bubbleinfo.com

Had my hands full the last couple of days trying to get this one closed in Rancho Santa Fe.

You’d think if you were able to put together a $2.9 million deal with a 2-week closing, the participants would go out of their way to help make it happen.  Yet it went like most deals do, with the inexperienced and incompetent throwing every conceivable hurdle in the way.

The first lender denied the loan due to a manufactured home being on the property.  That’s right, a practically-new 300sf modular on a permanent foundation, purchased for the caretaker and of little value, turned into a deal-killer.  This is after the appraisal came in at $3,033,000 with a $60,000 token value placed on the manufactured home.  The review appraiser knocked down the appraisal to $2.9 million, and when the underwriter saw the modular, they just flat out denied it like it was toxic waste, instead of cutting the $60,000 value placed on it.

First Guaranty of Texas took one look at how clean the rest of the package was, and said "hurry up and fund it".

But there were other little crazy things too.  Like the escrow officer who wanted the buyers to give her a $500 check to give her a "pad", even though the down payment, closing costs, plus an extra $10,000 were already in escrow.  It’s no wonder that consumers get so disgusted with buying and selling real estate.

It’s a humbling business too.  When my 10-year old heard that I sold a house for that price (an all-time record), she said, "you just got lucky".

On September 16, 2006, I detailed my prediction about superior properties retaining their value better than inferior properties, and it drew a slew of comments.  

Robert Cote said,

"I’ll buy you that $4 cup of coffee if you can find anything that isn’t off at least 10% from the peak this time next year."

The next day I named three neighborhoods in Carlsbad that I would use as measuring sticks:

1.  Terramar

2.  Olde Carlsbad

3.  La Costa Oaks, Davidson’s Starboard tract.

Terramar and Olde Carlsbad were safe bets, because they are both filled with long-time owners with plenty of equity – less chance of those financially-distressed moves.

Davidson tracts have done well throughout North County – they build upscale, stylish homes that look better than most tracts, and they get most of the awards each year.  The problem I could face is downward pressure from home sales in the other La Costa Oaks tracts – which could suck down the Davidson homes with them.

How are they doing?

There are three models at Starboard: 3,739 sf, 4,000 sf, and 4,337 sf (A quirky coincidence that Centex also built a 4,337sf model in La Costa Oaks too, so I want to be careful to only compare the Davdison-built comps).

First let’s list the sales around September:

3,739 sf model

7/5/06                 $1,144,500

7/28/06              $930,000

8/7/06                 $1,085,000

10/20/06           $1,275,000

11/8/06               $1,161,500

Average $1,119,200  Median $1,144,500

4,000 sf model

7/5/06                 $1,298,000

8/7/06                 $1,172,000

Average $1,235,000

4,337 sf model

9/27/06              $1,250,000

Generally, sales of all three models would have to be in the $1,100,000 to $1,200,000 range in September 2007 for me to win.

This bet will likely be hampered by fewer comps in the coming months, but there are some ‘brewing’ to keep an eye on:

Active listings:

3,739 sf model        $1,200,000         22 DOM

4,000 sf model       $1,239,000         34 DOM

4,000 sf model       $1,250,000         125 DOM

Pendings

3,743 sf model       $1,200,000          12 DOM

4,000 sf model      $1,229,000           96 DOM

4,000 sf model      $1,249,000          53 DOM

Solds

4,337 sf model       $1,024,000          4/18/07

3,743 sf model       $1,200,000          5/15/07

This is where it gets tricky in any tract neighborhood – where you tend to be married to the comps because they are so similar in location and features. Will that one low sale bring down the rest?  You can guess that the appraisers who are working on the three pending sales are raising an eyebrow, and are using others in La Costa Oaks but outside Starboard to help justify the sales price. 

Two notes on the recent sales.  The seller who dumped at $1,024,000 still sold for more than he paid for it, which is a big problem in any tract where there has been a big run-up.  The early purchasers can submarine those who bought later.  The second sale was the model home that was mentioned here as a Davidson sweetheart deal that the buyer bought in February for $1,050,000 – and has now flipped for a $150,000 increase!

Everyone is looking for $1.2-something, can they all hold out?  Will the three in escrow get close, or did they have to dump to find a buyer?

My cup of coffee is teetering….