Real estate lawsuits - your ticket to real estate riches
April 26, 2008
I just closed escrow as the buyer’s agent on a REO property - that is, the house had been foreclosed on, and the bank owned it. When a bank is selling a property (or, typically, it’s an asset management company that sells the property for the investor, marketed on the MLS using the services of a Realtor), there are few disclosures made about the property - because, of course, the owner of the property is an investment firm in Abu Dhabi or the pension fund for a plastic toy factory in Shenzhen, China - and what, really, could such an owner know about the property?
Exactly. So when you’re buying a property from the bank, you really have to be extra diligent in your investigations of the property. In this particular case, we stumbled onto some significant material facts that had not been disclosed to us by the seller - which is not surprising, because I’m sure the seller didn’t know. The buyer and I were at the property measuring the rooms or something, and one of the neighbors came over to have a chat. “Do you know about the lawsuit?” she asked.
“Lawsuit? What lawsuit?” I replied. That is what you really like when you are starting to wrap up your investigation of a property - to hear that there had been a lawsuit. “Oh, don’t worry,” she said, “it’s all been settled now.” She went on to say that there had been, in effect, a property line adjustment, and the subject property (the one I was helping my client to buy) had relinquished some “useless” land behind the garage in exchange for some use of some of the neighboring ’s land, which was a non-exclusive easement benefiting the subject property but had been used for years and years exclusively by the former owners.
Fair enough, and any such lot line adjustment would, naturally, appear on the title report. The problem was, we had not been given a title report yet, although I had requested a copy about a week prior. As often happens with the purchase of an REO property, the title & escrow company is some out-of-town outfit, often from L.A. I immediately contacted them, and said, hey, we really really need our title report, now. It took them several days before they actually coughed up a title report.
I forgot to mention - this neighboring parcel - it’s a vacant lot, and it’s for sale. At some point during all this, I had talked to the listing agent for this parcel, and he said he’d heard about the lawsuit, and said he heard that there were some un-recorded grant deeds lying around, but didn’t really know much about it and would check with the owner and get back to me.
I didn’t sit idly by, though. I went on to the county recorder’s office and looked to see if I could find any grant deeds and such that would be required in the event of a lot line adjustment. I couldn’t find any - but then, I’m not a professional title researcher. After a few days, the title report showed up, and…
No mention of any lot line adjustment. The property lines matched precisely the tax assessor’s map which I had already downloaded from First American Title’s beloved Fastweb system. Hmmm. So where, then, was this supposed land swap? What had the neighbor been talking about?
In a burst of inspired genius, I found my way on to the superior court’s web site - it turns out, you can search the case history index on-line. Ahh, voila. I did in fact find that there had been a court case between the former owner of the subject property and the current owner of the vacant lot. Unfortunately, you can’t actually view the case records on-line, you need to schlep yourself over to the courthouse and ask to see the records in person.
So I did. A pretty thick file, actually - two volumes, one of which they had to dredge up from the basement. The lawsuit was brought by the owners of the vacant lot, suing the owners of the subject property (again, the one I was helping my client to buy) for encroaching upon their land, using the non-exclusive easement in an exclusive manner. The judge never made a ruling, but rather, it was settled in a conference.
The result of the settlement was that this lot-line adjustment was to be drawn up, deeds signed, a new fence to be built, etc. The new fence had been built, actually. But where were those pesky deeds?
I contacted the vacant parcel’s listing agent again and told him what I had found down at the courthouse, and he said, “Well, I talked to the seller, and she invites you to call her, she’ll explain everything.” He gave me her number, so I gave her a ring. She’s a very nice lady, and even though this lawsuit and lot-line imbroglio had been hugely taxing for her, she was as pleasant as can be and very helpful.
She explained that yes, per the settlement, she had hired a land-user planner, had surveys done, grant deeds drawn up, got all the signatures in place, had done everything you’d need to do to get a lot-line adjustment done and then, supposedly…the city lost the application to do the lot line adjustment. It just vanished, and the process died. She kindly gave me copies of all the deeds and surveys and everything, and wished me well.
Upon keen examination of the provided documents, my client noted a salient detail: the land behind the garage was being given to the neighbor’s parcel, but the easement that was being encroached on was not being grated to the subject property - it was changing from a non-exclusive easement to an exclusive easement. That’s not the same thing as being granted - in effect, then, the subject’s lot size would be decreasing by about 10%.
To make a long story short, after a week or so of hemming and hawing and talking it over with various parties concerned, we made a devil’s pact with the bank - we would take the property as-is, and proceed to close immediately, if the seller (”the bank”) would drop the price by about 10%. The bank took this offer, and my client proceeded to swiftly close on the purchase of the property - the catch is, this lot line adjustment is now in his hands.
There are all kinds of interesting angels to explore here, like those grant deeds - so far as I know (and of course, I’m not a lawyer!) a signed and notarized grant deed is legal, even if it is never recorded. That’s one big reason why you have title insurance, in case someone shows up down the road with a legal, un-recorded grant deed and says “Hey, uh, actually, your house? That’s mine.”
