Before the collapse of the housing sector several years ago, most people (other than specialists in real estate or in mortgage banking) had never heard the term “short sale.” And in those pre-collapse days, if someone had described being underwater on their house, most of us probably would have conjured up images of a flood. We’re better informed today due to the barrage of press reporting on the millions of homeowners nationally who owe more on their mortgage (or multiple mortgages) than their home is worth in today’s market. Being “underwater” (also known as being “upside down”) on one’s mortgage has a psychological cost for anyone in that situation; but for someone who can no longer afford to make the mortgage payments, it may lead to the loss of the home through a short sale or foreclosure. Refinancing is generally not an option.
Looking at the Madison Park market, it appears that neither short sales nor foreclosures are having the kind of impact here that they have had elsewhere in the region. This is what we would expect based on data compiled by SeattleBubble.com, which shows that for King County, at least, the short-sale phenomenon is most likely to occur in the market segment for homes listed at under $350,000. Short sales are rare in the world of $800,000-and-up homes, which make up most of the Madison Park market.
An analysis of monthly listing information from real estate website Redfin indicates that there have been 14 properties in Madison Park listed as short sales since the beginning of 2011 (including one vacant lot). In any normal month during the period, however, short-sale listings represented only between zero and four properties, while the total neighborhood inventory ranged between 49 and 85. Atypically, in January of this year there were eight different short-sale situations shown by Redfin, though most of those properties were quickly sold. Today, there are only two short-sale listings (out of a total inventory of 67 condos, townhouses, and single-family residences).
The most expensive short sale that occurred since the end of 2010 was of a $1,705,000 spec house located in Washington Park (the list price, after multiple reductions, was $1,890,000). Washington Park had at least one other short sale (a house across the street from the Seattle Tennis Club), according to Redfin, while Broadmoor also had two (a $895,000 listing that sold for $840,000 and the other a $950,000 listing that sold for $800,500). For the respective banks, these sales probably represented quite a discount on the existing mortgage. That may be a typical short-sale situation, one example of which is a Madison Park home listed at $944,400 (also after multiple price reductions), which finally sold for $762,500. On the other hand, a $995,000 listing north of Madison Street sold for $985,000.
There were also five condos listed in the short-sale category (three of them located in the Canterbury Shores development, shown below). The final sales prices on theses properties ranged between $250,000 and $300,000.
As noted, there are two short-sale properties currently on the market here, one a townhouse priced at $525,000, the other a waterfront condo listed at $380,000.
It is probable that one or more of the 10 short-sale listings that wound up on the sold list were actually foreclosures. While a short sale is a somewhat “voluntary” action where the homeowner and bank agree to part company (the seller getting out from under the mortgage and the bank receiving less than the full principal owed), a foreclosure is certainly in the “involuntary” category. Sometimes what begins as an attempt by a property owner to short sell ends when the bank decides enough is enough. Legal action may then be necessary to gain control of the situation. Another option that is sometimes a last resort for a homeowner is simply giving the keys back to the bank and walking away (a foreclosure avoidance method known as a deed-in-lieu). Currently, there is a Broadmoor home on the market priced at over $2 million which apparently fits into this latter category.
Website RealtyTrac shows that while there are only two bank-owned homes in Madison Park at the present time, both of them are located in Broadmoor. When it comes to the real estate downturn, obviously bad things can happen anywhere.
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