Los Altos Real Estate Blog

Home buyers and bargain hunters are still out roaming the market looking for deals in Los Altos and Los Altos Hills.  I still get buyers who seem to think that either market is full of pre-foreclosure and bank-owned (REO) property.  The truth is, there really isn't.  Right now, there are only 5 properties that actually fall into the category of "bank owned".  They cover a wide range of values and they have been held by the bank for as little as a few months to as long as many years.  There are several homes in pre-foreclosure, meaning they have had a Notice of Default filed on the property but those homes are all like so many others in the past, either on the market to be sold or will go to auction where they will be bought on the courthouse steps.

The reality on foreclosures in Los Altos and Los Altos Hills is that the few properties that have been bank owned go on the market and get sold quickly at market rates.  I have seen properties in the last 2 years get placed on the market at very low prices (think under $1,000,000 in Los Altos Hills) only to get 50+ offers and sell for what they would have in a normal sale situation - for all cash!  That's the harsh reality.  The idea of getting a phenomenal deal on a foreclosure in these two markets is unrealistic.  The banks are not in business to lose money.  If they can sell in the open market to recover any loan losses, they will.  Experience has proven that with the few sales that have occurred in the last 2 years.

If you are looking for a foreclosure bargain, the only realistic chance you have of getting it is to buy the property on the courthouse steps.  This happens when a "trustee sale" is scheduled and a date is set to sell it to the highest bidder.  The trustee will set a minimum price so don't count on getting a property for half off!  On the date of the sale someone will come out onto the courthouse steps (literally), read off the property address and the starting bid, at which point you can make an offer.  If someone else is there to bid on the property (and there are usually many people), the price will rise - just like in a regular market sale!  You must have a check available to pay cash (cashiers check is fine too) to complete the sale.  I'm happy to outline the full process as there are several other details to know.

The bottom line is that neither the Los Altos nor Los Altos Hills markets have many or will have many REO (foreclosure) properties.  If you truly want a good deal in Los Altos, work with a REALTOR® who knows the market and can get you access to pre-foreclosure or off-market properties.  I've been able to get my clients access to opportunities with savings of tens of thousands to hundreds of thousands of dollars.  Having an experienced local agent working with you is vital.  Give me a call so I can help you.

As mentioned in many past articles, foreclosures are few and far between in Los Altos.  There has been some foreclosure activity in Los Altos in March so far.  The types of foreclosure activity include notice of default (preforeclosure), auction (on the courthouse steps), and bank owned (foreclosure is complete).

There have been no notices of default filed so far in March 2011 in Los Altos.  There were 3 notice of default filings in February 2011 in Los Altos and most of those were done early in the month.  We're unlikely to see very many more this month.  One reason for seeing so few notices of default is that the homeowner can sell the property quickly after they've missed the first few payments.  Most Los Altos homes for sale that are priced under $2 million will sell in the first 2 weeks on the market.

There is only one auction scheduled in Los Altos for March 2011.  That home is located at 1081 Miramonte.  This is a small home but on a large lot with new construction right across the street.  While I feel very sorry for the owners who will need to move from that home, it is an excellent opportunity for an investor who can build a quality home with top schools nearby.  This area of Los Altos is extremely popular.

No homes were taken possession by a bank in March 2011 in Los Altos.  This may change before the end of the month but so far there have been no properties converted to "bank owned".  There are a small number of bank owned properties in Los Altos and they are available for sale via the MLS. 

Reports on foreclosures in Los Altos can be confusing.  Some reports will say there have been many foreclosures within Los Altos over the last few years but the reality is different.  There have been several notice of default filings in Los Altos in recent years but many of those are sold in the open market or the owners pay up the balance due.  The result is that there are very few banked owned properties in Los Altos. 

There have been 6 notices of default in Los Altos so far in 2011.  None of those homes has been placed on the market so far.  They show up in tax reports as preforeclosure properties with a mix of both fixed and variable loans.  The homes are on Richardson Ave, Sierra ventura Drive, Brookmill Road, Beechwood Lane, Deodara Drive, and San Antonio Road.  With the exception of San Antonio Road (too busy), all these streets are in nice Los Altos neighborhoods.  These are not foreclosure properties yet because they only have a notice of default.  Most consumers consider a foreclosure property to be bank owned and these are a long way from there.  It is highly likely that the owners of these homes have been contacted by dozens of agents to list the property, which is what will most likely happen.

As for bank owned properties in Los Altos, there are currently 4 such properties and all are actively listed as Los Altos homes for sale.  Those properties are in generally good condition and in reasonable locations.  As with most Los Altos properties, they will sell for close to market prices.  Buying a bank owned property is much easier than a short sale because the bank is the owner and they've already taken whatever loss they'll take on the original loan.  Making an offer on a Los Altos foreclosure is nearly the same as any other listing and can close just as fast.  The few Los Altos foreclosure properties that have been on the market in the last few months have sold relatively quickly with a couple of notable exceptions.

With property values rising, the number of Los Altos foreclosure properties is likely to drop.  I say this because a homeowner can get their home sold in the open market and recover whatever equity they have without going through the foreclosure process.  This is good for buyers because it means more inventory and motivated sellers.  It's also good for sellers because they call sell their home without going through the foreclosure process which can damage their credit rating.

This is an excellent time to consider selling a preforeclosure home in Los Altos.  With many homes selling in their first 2 weeks on the market, at or over the asking price, the spring market is ideal to sell.  The more Los Altos homes for sale, the better, based on recent buyer activity.  If you are a seller in this market, I'll be happy to provide insight into current market conditions.

