Two weeks ago the sale of 250 King Street #802 closed escrow with a reported contract price of $670,000 ($454 per square foot and $1,000 “over asking”).
As plugged-in people know, it had originally sold for $906,666 ($614 per square foot) in April 2006 with two loans totaling $949,900 (105% LTV).
As plugged-in people also know, between those two transactions the two-bedroom Beacon condo was bought off the courthouse steps for $527,077 in cash this past November. Well done Courthouse Steps Ii LLC (not so much JPMorgan Chase).
A Beacon Of Distress (250 King #802) [SocketSite]
Bank-Owned Competition In Action At The Beacon (250 King) [SocketSite]

25 thoughts on “A Bad Beacon Comp At $454 Per Square (But A Good Financial Flip)”
  1. While you say it is a bad comp in your headline, it seems to me if I were an owner at the beacon I would think that a comp of $670,000 is much better then a comp at its $527,077 price from November.

  2. Sooooo…… courthouse buys don’t count for comps but short sales do? Someone please remind me of the rules around here?

  3. gee, back when we first saw a posting about this unit i estimated that the person who bought this property for 527k would make a sizeable profit on the flip. everyone hated on me for this. looks like i called it right.
    I believe prices have more room to fall but the truth is there are still tons of people out there who are willing to catch the falling knives. I congratulate the person at Courthouse Steps Ii llc on a good flip.
    This is not to say we are back to the insane times of ’05-’08, but there are lots of people who didn’t buy back then who are very eager to get into housing right now. If people are strategic about it, and identify good properties, there is still a lot of money to be made.

  4. If people are strategic about it, and identify good properties, there is still a lot of money to be made.
    You’re talking flipping, right?
    Your irresponsible kind has brought this economy down in 5 years. Please go back to doing whatever you were supposed to do before the idiots at the Fed decided to put us into this big Ponzi. Sorry, your call center job has gone overseas, therefore you’ll need retraining.
    These are houses, not casino chips.

  5. everything can be turned into casino chips. If you have the big stack at the table, it doesn’t matter what cards you have. you can still make loads of cash pushing the little guys around.

  6. Sooooo…… courthouse buys don’t count for comps but short sales do?
    Couthouse buys are only comps for courthouse buyers.
    Most buyers don’t pay all cash.

  7. You’re talking flipping, right?
    Your irresponsible kind has brought this economy down in 5 years. Please go back to doing whatever you were supposed to do before the idiots at the Fed decided to put us into this big Ponzi. Sorry, your call center job has gone overseas, therefore you’ll need retraining.
    Not all flippers are irresponsible. “Self-serving” would be a better adjective for flippers, while “irresponsible” would be suitable to describe buyers who bought more than they could pay for (i.e. many buyers during the bubble).
    If you think flipping this Beacon unit is inflating the market, perhaps the blame should lie with the final buyer.
    In any case, flipping this unit was needed to get this property in the hands of someone who needed a home. I doubt that anyone with the cash and the will to buy this on the courthouse steps would actually want to live there..

  8. i actually don’t think i’m irresponsible, i’m just facilitating people who are making (most likely) unwise decisions. as i mentioned, i still feel housing is overpriced, i just know that there are people who are willing to catch the falling knife. i feel no guilt when i’m ringing the register and laughing my way to the bank.
    also, i don’t think “my kind” is to blame for bringing down the economy. i blame the banks for giving out ridiculous loans to persons who can’t afford them and the govt for allowing such stupid policies. The govt is still incompetent in that they are absolutely unwilling to let housing prices correct themselves. Look at all the stimulus bills that keep housing prices inflated. Of course there is the argument that these stimulus programs are ending and that housing should finally correct itself. even if the economy tanks, i have complete faith in obama/govt that they’ll reintroduce new bills to keep housing at current prices (if obama/arnold are going to waste my tax dollars on housing programs that pump up prices, i think i should be able to profit off of it).
    lastly, i’m actually a gainfully employed professional who is doing quite well. i have no worries about my job being outsourced.

