San Marcos Price Reduction

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Submitted by ocrenter on April 25, 2006 - 11:22pm

I have been giving sdrealtor a hard time at the other topic "Median Price Down in North County" by showing the following two properties:

xx7 VIA DEL CABALLO, San Marcos, CA 92078
Bedrooms: 4
Baths: 3
Sq ft: 2,358
Listing Price: $550,000 - $599,876
Last Purchased: Dec 03 $460,000

and comparing the asking price of the first home with the sale price of the second home.

xx5 Via Del Caballo, San Marcos, CA 92078
Bedrooms: 4
Baths: 3
Sq ft: 2,358
Mar 06 $625,000

There was a lot of back and forth about lot premium and lot size and upgrades to try to account for the $75,000 in price difference in two homes with the same sqft and same floorplan.

All of that, I believe, is now rendered completely pointless because of this new development. As of today 4/25/06, there has been additional price drop down to $539,000 on the first home. Why? Because this home is currently in pre-foreclosure.

If you recall, this home was purchased for $460,000 in 12/03. A look into the loan doc's indicates a 80/20, zero down loan. Assuming a 2 year fixed loan on the 80% portion, this means this person just experienced a reset of his mortgage 12/05. After 3 months of paying at the higher rate, he is defaulting and going into foreclosure.

To avoid foreclosure, all he has to do is keep lowering the price until someone bites, and this can get as low as $490,000 for him not to lose money on this sale. What would the sale of a home at $490,000 do to comps in this neighborhood? Let's not even go so low as that, what would it do to the comps if he gets a buyer at the current reduced pricing of $539,000.

The next question of course is: what happens if there's another foreclosure in the neighborhood and the owner decides to slash prices? Well, we shall see, as xx7's neighbor xx2 has now just entered into pre-foreclosure this month, we'll see if xx2 throw their hat into the ever expanding San Diego Inventory of homes for sale.

Submitted by sdrealtor on April 25, 2006 - 11:31pm.

You are right..it's pointless....the house will sell for what it is worth in today's market just like the other nicer one did. A $490 comp would change things quite a bit while a 539K would have very little impact. BTW, the current owner is the second owner and bought in 12/03 right as the market began exploding higher by the day.

Submitted by powayseller on April 26, 2006 - 5:17am.

I was trying to follow the other post, and it seemed the houses were basically equivalent. A drop to $539K is a 10% drop, and is signficant. The impact is huge, both in reducing median numbers (gee, eventually the data will show what we know is happening) and in reducing future listing prices.

Submitted by ocrenter on April 26, 2006 - 6:47am.

Correction on the home that just enter'd pre-foreclosure, it isn't xx2 Via Del Caballo, it's xx1 Via Del Caballo. Looking at the loan docs looks like we got ourselves another 80/20 piggyback loan back in 3/03 for $422,000 for the 2445 sqft model. They refi'd in 8/04 for $450,000. (did it thru Ameriquest, that should sound some alarms).

So these guys also have equity to burn up and escape unscathed. If the xx1 guys can get their home sold in the $500's, look for $480,000 as the magic number for them.

If you use the interactive map feature of ziprealty, you'll end up with 12 homes for sale in this tract. The smallest model is the 2172 sqft homes, average asking price is currently $560,000. These two foreclosures are going to be interesting to watch. If we actually have a 2358 sqft selling for $490,000 and a 2445 sqft selling for $480,000, the slide in these 2172 sqft homes are going to be tramendous.

Submitted by jabrwoki on April 26, 2006 - 8:19am.

hey ocrenter ,

Cool analysis. BTW, where do you get personal info such as loan docs for each home !

thanks

Submitted by sdrealtor on April 26, 2006 - 8:53am.

FYI, The 625K sale is clearly an outlier. Comps in the last 6 months for these homes are 571K, 572K and 585K. The are 3 homes currently in escrow. All have value range price...550 to 585, 579 to 599 and 579 to 609. It's reasonable to assume that they will close with 1 to 2% of the previous comps. There are currently 12 homes for sale (that's *%&$'in alot!) with asking ranges between 550 and 640. The one that you are referencing has a range of 539 to 579. They are trying to appear as the most attractively priced home on the street and are hoping the next offer comes to them. I'd be surprised if they sold for the 539 and a comp around 540 would have little impact on the others. A comp of 500 would. BTW, I listed and sold a home nearby that was much nicer than these for a little more and it sold in about 1 week at a fair price for all. These homes should be 550K or less.

Submitted by ocrenter on April 26, 2006 - 9:00am.

once you are in foreclosure your info is open to the world. I got those from realtytrac.com.

Submitted by jabrwoki on April 26, 2006 - 9:03am.

thanks !!

Submitted by jabrwoki on April 26, 2006 - 9:11am.

Here's another in the same zip code (92078) (though in a nicer neighborhood) in foreclosure.
1168 CALISTOGA WAY, san marcos, ca92078
Can you get any info on its history ?

thanks

Submitted by North County Jim on April 26, 2006 - 9:25am.

I saw this one yesterday. Not only a foreclosure sale but listed as a fixer-upper. This house is less than three years old!