Another legal angle is the addendum I had the buyer sign where the agrees not to sue anybody (like me, or the seller, or the seller’s agent) for any reason related to boundaries and easements and adjusting or failing to adjust the lot lines. How would that one hold up in court? Hopefully I’ll never need to find out.
My client ended up buying this property at a very good price, thanks to a hard-fought, bitter lawsuit. There are many paths to real estate riches, and this particular bath was bumpy and winding, but my client is going to get there, just the same.
Posted by SantaCruzBroker at 10:32am
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Santa Cruz Real Estate - What’s In, What’s Out
April 22, 2008
This morning I was frantically running off a few flyers for one of my listings in Watsonville (a great mobile home in an awesome park - check it out). I needed to do a few errands down in Watsonville before my weekly office meeting, and loading up the flyer box at this listing was one important thing on my list. As I was standing by the printer waiting for the job to complete, the managing broker of Thunderbird comes up to me and asks if I’d like to participate on a panel.
“Panel?” I said, “Sure! What panel?” You know me, I never look a gift horse in the mouth - if the boss is going to give me an opportunity to be in front of a bunch of potential real estate buyers, I’m there! She explained: “We’re putting on a discussion about what’s in, what’s out in today’s Santa Cruz real estate market. We’re getting a few lenders together and some of the agents in the office to do a public event. I’d like to invite you to come along and talk about foreclosures in Santa Cruz, because that’s what everybody is probably going to want to know about.”
Hey, sounds good. I know about all kinds of real estate aside from foreclosures, but I imagine they’ll let me chime in if I have something I feel needs to be said on another topic. Here are the topics slated for discussion:
- What is the current state of the mortgage industry?
- What loan programs work best in the current market?
- What strategies can buyers use to best position themselves to buy?
- What is the prognosis for interest rates in 2008?
- What do home prices look like now?
- What is a short sale and how do I buy a home through a short sale?
- Why is now a good time to buy?
- What are some ideas to help me sell my house now?
- How can I use the Internet to help me buy or sell a home?
You, dear reader, may have noticed that there’s no topic about buying foreclosure real real estate. Presumably that topic will be added to the next version of the flyer they are handing out.
The panel discussion will be held on Thursday, May 8th at 6:00 PM at Santa Cruz Title Company in Capitola - 1955 41st Avenue, just three doors down from Starbucks (behind the Burger King, Citibank, and various other corporate logos).
If you are interested in going, please call my office to sign up: (831) 475-8400. Or, just contact me and I’ll put you on the list. They say “Space is Limited, Call now to Reserve a Seat” - but I don’t imagine the fire marshall will be on-hand to shut us down if we should exceed the rated capacity from the room. But if you do register ahead of time, we’ll probably make sure there are enough cookies for everyone (no promises).
Posted by SantaCruzBroker at 8:50pm
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Foreclsure News - from Santa Cruz and Beyond
April 15, 2008
I drive my wife crazy with my singing - and not in a Marvin Gaye kind of way. One thing I like to sing to her to wake her from slumber is Good Morning - my rendition is especially horrible and all I really know is the chorus part. But hey, I still think it’s better than a nasty alarm buzzer. And it is also better than getting woken up by the morning news, especially in these dark days.
You may have heard this one on the drive in to work, or perhaps they were bantering about it on NBC’s Today Show or something:
[From Bloomberg.com: Worldwide]
U.S. foreclosure filings jumped 57 percent and bank repossessions more than doubled in March from a year earlier as adjustable mortgages increased and more owners gave up their homes to lenders.
Yeah, good stuff. That’s what you want to hear as you write out your next mortgage payment check!
Of course, you know the famous saying - all real estate is local. What’s happening in Peoria isn’t really all that germane to what’s happening in bucolic Santa Cruz. So what is going on in Bucolic Santa Cruz? Read on:
[From Median home price drops to $650,000 - Santa Cruz Sentinel]
The switch pushed the median price of a single-family home down in March to $650,000 from $682,500 in February — but not as low as $599,000 in January, when 33 percent of homes sold for less than $500,000. The median is the mid-spending point of what sold during the month.
Only 75 homes sold in March, the fewest number of sales for a month in 11 years, an indication of buyer reluctance despite lower list prices. The previous low — 143 sales — was set last March.
That’s an interesting article, and it has more sales data from the aforementioned Gary Ganges, who I talked about briefly in my blog entry from yesterday. According to the article:
Ganges doesn’t specifically track REOs but he found 12 of the 28 homes sold in Watsonville in January, February and March were bank-owned.
Only 12 of 28? Hmm, that seems a little low to me. I do specifically track REOs, all the time, because that’s where the best bargains are to be had, and I’m always looking to find my clients the best deal possible. I just did a search, and I looked at all closed sales since the beginning of the year (up til now, mid April). I included Watsonville and the outlying areas (but not north Monterey county), and counted houses, condos, and multi-residential properties (actually, I don’t think any multi-res sold in that time period). My findings?
