1688 Dolores
As we wrote about 1688 Dolores this past October:

Purchased in April 2005 for $1,227,000 with 95 percent leverage and 5 percent ($61,400) down, the single-family home at 1688 Dolores was briefly listed this past March for $1,050,000 before being withdrawn.

Yesterday the Noe Valley home returned to the MLS listed for “$1,050,000” as a short sale and with one day on the market once again.

As we added in January:

As a plugged-in tipster captures in a scene more commonly associated with Detroit than Noe, the short sale doesn’t appear to be going too well despite a reduction to “$975,000,” confirmed by the notice of default filed by the first mortgage holder four weeks ago.

And while we previously noted the 95 percent leverage at purchase, we just noticed what appears to be a third for an additional $500,000 two years after in July 2007.

On Friday the sale of 1688 Dolores closed escrow with a reported contract price of $928,000, 25 percent ($299,000) below its 2005 sale price for the 1,450 square foot home on the Noe/Bernal border.
1688 Dolores was scheduled to hit the courthouse steps in two weeks.
Highly Leveraged In ’05 And Now Selling Short? Certainly Not In Noe… [SocketSite]
Highly Leveraged In 2005 And Now An LPS Flag Flies In Noe [SocketSite]
San Francisco Bucks CA Foreclosure Trends, But Not In A Good Way [SocketSite]

11 thoughts on “$1,610,000 Of Debt Versus A $928,000 Sale For 1688 Dolores”
  1. These second and third mortgages are recourse loans, are they not? I don’t understand how the mortgage holders manage to walk away from these short-sales without significant damage to their finances.

  2. Embarcadero wrote:
    > These second and third mortgages are
    > recourse loans, are they not? I don’t
    > understand how the mortgage holders
    > manage to walk away from these short-
    > sales without significant damage to
    > their finances.
    The guy that loaned $500K secured by a 3rd TD has probably figured out by now that the $500K is gone and won’t even bother going after it. If he does try and get some money back the borrowers will just file BK and say Bye Bye to the 3rd TD forever…

  3. @formeraptbroker:
    But if that is the case (i.e., beneficiary on the third deed of trust just writing off the loan), why do a short sale? Is the seller’s ponying up somewhere between tens of thousands and $300,000 to go forward with a short sale, as opposed to letting it be foreclosed on, worth the bad credit on the foreclosure?
    In other words, if the seller is not worried about a subsequent suit for the deficiency balance, why not just let it be foreclosed on? What is the benefit of the short sale? (Sorry for all the questions)

  4. “But if that is the case (i.e., beneficiary on the third deed of trust just writing off the loan), why do a short sale?”
    Because it was STILL a short sale from the perspective of the 2nd’s interest.

  5. @anon.ed – Right… its still a short sale form the perspective of the 2nd & 1st lenders’ interest… but my question, more generally is, unless the seller has many assets (which it sounds like this seller does not if the third is writing off the loan and the first is apparently proceeding by non-judicial foreclosure (thereby waiving any deficiency)), what is the benefit of the short sale over just walking away?

  6. In other words, if the seller is not worried about a subsequent suit for the deficiency balance, why not just let it be foreclosed on? What is the benefit of the short sale? (Sorry for all the questions)
    Was the 2nd mortgage purchase money in this case? (e.g. 80/15 loan) Was it from the same bank as the 1st?
    The 3rd can still come after you after foreclosure by a more senior mortgagee. A short sale potentially allows you to settle with the 3rd at the same time as settling with the prior mortgagees.

  7. The following is my laymen’s understanding and should not be taken as advice or may not be 100% accurate.
    For a short sale to go through all lien holders have to sign off on the deal. Typically you will negotiate to pay some small amount to the 2nd (and in this case) third lien holders to get them to sign off on the deal (maybe 5%-10% of what is owed) and also try to get them to waive all their future rights to seek a deficiency judgement, assuming the secondary loans were not purchase money. Sometimes the secondary lien holders will agree and sometimes not. In any case, it expensive to actually collect in California on a deficiency judgement and the threat of of bankruptcy can make it more expensive or impossible to collect anyway. Better just to settle for the lien holders and move on in most cases.
    From the seller’s perspective it is better to do a short sale as your credit typically only takes at hit for 2-3 years versus 7 for a foreclosure.

  8. “In any case, it expensive to actually collect in California on a deficiency judgement and the threat of of bankruptcy can make it more expensive or impossible to collect anyway.”
    In your opinion, why is it particularly expensive in California to collect on a deficiency judgment as opposed to another state?
    Also, most people who threaten bankruptcy in response to a creditor are usually trying to manipulate the creditor. If people really were going to file bankruptcy, they’ll file it, regardless of what the creditor’s opinion is.
    The reality is that people who merely threaten to file have no idea what bankruptcy may entail. For example, you could have to pay a reduced amount on a balance for 5 years and have that garnished from your wages. These days, most people making higher than median income are ineligible for Chapter 7 because bankster lobbyists wanted to make bankruptcy harder, and the Bush administration and Congress were happy to help out.

  9. @sfrenegade, like I said, I am no expert on this subject so it probably does not make much sense to debate this subject as I will likely be out of my depth. From what I do know, CA Civil Code generally favors property owners versus lien holders and CA courts are expensive to navigate.
    Let’s assume 1st and 2nd loans were purchase money on primary residence so there is no option for deficiency judgment in any scenario. Assuming 3rd loan ($500k) actually exists then this is likely recourse (hard money) loan. However, this lien holder will have to agree to remove lien for deal to close as short sale. Any savvy seller would require all lien holders to modify all promissory notes to remove all ability to seek a deficiency judgement after close based on the agreed upon terms of the short sale. A deficiency judgement is based on terms in promissory note, not deed of trust. If the seller could not get 3rd lien holder to agree to the above, then the 3rd lien holder would have to sue to get the judgment and then collect. These are not inexpensive tasks especially when trying to collect from a person that in theory does not have much in the way of assets in the first place as they had to do a short sale. If the 3rd lien holder has a large portfolio of loans it may be just be better to take the write-off. Frankly and IMO, the 3rd lien holder deserves to “take it in the shorts” if they in fact gave an additional $500k loan on this property, but that is a different discussion. Also, bankruptcy is still an option even Chapter 13. It may not wipe out all debt, but could reduce it greatly. Anyway, just my ramblings based on what little I know so should be taken with a grain of salt.

  10. Oh, it wasn’t a debate question, but just a question on why you thought it’d be particularly expensive in CA to get the deficiency judgment here. I’m not so sure that it would be, just because this is a situation where CA’s anti-deficiency statutes clearly don’t apply. However, enforcing the judgment is another story, as it always is, especially with a short seller.
    I agree that the 3rd lien holder deserves a loss here. I’m assuming the negotiations are largely in line with what you said.

  11. I’m really glad to see that the market price for this house has fallen to 25% below its 2005 sales price. How much down from peak (sometime between 2006 and 2008) is this place? 35%? 40% If the info re the additional 500k third loan is correct, then at least a few real estate pro’s must have thought the place was worth north of 1.6 at the time of teh loan!

Leave a Reply

Your email address will not be published. Required fields are marked *