths, this property is a true bargain for La Canada, and the second cheapest house currently listed there. It’s only been on the market for 7 days so I haven’t even seen it yet. It’s the new kid.
2. 1932 Hilldale. This is a 4 bedroom, 2 bath house of approximately 1800 square feet and it is listed at $675,000. Loans totalling $855,000 were taken out against it. Personally I think it has to be reduced quite a bit to attract a buyer, especially in view of what that new listing on the block came in at. Because the street is the street is the street and we know what they say about location. Here is the garage because the street goes down the hill from it and unless I was in a helicopter I couldn’t get a shot of it.
3. 2059 Hilldale. Listed at $650,000 with a first loan against it of $775,000. Three bedrooms, two baths, 1874 square feet, and nestled into the hill instead of hanging from it. I got a shot of the garage, but the house is set way back from that. See below.
What these three have in common apart from their address is that the loans total more than the price. Substantially more. So the owners of these houses get nothing out of the sale. The short sale lenders, assuming they agree, get something for their money, probably more than they would get with a foreclosure. They are also more likely to get a house in good condition and get it more quickly than with a foreclosure.
This leaves two more short sales in La Canada, and I’m going to focus on one of them just to give you an example of how these typically work.
4271 Orange Knoll Avenue is a traditional 2471 square foot family house on a cul-de-sac. I almost said quiet cul-de-sac but I stopped myself because that is one of the problems. This house backs up onto a freeway, too. Not the same freeway as the Hilldale properties, but a freeway nevertheless. This house is listed at $849,000. It has 4 bedrooms, 3 baths, a master suite with a fireplace and a master bath with a spa tub. The kitchen has granite counters. There’s a formal dining room. There are hardwood floors throughout. The backyard has a concrete patio with gazebo and the property is almost 9000 square feet. The problem? Let’s look at its history.
For starters it has a first loan of $709,600. Not so bad. Here’s the kicker. It’s also carrying a second at $226,400. Now these loans have been paid down. They come in at around $900,000 now. Not counting fees, penalties and missed payments. But you see the problem.
This property sold in June of 2005 for $887,000.Three years later it was listed for sale at $1,195,000. That was March, 2008. Real estate was already heading south. That listing expired without selling in July, then relisted by the same agent at the same price. Guess what? It still failed to sell. It was reduced by $100,000 and continued to languish on the market. In December of 2008 it was relisted at $1,145,000. That listing expired in March of 2009. In April, 2009, a different agent listed it at the much more realistic price of $899,000: it had become a short sale. At the end of that year it was withdrawn from the market while the seller explored bankruptcy.
On March 14, 2011 the property came on the market again at its current price of $849,000. And there it sits. The listing agent says that despite the fact that it is a short sale and the seller will make NO money, he refuses to reduce it to the level which would attract an offer. And who can blame him? At least he has a roof over his head. For now.
So why does this matter? I promised at the beginning of this post to tell you why. It matters because every time a short sale closes, our property values reflect those new, low prices. Those sales become comps for our houses. Zillow and CyberHomes and many other sites pick up those sales and average them in. So do appraisers. Buyers look at those comps. Those short sales affect us whether they are our houses, our neighbors’, or way at the other side of town on a windy narrow street set on a hill overlooking a freeway. Their loss is our loss. Their hill is our hill. Like it or not.