There were 35 sales of such properties since the beginning of the year. Of those, two were short sales, and twenty-two (22!) were bank-owned REO real estate. Actually, I’m surprised the number isn’t a bit higher. It should be noted that a few of the others that sold were in the city of Watsonville’s affordable housing program, and there was one Measure J property.
Sigh. Welp, I’m off to my office meeting. Keep up the good work everyone!
Posted by SantaCruzBroker at 7:54am
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Is it safe to buy a house in Santa Cruz yet?
March 26, 2008
I get questions like that all the time. Are we near the bottom? Have we hit bottom? How low will prices go? When will the market turn around? Good questions. Where to go for answers?
There’s just so much contradictory information, isn’t there? For example, our good, reliable, always-faithful friends at the California Association of Realtors (C.A.R.) report:
C.A.R. reports sales decrease 28.5 percent, median home price falls 26.2 percent in February
LOS ANGELES (March 24) – Home sales decreased 28.5 percent in February in California compared with the same period a year ago, while the median price of an existing home fell 26.2 percent, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.
But then we have this little tidbit which I saw splashed on the front pages of various newspapers the other day:
U.S. Economy: Existing-Home Sales Rise, Prices Fall
March 24 (Bloomberg) — Sales of existing homes in the U.S. unexpectedly rose in February as prices fell by the most in four decades.
There are other data points we can look at - for example, check out this entry from the Countrywide Foreclosures Blog:
14,413 REO’s Offered For Sale on Countrywide Financial’s Website
Total REO Asking Price: $2,976,805,967
(As of March 24, 2008)
Sounds like a lot of REOs - but look at the chart - the inventory is going down.
If you’re ever in need of a good a laugh, I recommend stopping by the Calculated Risk blog. It’s always a riot. They’ve got a bit of input on the New Home Sales numbers as reported by the Census:
[From More on New Home Sales - Calculated Risk]
There are actually two pieces of good news in the report. First, inventory levels (even accounting for cancellations) are clearly falling….The second piece of good news is revisions. During periods of rapidly declining sales, the Census Bureau routinely overestimates sales in the initial report - and then revises down sales over the next few months. In this report, sales were revised up slightly for November (from 630K to 631K), December (605K to 611K) and January (588K to 601K). This is actually a positive sign that New Home sales might be nearing a bottom.
So, what, exactly, does it all mean? The honest answer is, nobody knows. I’ll tell you what I think, though. I think that, barring any major, protracted recession, we are at or near the bottom of the market. I think Watsonville and the south county area is at the bottom and may already be heading up a bit - North Monterey county, too. I think that in the rest of Santa Cruz county, prices may have a bit to fall yet, but not much.
In short, I do think it is now “safe” to buy real estate in Santa Cruz county. We may not be at the bottom of the market in every nook and cranny of our diverse area, but I believe we’re close. My feeling is that anyone who buys today will not lose their shirt (and hat, and coat, and…), as many people did who bought in 2005 and 2006. I think worse case, if you buy today, you might lose a sock. Maybe a shoe, too. However, barring any calamity in the economy, I think now is a great time to buy in Santa Cruz. Mark my words. Unless I’m proven wrong, of course, in which case, forget everything I just said. 
Posted by SantaCruzBroker at 6:07pm
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Watsonville Foreclosures Meet the Press
March 03, 2008
Hey, I’m famous! Kind of. On the eve of our tour down to Watsonville to look at some REO foreclosure opportunities, I got a call from one of the staff writers for the Register Pajaronian. He asked if he could come along on the foreclosure tour. I said sure, no problem…
[From the Register Pajaronian - Foreclosed homes lure investors to local tour ]
Members of the Santa Cruz Real Estate Investment Club took a whirlwind tour Saturday through Watsonville, looking at six properties placed on the market as a result of foreclosure.
OK, so it’s not Sixty Minutes. But everyone has to start somewhere. The reporter from the RP (David Carkhuff) was very nice guy, visited a couple of houses with us, took some photos, and went on his way.
The Foreclosure Tour itself was pretty fun, and the folks who came along seemed kind of surprised at how cheap everything was in Watsonville. Afterwards, there was a debriefing back at Thunderbird Real Estate’s office, and a comment was made that prices aren’t quite there for investors yet.
Well, that’s as may be. However, from everything I have heard and read, most professional investors never pay list price. They may write up 10 or 20 offers for each one that actually gets accepted. I don’t know that you’d need to write up 20 offers to get a decent price on a place in Watsonville, but It’s true that the asking prices are not quite to the point where they are obviously a screaming deal for a true, pure investor. But they are very close, and in many cases, it’s possible to negotiate a price down to the point where it does make sense.
There were recently a couple of listings in Watsonville where the asking price did make sense to investors - and those properties sold in under a week. That’s the thing - when something is blatantly cheap like that, don’t expect it to sit on the market long. There is money around, but it’s smarter money than it used to be. It’s also faster moving money, so if you want to take advantage of this market, you’ve got to be fast moving, too.
Posted by SantaCruzBroker at 6:06pm
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