L.A. story: Was $545,000, now $125,000

Back story: Earlier this week I blogged about a foreclosed house that had been reduced 57% in price from its peak sales price to its current asking price. In response, commenter "E" maintained that 57% was no big deal and that he could easily find a foreclosed house discounted 75% or more. Taking up the challenge, I responded that if he could find the house, I would drive over and take a picture of it.  No slouch, "E" quickly found this listing from Redfin.com.

So about two hours ago I motored over to Highland Park and shot the picture you see. By my math, the house is being offered at a discount of 77% from its peak sales price, but it's a listing that raises a few questions. I'll explore them below.

More on the house: It's a bank-owned, two-bedroom, one-bath on a half lot in Highland Park that's been on the market 225 days. Agent's description:

"PROPERTY SITS BEHIND ANOTHER PROPERTY YOU MUST GO UP A WALKWAY NEXT TO A DRIVEWAY TO GET TO THE HOUSE. NO FHA OR VA OR LOW DOWN FINANCING PROPERTY WILL NOT QUALIFY THIS IS A FIXER. LENDER OWNED REO PERFECT STARTER HOME, SOLD AS IS NO TERMITE NO RETROFIT. ALL OFFERS MUST INCLUDE PRE-APPROVAL LETTER W FICO SCORES AND PROOF OF FUNDS AND COPY OF EARNEST MONEY DEPOSIT CHECK."

Here's the sales and listing history, also from Redfin.com:

Sold: April 2005 for $240,000
Sold: June 2005 for $410,000
Sold: April 2006 for $545,000
Foreclosed: September 2007 by Morgan Stanley Trust, $385,000
Listed for sale: January 2008 for $300,000
Reduced: February 2008 to $179,900
Reduced: April 2008 to $169,000
Reduced: June 2008 to $149,900
Reduced: August 2008 to $125,000

Questions: What happened between April and June of 2005 to cause the price to nearly double in two months? And how did the house -- wedged into a half lot in a backyard with no parking -- ever appraise for more than half a million? I called the listing agent, Zita Doyle, who said, "Honestly, I don't know how anybody could have appraised that house for that amount of money." I'm curious to hear your thoughts on this.

-- Peter Viles

Photo Credit: L.A. Land

Comments

[SMRR]

E was referred to as the angriest renter? For what, seeing with better clarity than the rest - as sighted above. He took the challenge and did the legwork and backed up his BS.

What else. E called out Cramer for saying Bear Sterns was fine? Cramer should be taken off the air for being so far off and have to buy back all his books from every college student and part time investor.

E is up there w/ Rational Renter as two of the most meaningful posters on this blog.

[SouthPas Renter]

It's called fraud. How else could this place almost double from April to June 2005. And everyone was involved, agents, appraisers, banks. That is why the current downturn was badly needed.

[IToldu2CashOut]

The funny/sad thing is that this place could still go lower. In many other areas of the country this is a 20k house. Why should it be 120k in LA?

[Mary C.]

Why is it a fixer, and what needs fixing? I'm assuming it was probably built into someone's backyard (maybe as an inilaw unit) in 2005, since it has no other sales history. Also, is it even legal? How can you have an independent lot in someone's backyard? I wonder what the last owner did to it, or failed to do to it, to bring a property that appraised that high to fixer status (or if it was a fixer when it appraised that high)?

[Corntrollio]

So you mean that if you put some granite countertops in and some stainless steel into the house that its asking price shouldn't double? zomg!

[esp4p3]

I agree, fraud was involved for this property to sell for 545k. Who in their right mind would pay that for this POS?

[Tom Lindmark]

It's pretty obvious what happened from April to June, isn't it? Someone bought it, rounded up a crooked appraiser and lender and scammed the system for several hundred large. Just one of thousands like this but no one is going to jail. What do you think gives there?

[zach]

5k not a penny more

in a bad neighborhood you would have to spend 200k on security alone

[E]

Phew! Pete...glad to see you made it back alive. ;^)

Aren't you glad I scored you a couple hours leave from your desk?

Is there a way that we can find out who was representing this house when it "doubled" in price?

As far as I am concerned, this is the kind of fraud that makes my stomach turn with regards to this whole mortgage mess.

I've got another fun one for you. I found a condo in Oxnard that with a 10% off offer it would be lower than it sold for in 1989!

4556 Saviers Rd.
Oxnard, CA 93033

MLS# 80015852

Wheeeeeeeee. How low can we go!

Anybody else starting to realize how "forked" we really are?

[LA-renter]

Peter,

This house should be a monument.

Do you think we could collect signatures for Sacramento or Washington?... Make the house and its half lot into state or national parkland?

In case you forgot, "those who cannot remember the past are condemned to repeat it."

We could display mementos of the Great Bubble of 2005 throughout the interior.

As the next housing bubble expands in 2013, we can just point doubters to this true national treasure.

[Laker]

E,
Two thumbs up! Nice work.
In general, this is a nice example of fraud. Mortgage broker, appraiser, RE agent, buyer, seller.
I think that anyone with full MLS access can get back to those sales, and find the listing agents, then we can go from there.
sfvrealestate,
can you help E with the info?

For your Oxnard condo,
Last sold:
Jul 06, 2001 $51,000
Jul 12, 2001 $105,000

I don't understand what happen in 6 days...

[RM]

That's not a house, it's a shed! Some appraisers need to be called on this one for sure.

[Ace]

Why does every angry renter here now feel the need to have their own lame housing bubble blog?

Get out and buy a house already. Then you can spend your spare time mowing the lawn or fixing leaky faucets instead.

