How many short sales and bank owned properties are there in the west valley?

Sometimes I get calls from people wanting to get a "steal of a deal" on higher priced Silicon Valley real estate by purchasing short sales and bank owned properties in  areas with great public schools like Cupertino, Saratoga, Monte Sereno, Los Gatos, and Almaden Valley.

Unfortunately for bargain hunting home buyers who are seeking premium school districts in Santa Clara County, there just aren't that many of them. 

It's very easy to find distressed properties for sale in less expensive areas. In fact, for the first quarter of 2009, 95% of all sales in the Alum Rock area of San Jose, which is one of the poorest areas of Silicon Valley, were either short sales or bank owned properties. 

It's a different story in most of the expensive west valley markets, though. We see far fewer of these in places like Palo Alto or Los Altos (or Los Gatos, Monte Sereno and Saratoga).  There's a very direct correlation between the best  public schools, low crime, higher income, and higher education levels of homeowners with lower numbers of foreclosed homes. 

Here are the numbers of available homes for sale, which I've culled from our MLS, without further elaboration:

MLS Area - info as of 5/3/09	Type	Active Listings	Short Sales	Bank Owned
16 (Los Gatos/Monte Sereno)	SFH	200	11	4
	Condo/TH	52	5	1
17 (Saratoga)	SFH	172	10	2
	Condo/TH	20	1	0
14 (Cambrian Park)	SFH	129	28	11
	Condo/TH	38	12	4
13 (Almaden Valley)	SFH	124	6	3
	Condo/TH	19	2	0
18 (Cupertino)	SFH	162	2	1
	Condo/TH	62	5	0
15 (Campbell)	SFH	155	26	11
	Condo/TH	70	17	5

So, bargain hunters, what CAN you do to maximize your potential in this market?

Easy: don't go after the turnkey home.  The perfect home with everything remodeled is getting lots of attention because most buyers want exactly that.  Aim for the home that needs updating and remodeling, though, and you will have a far better chance to make a great deal because you won't be trying to outbid every other buyer.
 

Distressed Properties in Los Gatos: How Many Are For Sale?

Trulia is a great source for real estate information, but when it reports on the distressed housing sector, it relies on Realty Trac, which I have found to be inaccurate and unreliable much of the time. Twice I've had a subscription to Realty Trac and seen homes showing up on their database which were long since closed, for instance (so the numbers were inflated). If you are visiting these sites to get a sense of the distressed housing market in Los Gatos, please allow me to provide you information from our MLS as of today. You may be surprised that it's not quite as bad as it may appear on that site. 

A couple of disclaimers: first is that not all distressed homes are for sale. The first step in the foreclosure market is receiving a Notice of Default. Some people do "catch up" and that NOD never turns into a foreclosure.

In other cases, the home may be on the market with a NOD but is not actually a short sale - there's enough equity in the home so that when it sells, the bank will be paid off in full. Those types of sales are "under the radar" as our MLS only tracks homes identified as short sales and those known to be bank owned (which the agents are required to disclose).

That said, here's the information as of today on homes in Los Gatos which are short sales or bank owned. I am including the Santa Cruz mountain areas as well (95033). These numbers are far lower than in much of Silicon Valley:

Los Gatos	Total for sale	# Short Sale	# Bank Owned
95030 Houses	57	0	1
95030 Condos	7	0	0
95032 Houses	96	5	5
95032 Condos	38	3	0
95033 Houses	18	1	0
(no condos)
totals	216	9	6

One extreme, in these times of financial chaos nationwide, is to assume that Los Gatos is "tanking". That is one extreme that I hope I have helped to dispell here. The other extreme is to assume that we are somehow so insulated in our beautiful haven that we are not impacted by the crisis at all. Make no doubt, Los Gatans are feeling the effects of the mortgage meltdown and the crisis in our economy overall. The lack of available credit is hurting home buyers and home sellers, but also those who work in any industry where having credit matters or where spending is a matter of discretion. So Los Gatans who sell automobiles are hurting right along side those who sell houses or have anything to do with the Silicon Valley real estate market.  The lack of available money to loan is part of the formula which is pushing house prices down, of course.

So yes, Los Gatos is impacted by the mortgage crisis and general roller coaster on Wall Street. Some homeowners are in real trouble with their mortgages. Many residents who work in credit-dependent fields are making much less then they used to and in some cases have walked away from careers in lending and selling altogether. But the sky isn't falling on our housing market. The numbers, above, are proof enough of that.

Taking a Pulse of the Silicon Valley Short Sale Situation

What's happening with the number of short sales in Silicon Valley? Are they rising or falling? How does this impact the real estate market in various parts of Santa Clara County?

Let's have a look at the numbers over the last few months in selected areas of Silicon Valley. Below, please find the number of active (for sale) short sale listings of single family homes and condominiums or townhomes in Los Gatos, Monte Sereno, Saratoga, and other parts of the San Jose area.

