Today we Salute Lawndale with our Real Homes of Genius Award. Let us become familiar with an acronym that we will be hearing about for years to come, REO. That is, Real Estate Owned. This means a property that goes back to the mortgage company or bank after an unsuccessful foreclosure process. As we can see from this exhibit, we have financial institutions deciding that they will jump in the river of denial with many current sellers. As in Shakespeare’s A Midsummer Night’s Dream, we have a bunch of nut jobs running around the forest wanting things they cannot have. Hermia refuses to marry the man her father has chosen and runs off with her lover Lysander to elope. I am not going to turn this into a literary analysis but suffice it to say that we have a play with many people running around in a drug induced Wonderland. Does this sound familiar? Can you think of another environment where people are delusional about their expectations?
Whatever happened to the “summer bounce” or the “spring bloom” that many housing pundits had promised? Can it be that the piper has finally played his last tune? Let us look at this 1,437 square foot home with 3 bedrooms and 3 baths. When you envision lifestyles of the rich and famous doesn’t this spectacular home come to mind? Like swimming in the public pool, this aqua colored trophy is set to entertain. The borrower converted the garage into a family den. Ergo it is worth nearly half a million dollars. Logic is a blast isn't it?
When we talk about foreign cars going from zero to sixty we get a sense of thrill in our gut. Red Ferrari Enzo’s that hum like exotic birds only to be crashed by Eddie Griffin for a charity event promoting Redline; a film funded by the now infamous Quick Loan Funding high roller, Daniel Sadek. The film was a bomb and apparently, his company is following the same fate as the Ferrari. Let us dig deeper into the history of this home:
What do we have here? Can it be possible that we are back to 2004 prices? Like Wal-Mart, we’re rolling back the prices apparently. Blasphemy you say! How can an architectural masterpiece like this be worth any less than the peak price? Well let us take a look at rental rates in the immediate area:
We find that the median rent in the area is $2,200. Moreover, the monthly carrying cost for this place, at the current asking price is approximately $3,500. So a difference of $1,300 a month. Banks unlike sellers do not have the luxury of holding onto property for eternity until reality meets their hallucinations. Let us see what a motivated seller looks like in full action:
Price Reduced: 04/03/07 -- $529,900 to $499,900
Price Reduced: 04/25/07 -- $499,900 to $491,900
Price Reduced: 05/23/07 -- $491,900 to $454,900
Now we’re talking! In two months we have a $75,000 discount not including the sacred 6% agent commission. Why would you buy now when the momentum is clearly on the downside? Foreclosures may be the X-Factor in breaking the stalemate we’ve been in for countless months. The bank is not a property manager. They are not Robert Kiyosaki looking to rehab the place and flip-it to showboat on HGTV. They need to unload a costly asset from their books as soon as humanely possible.
2006 Q1 Notices of Default: 18,856
2007 Q1 Notices of Default: 46,760
That is a whopping increase of 148%. With inventories rising and pending sales dropping, the market is quickly becoming a buyers market. But why listen to the facts? Go out and buy this house because this price won’t last! Contrary to reason, trends, and everything rational this house makes perfect economic sense.
Today we salute you
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