[Qatar Boy]

This kind of scum was rampant in 05 and even 06. Everyone was on it: Mortgage broker, RE agent, buyer, seller and above all "appraiser'. I'd venture to say that even the banks were players as they kept ignoring it for so long. I'd say the bank leardeship was blinded by short term prospects of bonus payouts that they simply milked the cow until the milk stopped flowing.

[Tbone]

I had a similar shock recently. Looked up my previous home to see how Zillow was treating it after I sold it and noticed my ex-neighbor's house is now a foreclosure sale. They sold in '05 for around $540K and moved to Cincinatti where they bought a new home outright. It sold again for $640K in November '06, right at the peak of the Zillow graph and is now for sale for.........$274K! But keep in mind my ex-neighbors originally bought it for $184 in '01 so it still has some dropping to do I think. I'm just thankful I was able to sell my place before this house listed.

[Bill]

I honestly don't know why it isn't easier to nail these appraisers to the wall. I mean when the appraisals are clearly that far off, the evidence should be overwhelming. Then once you have them singing, you get to find out where the real pressure to meet the numbers were coming from.

Or maybe that is the reason no one's really trying ......

[Scott]

Look at the bright side.

Whether there was fraud involved in these transactions or not, looking at the sales history makes one thing clear. Activity, commerce and business flowed through this house over the years. The money from the transactions most likely circulated in the area for awhile, and a snobby bank somewhere back east is taking a financial beating.

To my eyes, that ain't too bad.

[latesummer2009]

Real Estate Fraud, plain and simple. We will see more of this as dead fish always float to the top. I have a better one for you Peter. Check out 3121 Urban Avenue in Santa Monica.

According to Redfin:

3121 Urban Ave, Santqa Monica,CA 90404
2+2 SFR, 1475 sqft house, 6168 sqft lot
1st house south of the Santa Monica FWY.

Sold 4/28/89 for $330,000
Sold 9/26/06 for $1,390,000
Sold 1/29/08 for $1,040,000 (Bank)
Sold 8/8/08 for $699,000
Sold 8/12/08 for $323,363 (Bank?)
2007 Taxes paid $5,362 ???????????????

http://www.westsideremeltdown.blogspot.com

[first timer and very dumb]

This is my first time to this blog, can someone who understands the RE market explain a few basis RE 101 questions to a newbie with no prior experience in RE. I don't understand where the fraud is? I come from a stock market background and if a stock doubles in one day, maybe plenty of people will say a 100% increase in a company's market capitalization doesn't make logical sense, no one says fraud is involved, they just call it supply versus demand. At the height of the tech bubble, there were a lot of extremely overvalued tech companies, (I am thinking about the legitimate ones like the Cisco's, Dell's, JDSU's and not the the Enron types, which were clearly fraud) but it was caused by the "greater fool theory" (momentum investing) and not by fraud. It seems to me (and I admit I am ignorant of knowledge of the RE market and probably missing a lot, hence the question) it was just a lot of greedy buyers (similar to the tech bubble) who overpaid. But is that fraud on part of the seller or mortgage company? What am I missing? Thanks!

[Keith]

Fraud or Flipper? The buyer was either a criminal or criminally stupid. But that was just about every buyer from 2005 to 2007.

[dutchtrader]

Hey

Didn't a poster named Milla buy a house in highland park?

[Laker]

dutchtrader ,
Milla bought in highland park for something like $410,000 and i i think it was a similar 800-900 sf 2 bed house on a 4000 sf lot.
Back then, she bought at about $70,000 less than "zillow" zestimate....I just checked it again, and it looks like her house dropped by that amount and now is almost worth. according to zillow as much as she paid...

latesummer2009 ,
Let me try to help you here:
I think the "Sold 8/12/08 for $323,363" is a typo system glitch. It does not appear on property shark but it is relatively fresh. It is best to wait another two weeks and recheck it. (It could be a 2nd mortgage foreclosure or something) but it seems that the last sale of $699,000 is legit so the title should have been clear by then...
If you look at it from the top to bottom (dumb RE Investor), The house sold for HALF price of last sale:
Sold 9/26/06 for $1,390,000 Down to
Sold 8/8/08 for $699,000
But if you look at from bottom up (smart RE investor), you will see that it sold for 4/28/89 for $330,000
So it still had some nice doubling of price in the last 19 years...
Lastly, look at the previous owners last names, and the last sale of $1.4 Million. You will see that this sale was 100% fraud, I would not mention the nationality of the owners as Peter already penalized me once for that, so i will not do it, just look at property shark and draw your own conclusions.

[sfvrealestate]

Laker, I looked this up on all the mls's, but there's no info on this at all. Most multiples only go back two to three years. So no info.

Mary C, lots like this in L.A. County are rare, but not unknown. It could be a "flag" lot. The County allowed all sorts of weird subdividings back in the 1st half of the 20th Century.

First timer, I think your "momentum investing" theory explains it all.

[The original RZ]

I love how houses in not-so-great areas went for more than half a million dollars during the peak of the bubble. It's one thing for homes in La Canada to go for a few million - they are in an area with excellent schools, low crime, and lots of stability - but for a gangridden area to sell for so high is ridiculous. Seems to me the foreclosure price should have been the peak price until the area improves drastically.

[The original RZ]

"I honestly don't know why it isn't easier to nail these appraisers to the wall."

Bill, I agree with you completely. It seems like everyone else (predatory lenders, flippers, people who bought homes they couldn't afford) have had their share of the blame in this housing mess, but the appraisers have gone blame-free. Why isn't anyone going after them?