Out of morbid curiosity I made an “offer” on 765 E. Bradley Ave #41. (MLS #078015909) It is a REO unit that has been on the market for 5 months. The original asking price was 230K and was reduced to 175K at some point. I just wanted to see what kind of reaction I might get (or none at all) if I were to offer what I really want to pay. I am curious to see if I get a reply. If so, I think it means there is absolute desperation setting in on the part of the banks. Because I want a 50% discount on the original asking price.
By the way, regarding the crime and vandalism in this particular part of El Cajon, this morning when I was walking out to my car on the street to go to work I saw that 3 or 4 cars had had their tires slashed overnight. They were parked right on the street in front of the unit where everyone has to park. And there was also at least one attempted car jacking of a resident here who parked on Bradley Ave. Gangs are sometimes just hanging out on the steps of the complex. Hooligans seem to rove pretty freely around here at night.
Anyway, here is the text of my email offer in case it is entertaining. I know it is naive and ridiculous, but I am doing it for my own reasons and an informal test of true market conditions. If they actually make a counter offer and try to split the difference it will give me great hope for a future opportunity somewhere I actually want to live. If they accept my offer, I will be shocked, and ready to move in.
I am not pre-approved. I would have to make an offer based on the condion of getting approval. I was neither planning to buy nor ready to buy in this current market. It is not yet a “buyer’s market” IMO. The downturn is just beginning. I think a few more years into this will be much better for families looking to buy. Then I might get a reasonable price on a loan that is made with an actual expectation of eventual payoff.
I firmly believe rising ARM payments are going to force a lot of the increased number of “homeowners” (70% vs 63% historically) nationwide to default, and especially here in S. California with our ridiculous suicide loans. That is why this unit is for sale and many others like it. This growing crisis is already moving lending standards. Establishing basic standards once again is going to be necessary, is already slowly happening, and will further erode property values to more fundamentally sustainable levels.
Having said that, the MLS listing said 175K and make an offer. I went to the condo and toured it the other day. It was really in bad shape. It is in desperate need of new carpets and paint and all the cabinets and tile and fixtures are in poor condition and just plain ugly. (Pretty much what you’d expect from a deadbeat homeowner I guess). Oh yeah, the toilet wouldn’t flush. I don’t know why, and I didn’t spend too much time looking. I didn’t try all of the lights and fixtures. There is obviously thousands of dollars of work that will be required to make it something I want to live in. I am looking for a home for myself and my family and not a rental unit. I also note that this is not a desireable community to live in from a basic crime standpoint. (I know because I live at 425 E Bradley Ave).
175K is a bottom end price for a bottom end foreclosed unit in the lowest priced part of the county. I know the asking price supposedly takes into account the condition, based on a perceived fair market value of a liveable unit being in the low 200Ks. I don’t believe any unit in the complex will sell for 200K for many years to come.
I note that a 1bd/1ba condo in the same 765 E Bradley complex just sold for 102K (#51). I had a chance to see that unit and it was in much better shape.
I believe the floor of the downturn for 2bd/2ba condos in El Cajon will be set by investors rather than speculators which drove prices out of reach in the first place. Current rents cannot come close to making an investor cash flow positive and there is no longer speculative appreciation to count on.
There is just no sustainable reason for the disconnect between rents and property values.
We are headed dramatically the other way. A bottom end condo in El Cajon in general will likely settle in a few years below 150K, I hope, and I’m not interested in overpaying today. That estimate assumes a liveable, rentable condition unit and that interest rates don’t move much in the meantime.
There is also a bank owned (apparently, because it is not on the MLS) condo in the same building (#45). It is in much better shape and a much more desirable unit location. That is the one my wife and I would prefer. It will be interesting to see what the bank unloads it for, or which bank blinks first with the asking price. I haven’t got a response from the real estate agent so I don’t know what the asking price for #45 is. However, it is by far the more desireable unit.
My offer is 110K for #41 (as is) and I’m not interested in paying closing costs. I have taken into account the increase in rent value of a 2bd over 1bd (which will ultimately set prices again), the recent 102K sale of the 1bd/1ba in the unit, and the money required to make the unit liveable, plus the knowledge of where the El Cajon condo market seems to be quickly headed. My total cost, after renovation, would put it in the price range I am comfortable with. And yes, I know the asking price has already been reduced 55K. I don’t know how long that price reduction has been on the market, but it is still chasing the market down IMO (based on the much better unit and 200K asking price for 465 E. Bradly Ave #2).
If the bank is looking to move the condo off the books I can accomodate for 110K. Otherwise I will keep waiting. I just note that the market isn’t exactly moving and the “spring bounce” didn’t happen here in El Cajon condo land.
I have been watching the condo complex no more than 100 yds up the street from me at 465 and 469 E Bradley Ave. There is a bank owed (I assume based on the 273K sale OCT 31, 2006) foreclosure there for 200K (900sf 2bd/2ba #2) and 2 other units for sale (#11 and #6). The bank owned 200K unit is 50K+ less than the other 2 identical units, yet there has been no action on it for 2 months. It will be interesting to see what price will eventually move it off the books. I anticipate the other 2 will probably end up being foreclosures as well and will have to compete with each other based on the foreclosure sale price of #2 if it ever sells. Anyway, there are no takers on the unit after a 73K decrease in “value” (-27%) in only 8 months. (That unit is bigger and in much better shape than 765 E. Bradley #41 and it is going to sell eventually for a discount on the 200K asking price).
Forced foreclosure sales and auctions will end up setting price expectations, up to the natural floor of price/rent ratios based on the stomach for risk of real investors, IMO.
My offer is significantly less than what the bank is hoping for and I can only assume that if I hear from you again it is because the situation banks are in trying to move REOs off the books is more severe right now than the average person realizes.
