Are Los Altos Short Sale Properties a Wise Investment?
There are nine short sale listings currently listed for sale on our local Multiple Listing Service. Seven of these are “sale pending” (in contract), one is an active listing and one is attempting to be sold via auction (today). List prices for these properties range from a low of $799,000 to a high of slightly under three million dollars.
Taking a quick look at the tax records on these properties, it is interesting to see how these properties and their owners got into financial difficulties.
Surprisingly, it appears as if only one of these homeowners used the property as an ATM. Six of the owners bought the properties as investments. They remodeled the existing structure extensively or built a new home with the intent on selling and cashing out. It appears the last two “investors” ran out of money and/or the market turned sour before they could build.
Compared to two or three years ago, these properties are a solid investment because they will sell at about a 40% discount from their peak list price.
However…
(1) These properties were clearly overpriced when they originally hit the market (otherwise they would have sold). They also provide an excellent example (worst case scenario) detailing what can happen when a seller over-prices his/her home and ends up chasing the real estate market down.
(2) With every upswing in the real estate market, there tends to be some sort of correction. In the last 2 decades the upswings have generally outpaced the downswings and property has appreciated well. A Los Altos home bought in 1995 for 500K is worth 1.2 million today. However, that same home bought in 2007 for 1.5 million is worth 1.2 million today. Unfortunately, our current market correction is much deeper and longer than most “experts” (and novices) believed could occur.
(3) Even though we are seeing some signs of recovery in our economy, we are unsure about the overall strength of the Los Altos real estate market. Therefore, it is tough to determine whether today’s “good buy” will be looked upon as such in the coming years.
