Luxury Home Foreclosures?

It appears that even the luxury real estate market will not fully escape the financial ravages that are taking down less-expensive neighborhoods.

Housing Wire asks: Has REO gone jumbo? To find out, they consulted with Integrated Asset Services, LLC in Colorado to see if foreclosures are moving up the real estate food chain. And though not all properties with loans in excess of the the conforming $417,000 are luxury homes, it appears that an increasing number of residences in that loftier lending arena are heading to short sale or foreclosure. In California, for example, IAS and Housing Wire saw 102 REO’s sell for more than $417,000 during April, compared to just 13 in April, 2007.

Anecdotally, we have seen a spike this past year in San Diego luxury homes that are closing as short sales (where more is owed on the property than what it is worth), or which end up as foreclosures and REO’s (real estate owned bank properties). We have also seen that it takes lenders far longer to reach an agreeable sales price compared to smaller loans–and that may be understandable.

On one hand, more money is at stake and greater care must be taken in reaching a fair valuation; on the other, carrying costs (taxes, insurance, maintenance, security and HOA fees) run far higher than ordinary REO’s. And that those are bills most lenders and services do not want to shoulder.

In a recent transaction in coastal Encinitas Ranch, Washington Mutual required two appraisals and took almost four months processing time before reaching an agreed-upon sales price. And during that time, foreclosure sale was delayed twice. The original loan amount was $1.2 million and the final sales price was $880,000. It was a major hit for the lender/investor , but costs would surely have been greater if this Encinitas home had gone to foreclosure.

We are currently involved with two other sellers who have loans exceeding $1 million and whose custom homes could end up as foreclosures if Countrywide and First Franklin investors cannot come up with pricing that reflects current San Diego market realities. Neither home is coastal (which would help prop up valuation) and neither have area comparable sales that would support pricing anywhere near what is owed on these homes.

Outside of our San Diego real estate practice with Villa Sotheby’s International Realty in Del Mar, we are hearing whispers that there will be more luxury short sales and REO’s before the real estate market recovers. And out of the confusion and delays in disposing of these luxury properties will be opportunities that luxury investors have been long awaiting.

And even the ultra-luxury real estate market appears to be experiencing some correction. In 2006, we wrote about Donald Trump’s luxury estate in Palm Beach being offered at $125 million. Recent reports say it sold at just $100 million.

What may have been painful for The Donald would have been a coup for the lucky buyer. I guess every market has silver linings–for someone.

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by Roberta Murphy

To paraphrase Charles Dickens, these may be the best of times and the worst of times at least with San Diego real estate.

Few are surprised that the real estate bubble popped in the plethora of new home subdivisions that peppered San Diego County in the last few years.

Stupid loans and and unwitting buyers created a marriage that has crippled the real estate industry.

But not all markets and communities suffer in the same way,

For example, few would consider Rancho Santa Fe, California real estate a bargain, when single family Rancho Santa Fe homes start at $1.15 million and currently peak at $29.9 million.

Moreover, only 16 of the current 167 active listings in RSF are priced under $2 million.

The bargain bin of real estate? Hardly!

Still, we have stumbled across a few notable buys:

• A 3220 square foot Del Rayo Downs home in Rancho Santa Fe was purchased for $1.74 million on 3/14/2006. It is vacant, in lovely condition and has been reduced to $1.395. The owner will even consider a trade.
• A gated, private and single story Mediterranean estate with over 5000 square feet on one acre just closed escrow at $2.1 million. It needed TLC, but the lots and bones were probably worth the total price. Located just outside Fairbanks Ranch.
• A 19.4-acre gated Covenant estate was listed at $29.5 million last August and closed escrow at a paltry $21 million last month. It was reportedly a cash sale.
• A Notice of Default has been filed against a lovely and very spacious 3-bedroom Rancho Santa Fe condo that has recently been reduced to around $1.2 million. I am already calling clients on this one.
• Another Rancho Santa Fe townhome was reportedly purchased for $1.675 million in the summer of 2005. It is now on the market at a value range of $1.3 to $1.4 million, has assumable financing, and guaranteed golf membership in the Rancho Santa Fe Golf Club .

Do we expect Rancho Santa Fe real estate pricing to fall off a cliff?

No way.

But it is certainly worth our time to scout the market to find sound values such as these.

Moreover, many who are now home shopping in Rancho Santa Fe and other luxury neighborhoods now can thank their lucky stars that they werent buying two years ago.
If you would like more information on Rancho Santa Fe or other San Diego luxury real estate, just give me a call at 760-402-9101 or 877-818-8197. You may also email me: roberta@sandiegopreviews.com

Read also:

Luxury Builder Claims 2007 Worst in 40 Years

San Diego Irresistible to Ex-Pats and Foreigners

The post Bargains in Luxury Real Estate appeared first on Luxury Home Digest.