Saturday, January 10, 2009

Minty Meltdown

I recently received an e-mail from Redfin that caught my eye--in a good way for a change. This condo gives me hope for the day when hard working Americans can afford a nice property they can be proud of, without becoming permanent debt slaves or facing financial ruination.

Address: 2662 E 2nd St. #F2, 90803
Asking Price: $309,000
Size: 2 beds, 2 baths, 1,275 sq. ft. (built in 1966)
$/Sq. Ft.: $242
HOA Fee: $224
MLS#: P670402
On Redfin: 4 days
Down Payment: $61,800
Monthly Payment: $1,900
Income Requirement: $88,000
Description: Don't miss this beautiful opportunity in the Tiarra Imperial complex in the heart of Bluff Park historical district. Features include: very open and light floorplan, hardwood floors, completely remodeled kitchen with travertine counters, peach travertine flooring, and high end stainless appliances. This unit also boasts a master suite with private bath, INSIDE LAUNDRY, spacious, south facing balcony with city views! Designer appointments throughout! Hurry, this property will not last!

In this neighborhood this close to the ocean, $242 per square foot is a smoking deal. For once a listing agent is correct exclaiming "this property will not last!"

But before Anonymous gets his panties in a bunch, it is worth noting this is a short sale. That means there is little likelihood this price will be approved by the bank. Further, short sale status means it will likely take two months for the bank to reject that price. No need to get too excited.

See how comfortable this cat looks?

She knows as well as anyone that it will be a looooooooooong time before she needs to relocate her litter box.

So, yes, until it actually sells for $309,000 (which would make nearby sellers' heads explode), there isn't much reason to believe true affordability for hard-working families is here. However, my overall point is that this is a sign of good things to come. Remember, it wasn't too long ago that sub-$300 per square foot was considered by perma-bulls to be anomalous outliers. Now $250 per square in Long Beach is as common as crabs in a truck stop brothel.

But the most interesting thing to ponder about this property is HOW it became a short sale.

Consider this: according to Redfin the current seller purchased in 2000 for $177,500 ($139 per square foot!). If you add up the last eight years of ownership, right now she has at least $100,000 in equity, meaning the total outstanding balance on the loan would be around $77,500.

SO JUST HOW IN THE HELL IS THIS A SHORT SALE AT $309,000?! She should be pocketing more than $200,000 and boarding a plane to Barbados!

The most likely answer is that she compulsively refinanced, tacked on massive HELOC (Home Equity Line of Credit) loans to the balance...and blew the money. How can you conclude otherwise?

And assuming that's the reason for the short sale, it means she must have taken out all of her $100,000 in equity, PLUS hundreds of thousands of dollars on top of that. Incredible to think about, no?

With all the talk of subprime and Option ARM loans sending people into distress and foreclosure, it's easy to forget about the stunning number of pre-bubble homeowners who got drunk on HELOC juice and serial refinancing during the real estate frenzy. Not many people are talking about this phenomenon, but it will certainly be a factor in growing distressed properties, and it turn further price decreases.

As far as the actual property goes, I'm tempted to submit an offer. Seriously. I really like this place.

I drove by today and I could totally see myself living there. Obviously I would need to change some things upon purchase. Namely, the atomic booger paint scheme in the kitchen:


Not to mention filling the nail holes made by all those frames (take it easy, lady. I realize you're a big fan of Aaron Brothers, but relax. Actually, I might have an idea where all that HELOC money went).

Other than the mint-colored kitchen and Yoda's bathroom, I'm pretty impressed. It's spacious, in a killer neighborhood, has in-unit laundry, a comparatively reasonable HOA, and I love the floors and plantation shutters.

The downsides are that it has two shared walls and only one parking spot. But overall this would be a really nice place to live. I guess the question is whether or not the bank has any intention of letting it go for such a seductive price.

Considering a unit one upstairs sold in August for $451,000, I very seriously doubt it. Methinks the $309,000 asking price is nothing more than an attempt to create a bidding war.

But considering what the top-floor unit sold for, and what nearby units are listed for, if you listed at $390,000 you would still be competitive and could eliminate the need for a short sale.

Or would it elminate the need?

I'm open to your ideas, but I suspect the HELOC-abuse is much worse than it appears. Unless there was a sale during the peak for $500,000 that didn't show up on Redfin, that's the only logical explanation.

UPDATE: An astute reader pointed out that Redfin is already reporting the condo is "Off the Market." My suspicion is that the seller was trying to get a loan modification and threatened to short sell it for way below comps as a means of leverage. That's pure speculation, but given the overall fishiness of this listing, it wouldn't surprise me.


  1. HELOC abuse? can't you see all the money plowed back into paint? that must be 200 large right there! and another 200 large on framing!

    definitely undervalued at twice the price!


  2. Wouldn't it be funny if there were picture frames hidden everywhere in the house? In the oven, under the bathroom sink, between the matress and box springs. HAHAHA!

    For some people it's purses, others it's cats...for her I guess it's framed artwork.

  3. Monday morning and Redfin has it as "Off The Market".

  4. Something fishy is going on with this place. I wonder if the seller was just threatening a short sale/foreclosure so she could get a loan modification...