  9. “Couthouse buys are only comps for courthouse buyers.”
    That’s not really true. Courthouse buys are comps for all buyers. Are you saying that if there were two identical houses that if one were being auctioned on the courthouse steps and one were listed on MLS, it would justify a huge price difference between the two? If so, please explain.
    If your suggestion is that the only people who would be able to buy the courthouse house would have to bring an excess amount of cash, maybe that tells you something about how financing affects housing valuation and not how foreclosure does.
    Foreclosure and short sales on more houses than have been foreclosed upon would be a good thing for our market. Instead of propping up zombie homeowners (better called long-term renters than owners) and zombie banks, we would have more productive use of assets, better valuation, and, importantly, less debt. That would be a good thing. A foreclosure moratorium only helps extend bad valuation.
    Loan modifications where the bank agrees to take a haircut are good, although many of these people never should have been allowed to buy a house, and wouldn’t even be allowed to buy the same house in a de novo transaction, so I’m not sure how HAMP is helping people who end up with such high bank-end ratios as the statistics say. They’re highly likely to redefault, and that’s what we’re seeing.

  10. Speaking of one man wrecking balls, here’s a Sunnyvale ‘investor’ who was like a kid in the candy store. His Unit 1106 (1/1, 982 sq.ft.)at the Beacon received a NOTS on Dec. 30, 2009 (bought for $725k in April, 2007). No word yet on its fate. Then there’s his property at 325 Berry #424; it received a NOTS on May 12, 2009 and was ultimately sold for a loss (his or the banks?) on March 18, 2010 for $500k (original purchase price: $671k in 2007). But wait, there’s more. He also owned at The Odeon (181 O’Farrell #314) and received a NOTS on May 20, 2009; Redfin shows this sold for $550k on April 23, 2010 (original purchase price: $965k Feb. 2007). He was also a co-owner of Unit 804 at One Rincon (425 First St.) which was foreclosed on April 7, 2007. His primary residence in Sunnyvale went back to the bank on May 6, 2010. Count ’em folks, that’s five properties tied up by one individual. Bad timing, I guess…

  11. Probably 1M+ in losses on one guy’s shopping spree.
    Guess who’s paying the credit card when all is said and done.

  12. SFRenegade-
    Do you have similar access to homes that are being actively marketed (short or traditional sale) vs those being sold on the courthouse steps? I would put a big premium on access to information on a property.

  13. My parents saved up and paid cash for their first and next home. And they paid cash for their cars. My father used to say ‘if you have to borrow to own a house or car, you can’t afford it.’ The great US economy is currently based on the mighty wheel of financing and housing and automobiles are two major cogs. Good or bad, the genie is out of the bottle and there is no going back. I wonder what would happen if we decide to go the way of the German, or Swedes – most rent their entire life and buy only when they have very large (50%) down payment. Or if we remove mortgage interest deduction entirely…

  14. GoodOldBritishWeather, that’s actually not a very good example partly because people sometimes waive inspection contingencies in MLS sales (and did so more often during the boom). In addition, sometimes banks limit access to short sales too.
    If all you’re saying is that someone takes a larger risk when buying on the courthouse steps, that’s fine, but that doesn’t negate the principle. It’s still useful information and a useful comp.
    Maybe you’re saying, a foreclosure PRICE isn’t the same as a market-sale PRICE. But that’s not the same as saying a foreclosure isn’t a COMP. It’s most certainly a comp because a comp is information, and each person can use that information to place a valuation on how much the lack of access is worth to them.

  15. Foreclosures are a good comp, because people are actually betting their own money. It doesn’t get much more real than that. I am sure betters are concerned about what they will do if their plans doesn’t pan out, like how much rent they can collect and so on…
    Making bets with Other People’s Money at 97% financing doesn’t say much about a market apart the fact that a lender was stupid enough to let people play around with their marbles.