As most buyers know, there are very few default notices in Los Altos or Los Altos Hills.  Now we hear word that default notices are dropping again in Santa Clara County as a whole.  An article in the San Jose Mercury News reports that default notices (often mistakenly called foreclosure notices) dropped year-over-year in 2010, down over 33% to 10,052.  That's still higher than 2007 but it shows a trend driven by a stronger economy.

There are 11 properties in Los Altos with notices of default filed at this time.  Most of these will either have the default corrected (by bringing the loan current) or they'll be sold on the open market.  There are only 4 properties in Los Altos that have become "bank owned" or REO properties.  One of those has been on the market for a long time because it's in an undesirable location and the property condition has deteriorated considerably.  Poor locations are a common theme with foreclosed properties in Los Altos and Los Altos Hills.

Los Altos Hills has 3 properties with notices of default at this time.  The homes are a mix of moderagely sized homes (for the hills) and generally they will also be sold on the open market.  Recent REO homes in Los Altos Hills have been priced very low and some have gotten 50+ offers (many all cash) pushing the prices up to or close to market rates.

The market will see a few more of these in the coming year but the trend has been to sell these homes before they hit the market.  If you're looking for a bargain on foreclosed properties, there are two things to consider; location of the property and general market strength.  The properties that don't sell in the open market are usually in very poor locations which is why they stay REO for so long.  The rest sell at market rates because the market in Los Altos and Los Altos Hills have recovered substantially from years past.

In Santa Clara County, foreclosures were down 29% from September 2010 and 36% from October 2009.  That's a drop in new foreclosures and can't be entirely attributed to the foreclosure stops from BofA, etc.  Default notices were down 11.1% from September.  These numbers show a massive shift from the down market we've seen in the past toward a growth in prices and lower inventory we see now.

Another interesting statistic tied to these changes is that is it taking 45% longer to process a foreclosure than it did a year ago.  Again, this is GREAT NEWS!  Why is this great news?  Because as the jobs market continues to recover, we'll see more and more people who are new in the process (just received a NOD) who can get back on track with their payments.  While I adore the economists who see the "crisis" lasting another 3-5 years - they're just projecting and leaving out any chance at recovery.

These declines in Silicon Valley have been happening for months now.  I'm expecting that we'll continue to see these drops as the job market improves, consumer prices drop, home prices increase, and incomes rise.

During my most recent open house I had a few people ask if I was aware of any foreclosures in Los Altos or Los Altos Hills.  I said yes but also pointed out that very few homes ever become REO (bank owned) property in Los Altos or Los Altos Hills for several reasons including:

• Strong buyer demand
• Ability to sell as a short sale
• Significant equity in the home

So, will you get a deal on a foreclosure in Los Altos or Los Altos Hills?  Not likely.  Why?  Because the homes that are listed as short sales that have eventually become REOs are usually in poor locations and didn't sell in the open market for a reason.  One street in Los Altos Hills that has been a few of these is Elena Road.  The homes that have had trouble selling there have been close to 280 and priced too high.  The banks have been unwilling to reduce the price they let so the homes languish.  The short sale home on Lincoln Ave is in disrepair so potential buyers will have to look past the potential repair costs to get a good value.

Los Altos - Foreclosure vs. Short Sales Deals

One home that recently transitioned from short sale to foreclosure is facing the same issue that others have, the buyers want a deal but the bank won't reduce the price.  One home in South Los Altos on Richardson Avenue has been on the market for a long time but the bank won't take less than the asking price.  An offer that is close might get their attention and we'll just have to see what happens in the future.

The few foreclosed homes that have come up in Los Altos Hills include a couple that were underpriced on purpose (under $1 million) and ended up receiving dozens of offers hundreds of thousands of dollars over the asking price.  When that happens, the idea that a buyer will get a property in Los Altos Hills for a substantial discount is nearly zero.  With properties getting that much attention, the "bargain" potential drops a lot.

Can You Get A Deal In Los Altos?

You may but don't count on it.  As I said, the few homes or properties that have become REOs are usually in poor locations and not the best investment.  The ones that have come up in good locations sell quickly at market rates.  If you're looking to save money on a home in Los Altos, I recommend looking at homes that have been overpriced and negotiate with the seller on a value in line with the market.  Remember, prices are trending up slowly in Los Altos so buying before the Spring push could get you a great deal!

The number of foreclosures in Los Altos, Los Altos Hills, and Mountain View are small compared to other harder hit areas such as San Jose, Milpitas, and East Palo Alto. However, those areas had mostly subprime loans.

The story now is that prime loans going into default have increased (in Q3) to 33% of all defaults versus 21% for the same quarter in 2008. The primary reason for this increase: unemployment.

In general, the Los Altos area is less at risk for completed foreclosures (trustee’s sales) because turnover of properties is well below lower priced markets such as Mountain View. Most homeowners in Los Altos bought with 20%+ down and/or have been here so long their equity allows them to borrow in hard times or sell before getting into a default situation.

However, there are exceptions. One Notice of Default was placed on a Los Altos property with a $1.5M loan. The value of the property is close to that amount so the owner may try to sell in the open market or attempt a short sale.

There were four (4) other homes that received a Notice of Default in October. All have loans under $1M with fair market values well over that amount. So, while we may see more defaults in the area, I believe we'll see very few actual foreclosures or trustee's sales. Currently, there are no listings for these types of sales in the area.

If the “in default” condition is temporary and you can catch up with your payments, of course it's in your best interest to do so. However, if you're a homeowner with plenty of equity and fall behind in your payments, sell before the default process goes too far. You're better off saving your credit by selling -- it will be less painful than foreclosure.

Here are the original articles from the SJ Mercury and MSNBC respectively:
http://www.mercurynews.com/real-estate-news/ci_13823704
http://www.msnbc.msn.com/id/34039065/ns/business-real_estate/