Note the lack of interior photos in the MLS.

Submitted by powayseller on April 26, 2006 - 9:30am.

This property is listed as Sold 2/6/06.
Sales Price: $640,389
Prior doc info:

Recording Date 8/12/2004
Lender Name First Franklin Financial Corp
Price $720,000
1st Loan Amount $569,800
2nd Loan Amount $142,450

You can get a membership to RealtyTrac for a few bucks a month.

Submitted by jabrwoki on April 26, 2006 - 9:55am.

The current asking price seems to be $619k. Of course as Jim mentioned there is only one photo of interior (kitchen) that too recently added. There are also some caveats (to buyers) on staying away from a unfinished deck LOL.
powayseller, membership seems to be $39.95 per month (a bit steep for just browsers) but probably justified if you are serious about buying right now.

Submitted by North County Jim on April 26, 2006 - 10:30am.

It appears "sold" in this case is a euphemism. The property was deeded to the foreclosure trustee on 2/6/06.

As for the sales price of $640k, I'll leave that to those more knowledgeable.

The former owner looks like he went on a buying spree in 2004. The recorded documents index shows seven default notices in 2005.

Submitted by sdrealtor on April 26, 2006 - 12:00pm.

hardly a buying spree. Guy bought house in August 2004 that he couldnt afford (i.e. 100% financing) and greatly overpaid at absolute peak of market. Guy realizes mistake and puts back on market in December 2004 trying to get out. House sits on market for more than 1 year because he cant sell at a loss. He didnt have any money to begin with. House gets foreclosed and lender takes an 80K bath. Coming soon.....house sells around 600K and lender gets another 80K bath.

Submitted by North County Jim on April 26, 2006 - 12:59pm.

Maybe just a matter of semantics but I would characterize taking title to five properties in the county in a four month span as a buying spree.

However, the real point of this guy's story is how many more are in the same boat.

Submitted by ocrenter on April 26, 2006 - 2:55pm.

did you guys see how the picture of the lawn is paintbrushed brown by the selling agent?

so do we know how they got the "selling price" of $640,000 when it foreclosed in Feb 2006?

Submitted by sdrealtor on April 26, 2006 - 2:56pm.

A little more semantics but all the NOD's were likely filed against the same property. I checked the tax records and as far as I can tell it is the only property he has ever owned in SD.

Submitted by sdrealtor on April 26, 2006 - 2:57pm.

It's in the tax records. That is what teh lender accepted for the note and all unpaid liens in arrears.

Submitted by North County Jim on April 26, 2006 - 5:14pm.

You may want to check the recorded documents index. I'm guessing - only guessing - that this was not his only default.

Submitted by sdrealtor on April 26, 2006 - 5:17pm.

no time..no one by his last name has ever owned any other property per the online tax records I have quick access to.

Submitted by North County Jim on April 26, 2006 - 5:27pm.

I'd rather not post a link to the index of his recorded documents. Trust me, he is the grantee on five separate deeds over a four month period in 2004. In each and every deed transfer, he is the grantor on two trust deeds. I'll go ahead and conclude 80/20's all around.

I'll defer to your knowledge on the foreclosure process but I think it's a stretch to think that this is his only default.

Submitted by jabrwoki on April 26, 2006 - 5:50pm.

Any ideas what's with the unfinished deck for a property owned for more than a year ? What a train wreck !

Submitted by powayseller on April 26, 2006 - 10:03pm.

RealtyTrac shows 4 NTS on the same property, all filed on 12/8/05. Three are for a house on lot 85, 2128 sq ft. and the last is for a house on lot 83, 2099 sq ft.

Submitted by ocrenter on April 27, 2006 - 1:33pm.

I would imagine the owner ran out of money! afterall, that lawn is in such a bad shape the agent paint brushed the lawn brown and wrote in the caption "ready for a new lawn."

Submitted by ocrenter on May 5, 2006 - 7:09pm.

Well, we now have price reduction to $515,000-$554,876 on this 2,358 sqft home. The listing states: "Urgent urgent sale. Seller must sell now. Vastly reduced"

Bugs and sdrealtor, if they find a buyer at $515,000, what will it do to the comps of that tract? what about the entire zipcode 92078?

Submitted by Bugs on May 5, 2006 - 8:26pm.

No one sale should make or break a neighborhood. If the average exposure time necessary to get a sale at a reasonable price is 4 or 5 months, that 4 or 5 months starts when the listing price is set at a reasonable level. Being compelled to sell faster changes the conditions of sale from being a market sale (willing seller under no undue pressure to sell) to being a quick sale or liquidation sale. In other words, such a sale is no longer a market sale, per se.

When it starts to get tricky is when a bunch of sellers are compelled to sell. Once it becomes common it is no longer a case of "undue pressure". Such sales can and do set the market values for everything else because they represent the readily available substitution for the sales that are not discounted.

Saying that a seller is compelled to sell now in a listing is like begging for a further 5% or 10% reduction on every offer that comes in. I wouldn't read too much into what happens on this sale unless you start seeing several of them.

Submitted by Bugs on May 5, 2006 - 9:05pm.