  16. The price an all-cash buyer pays on the courthouse steps can’t be directly compared to a normal sale. That buyer is taking on more risk, putting in much more cash, and the condition of the property is frequently not comparable to a cleaned-up property available for regular sale. Furthermore, this kind of flipper – the kind who pays cash on the courthouse steps, not the kind who takes out half a dozen liar loans to speculate in SOMA condos – provides valuable liquidity in the market and helps clear distressed properties, getting them into the hands of people who actually can and want to live in them.

  17. “Count ’em folks, that’s five properties tied up by one individual.”
    The # of properties an individual owns is a meaningless statistic in and of itself. There are lots of investors who have many more than 5 properties that are doing just fine. Each investor’s situation is different.

  18. But the fact that a price is different doesn’t mean foreclosure isn’t a comp. Again, you can place a valuation on the additional risk and the condition. A comp is *information* not a price.
    And again, financing is a separate factor. Or else a non-foreclosure all-cash purchase is not a comp for a 20% down purchase.

  19. Willow, I used the verb tied up (versus owned) intentionally. There is a person that posts on SS occasionally named deshard. He purchased at the Odeon in good faith and is totally hosed because inventory was taken off the market by an “investor” who was, from what I can tell, banking purely on appreciation. There is no way the properties could have cash flowed (well, perhaps for a brief moment with the most exotic ARM). At any rate, the tied up properties are now returning to the marketplace and an equilibrium will be found. I’ll have another ‘investor’ profile later today.

  20. That’s not really true. Courthouse buys are comps for all buyers. Are you saying that if there were two identical houses that if one were being auctioned on the courthouse steps and one were listed on MLS, it would justify a huge price difference between the two? If so, please explain.
    I don’t know what you mean by a “huge” price difference, but it would probably justify a price difference many would consider “significant.” For one, MLS listings reach a far larger pool of buyers. Secondly, for the reason you already explained (below), which is financing:
    If your suggestion is that the only people who would be able to buy the courthouse house would have to bring an excess amount of cash, maybe that tells you something about how financing affects housing valuation and not how foreclosure does.
    I would consider most MLS-listed foreclosures to be very relevant comps for most buyers, without a doubt.
    But the fact that a price is different doesn’t mean foreclosure isn’t a comp. Again, you can place a valuation on the additional risk and the condition. A comp is *information* not a price.
    While I agree that a comp is information, it really just comes down to how broad a brush one uses when comparing properties. Just for agrument’s sake, while the sale of a distressed property in the Beacon is indeed information, I don’t think anybody would consider using that information when trying to figure out how much their Diamond Heights SFH is worth.
    Personally, I wouldn’t know how to factor in the information from an all-cash auction sale into the price of a MLS listed property, because I (unlike a saavy flipper) have no idea what the premium is for the option to finance. So for me, I wouldn’t consider such a sale a comp.
    FWIW, I think we’d be in better shape if home sales were all cash transactions.

  21. EBGuy: I hear what you are saying but I actually think it’s perfectly ligitimate to buy something that is not cash flow positive with the idea that you will profit from future appreciation. It’s a risky bet (particularly in this market) but it sometimes pays off.
    The question is, who’s the wrecking ball? The “investor” or the underwriter(s) that approved the funding of these loans? Perhaps both.

  22. purchases transacted at the courthouse steps are wholesale; those on the market are retail. kapeesh?

  23. i don’t understand the “is it a comp” argument. the proof is in the pudding – from $527k on the steps to $670k in the MLS. it’s the difference btwn wholesale and retail – MLS is retail – advertised to all. Court house steps are a scary and unknown place to 99% of potential buyers.
    what surprises me here is that a Beacon 2BR sold for $670k. granted it’s a large unit over 1400 SqFt. but it’s a building with serious problems, and it’s nearly $900 per month when you combine HOA and leased parking. retail to me would have been about $600k
    So I was curious who the Buyer’s agent was – sure enough it was the listing agent who also represented the buyer – so i think someone trying to go it alone got hosed. any decent buyer’s agent would have negotiated this far lower.

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