	3/26/2008	5/18/2008	7/19/2008
Los Gatos	5	8	7
Monte Sereno	1	0	0
Saratoga	0	1	4
Los Gatos Mtns	3	2	3
Cambrian Park	59	63	68
Santa Clara	56	63	69
Campbell	13	19	23
Cupertino	1	1	0
Los Altos	0	2	1
Sunnyvale	50	58	51
Blossom Valley	196	217	190
San Jose (all)	1534	1777	1708

While there's a noticeable rise from late March to late May, the numbers are backing down a bit now.

Can we infer anything from this?  Yes and no.

First of all, we do not see a worsening of the market overall - the doom and gloomers would like us to think that the sky is falling on the local real estate market, but looking through this lens, it doesn't appear to be the case.  If the numbers of short sales were swelling, it would portend lower prices because short sales themselves tend to sell for less, and most short sales eventually turn into foreclosures - and they also sell for far less than homes which are lived in and loved.

On the other hand, we are not done seeing loans reset. That is, a lot of folks took out mortgages a few years ago with adjustable rate loans that would be level for 3, 5, 7, or 10 years. As some of these get reset, there may well be more people in trouble who scramble to sell with a short payoff to the bank or who otherwise cannot make the new, higher payments. So we may be getting new waves of homes in the short sale pool.

Whenever I do a post on foreclosures, short sales, and bank auctioned homes, I get emails and calls about how to buy one of these homes at a steal of a price. So I'm going to quickly recap my input on what to do if you are a bargain hunting buyer:
 

1. The biggest problem with short sales is that although the seller wants to sell, the buyer wants to buy, and the agents want to help their respective clients, the success of the transaction depends on the lending institution approving the sale. In my experience, this is where the problem is - most often, the banks either do not respond (at all, ever), or they take so long to respond that the home's no longer worth what the buyer inititally offered. Worse, some lenders use a servicing company to handle payments, and some of them would rather service a loan through foreclosure than facilitate a short sale.  I spent a lot of time in early 2008 putting short sale transactions together, only to have the bank ignore the offers.  My advice: save yourself time and effort and buy a home that you can actually close on. (I am not working on short sales any more in this market.)
2. When short sales fail to produce a closed transaction, the property continues through the foreclosure process. The next step is the auction by the bank. There is no role for the real estate agent here, so we Realtors can't help you with this stage. With the auction, you'll need a large percentage of cash on hand and you have NO right of recission - no ability to investigate the property and later change your mind. No congingencies - which I think is very, very dangerous.
3. Bank owned properties have gone all the way through the foreclosure process. They are usually vacant (in some cases, the bank allows the former owner to stay on as a tenant so that the house is not vacant and vandalized). The bank wants to sell and will permit you to do inspections and to have a reasonable contingency period. The main risk here is that the house may have been beat up by the former owners on their way out. That doesn't always happen, but it's certainly a possibility. Bank owned homes are usually offered on the MLS, and a Realtor or other real estate licensee can assist you in purchasing one of these. Agents are not afraid of "working these" because they know that the bank needs and wants to close escrow - so there's a chance for a happy ending here (unlike with most short sales).

Whether you want to buy a distressed property in Silicon Valley or just want to know how these sales impact your home buying, home selling, or home value, the data is important for understanding how the real estate market is faring here. I'll continue to keep you updated in the coming weeks and months.

Best regards,

Mary

Mary Pope-Handy, Realtor,  CRS, ABR, e-PRO, SRES, ASP, RECS, CNHS, ACRE
Helping Nice Folks to Buy & Sell Homes Since 1993
Co-Author: "Get The Best Deal When Selling Your Home In Silicon Valley"
877 397-5391 (Direct/Toll-Free/Fax);   408 204-7673 (Cell)
www.DelightHomes.com     (PopeHandy.com)
emailto: Mary@PopeHandy.com
Blog: www.LiveInLosGatos.com & www.ValleyOfHeartsDelight.com

Are there many short sale listings
in the Los Gatos, Monte Sereno, Saratoga area?

In some parts of Santa Clara County, a high percentage of homes on the market in the lower price ranges especially are offered as "short sale" listings. For example, recently I've been assisting buyers of single family homes in the $500,000 price range in parts of San Jose (such as Evergreen, Blossom Valley, Santa Teresa and South San Jose). The vast majority of those listings, perhaps 95% or more, are "short sales".

But that's not happening in Los Gatos, Monte Sereno or Saratoga. Short sales pull values down, so if you live in this lovely foothill area, be glad that the real estate market here is healthier!

Here are the numbers of local short sale listings as of today, March 26, 2008:

• Los Gatos - 5 total, 2 single family houses and 3 condos or townhomes which are listed as being short sales as of today (95032 and 95030 areas)
• Monte Sereno - 1 single family house listed as a short sale.
• Saratoga - 0 single family houses, 0 condos or townhomes which are presented as short sales.
• Los Gatos Mountains - 3 single family homes