Okay, here's another one to chew on. The best way to track price trends on the neighborhood level is to use sales of the same property that occurred during the time frames in question. These paired sales don't come up that often so when they do it's interesting to take a look. As always, one example is just one example. It doesn't get beyond interesting until we can accrue a bunch of them.

This one is also located in San Marcos near the Carlsbad border; up on the hill overlooking Palomar Airport Road/Rancho Santa Fe Road.

For those who have access to the data, this home is located in the Rancho Dorado subdivision (1128/A-3). It's a 2001 home of 2680 SqFt with a view amenity, on a 17,000 SqFt lot. It originally sold in 06/2001 for $371,000, which was higher than average for that model at that time and is indicative of above average upgrades and possibly a site premium.

This property has 2 recent sales. It sold in 06/2005 for $767,000 after 7 days marketing time, and was subsequently relisted in 10/2005 for $774,900. It was reduced to a range of $735k - $760k before going into escrow in 03/2006 after 149 days marketing time. It closed in 04/2006 at $740,000.

Now anyone with access to the data can figure out which property this is and verify the facts for themselves. I try to avoid listing addresses on the internet because of privacy concerns, but if someone already has access to the data then my discussion of it is not divulging anything that isn't already available to them.

Both sales resulted from fairly typical marketing times. There is no indication that the 06/2005 sale was high. In fact, a similar model directly across the street with no view sold 2 months later in 08/2005 for $776,000; and its original sale price in 06/2001 was lower than our subject ($359k vs. $371k). If anything, it indicates our subject's prior sale in 06/2005 was low, not high.

So, a solid $27,000 reduction in price demonstrated by 2 well exposed sales occurring 10 months apart. The loss itself is less than 4%, but if annualized it would be over 4%. This is by no means a radical loss and it doesn't necessarily jibe with a blanket assumption (for those who are so inclined) that the market has already receded by 10%. We would have to assume the 06/2005 sale price actually was low to come up with a higher percentage of loss. Obviously, assumptions aren't what we should be looking for in something like this. It does demonstrate the wisdom in Rich's motto - "In God we trust - everyone else bring data".

If this were a cash flow investment it would be a rather painful way to lose the cost of sale ($25,000+), the property taxes ($8,600 or so) and the mortgage payments of at least $25,000. It wouldn't be quite so bad if this were the primary residence and the interest could be written off and the mortgage payments stacked against the rent. Still, you add it all up and the cash this investment lost in principal loss, carrying costs and costs of sale is nothing to sneeze at if you're a wage earner here in San Diego County.

I'm headed out of town for a week, so I won't be following up on this topic any time soon. But if you guys can rustle up some more paired sales we can look at them when I get back.

Submitted by ocrenter on May 13, 2006 - 7:45pm.

"No one sale should make or break a neighborhood."

I do agree with that. But I don't think this will be limited to just one. The foreclosure property found a buyer when the price went down to $515,000. Are there any more?

Answer is yes.

xx7 CAMINO HERMOSO, San Marcos, CA 92078
same sqft, same model. Not in foreclosure. But obvsiously wants to get out before it is too late. Priced at $549,900 - $579,900

So we now have 2 homes both at 2,358 sqft, one sold at $515,000 and let's assume the second one find a buyer for $550,000. Can the comp for the rest of 2,358 sqft homes still be in the $600,000's?

Submitted by sdrealtor on May 13, 2006 - 11:35pm.

Same community
5XX Via De Caballo
4BR/2.5BA, 2172 sq ft, pictures show zero upgrades
closed on 4/26 for 585K with a 15K credit to buyer for closing costs.
Thats a net sale of 570K

They are all different and every situation sill be unique

Submitted by ocrenter on May 14, 2006 - 5:41am.

Fools are unique in their stupidity. Why buy the Camary for thousands more when you can buy an Avalon for less?

There are 5 homes with 2172 sqft selling in that community. 4 are priced between $550,000 to $560,000. One is priced at $599,000. It will take a very unique individual to pass up on the 4 to purchase the one for $599,000.

5xx closed late April, meaning it went pending late March. The distress sale at $515,000 and the new listing at $549,000 (both of which 200 sqft larger) came in late April and early May. Do you really think the proud new owners of 5xx are saying to themselves, "these homes are all different and every situation is unique." More like, "I've just caught a falling knife and it hurts like hell!"

Submitted by sdrealtor on May 14, 2006 - 7:07am.

Actually my experience has been that right or wrong, people buy the house they want to live in and not necessarily the cheapest one. If the 599 is the one they like the best for some reason that it makes it unique to them then that is the one they will buy. A difference of $25,000 or less typically wont sway people's choices. Renter's dont put so much emphasis on the house because they dont expect to be there more than a year or two. Most buyers expect to remain in a house longer than they probably will actually stay there.

Everything you say makes logical sense but people buy homes emotionally and their decisions often dont make sense. I cant tell you how many times a buyer has told me what they NEED and what they WONT buy only to buy exactly what they say they didnt want.

Same thing with cars....you go in looking for the economical car and leave with Sports car touring edition.

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