Thursday, October 29, 2009
Interesting BPO just completed on a 2005 built residential condo complex in San Jose. Of the 13 active and pending in the complex, 11 were short sales and 2 were bank REOs. 12 of them were "in escrow" with the remaining unit taking offers in few days. Prices were in the $450,000 range for new units bought from the developer in 2006, now the base line trading value is between $245,000 - $280,000. The complex has two main issues - even though the units are very luxurious and in a good location - an HOA litigation and a very high rental to owner ratio. These two problems have eliminated most lender financing and relegated buyers to pay all cash. Obviously this then only brings in more investor buyers and keeps the rental/owner percentage the same or even worse. The short sale process seems to be taking hold well and that is a trend that will continue in the overall market as many banks prefer to short sale a property instead of the foreclosure alternative. Sales of approximately 5% of the complex happened this year at these low prices. What is worrisome are the 95% of remaining owners who are significantly under water.