Foreclosures at the high end increase across the Bay AreaTopic: Foreclosure
The housing crisis, which first devastated borrowers who purchased lower-cost homes with subprime loans, has caught up with people whose wealth helped them hang onto their houses longer.
Throughout affluent communities in the Bay Area, million-dollar-and-up homes are increasingly being lost to foreclosure, or sold as a last resort for far less than their mortgages.
More than 1,500 Bay Area homes with mortgages of $1 million or more were scheduled for auction last year, more than double the number in 2008, according to ForeclosureRadar, a foreclosure tracking service.
"The fact is, upper-end folks are starting to feel the crunch," said Barbara Safran, president of the Contra Costa County Association of Realtors.
Santa Clara County had more than 400 homes valued at $1 million or more scheduled for auction in 2011, the most of six Bay Area counties.
Anne Walker of Coldwell Banker in Cupertino has a $1.7 million foreclosure listing in wealthy Monte Sereno. Like others in their situation, the former owners have no interest in talking about it publicly.
"Most of these higher-end people are, like, 45 years old plus, and they've gone through all their assets," Walker said. "It's a really devastating situation for them. They thought they had planned. They had their kids' college fund, they had their 401(k)s, the stock, the mutual funds, and they've been hanging on for the last three years. They've gone through everything, and
they have nothing left, not even the house."
No one is immune
Contra Costa County, which led the region in lower-end foreclosures, is now one of the harder hit on the high end, with about 300 homes valued at $1 million or more scheduled for auction in 2011. Even the exclusive country-club community of Blackhawk is not immune.
"About a year and half ago, we started receiving listings of foreclosures from Blackhawk. Prior to that, it was unheard of," said Bryce Ellsworth of Windermere Ellsworth & Associates of Brentwood. "I sold a home in Blackhawk last year, on three-quarters of an acre, a beautiful pool and backyard and nicely done kitchen. It was $4 million on the previous sale. This time it sold for $1 million cash."
A Danville woman whose daughter's five-bedroom Blackhawk home is in foreclosure said, "She is just living in it, still trying to work with the bank, probably unsuccessfully. A lot of people just stay in their house until they can't stay any longer."
The woman, who asked not to be identified, said she thinks the economic downturn's effect on small businesses is taking a toll on upper-end homeowners. "The recession's going on forever," she said.
Short sales on the rise
Some homeowners are in default because they've stopped making payments while they try for a loan modification. Others simply may have decided to stop making payments, thinking the home will take years to return to its former value.
A growing number of foreclosure proceedings end with a short sale -- selling the home with the agreement of the bank for less than the value of the mortgage.
There were nearly twice as many short sales last year of Contra Costa County homes whose initial price was at least $1 million as there were in 2009, according to real estate information service DataQuick. Santa Clara County short sales increased nearly 20 percent in 2011.
A 4,900-square-foot home in the Saratoga hills, for example, was listed as a $4.5 million short sale in August. When it didn't sell, the bank took it over and now is asking $2.6 million.
A 13,000-square-foot, seven-bedroom, 8.5-bath home in San Jose's east foothills is being offered for $3 million in a short sale.
Eight $1 million-plus homes in Atherton and 22 in Los Gatos were in some stage of the foreclosure process in December, according to ForeclosureRadar.
Defaults span East Bay
In the affluent enclave of Orinda in Contra Costa County, 53 homes were in some stage of the foreclosure process, 19 of which currently are valued at more than $1 million.
In nearby Danville, 30 homes worth more than $1 million were in some stage of the foreclosure process in December -- either in default on payments, scheduled for auction or taken over by a bank. Among them is a seven-bedroom, 6,000-square-feet home scheduled for auction by a bank this month with an initial bid price of $2 million.
Next door in exclusive Alamo, 28 homes were in some stage of the foreclosure process in December.
Finite staying power
"In general, the wave of foreclosures is going more toward the higher-end properties," said short-sale specialist Joe Reichert, of Keller Williams in Danville, who was showing a home Thursday in Alamo that is listed for $999,000 -- which is less than is owed on it.
"It hit all the lower-end properties fastest," Reichert said. "The people in the lower-end homes were a month or two away from not being able to make payments. The people in the higher end had more staying power and more to lose by defaulting. They're starting to go now. We're definitely starting to see more."
Reichert said some homeowners simply are giving up on the idea that home values are going to increase to anything close to what they were when they bought their home.
A business consultant, who asked not to be named, sold the five-bedroom home in Danville that he bought for $1.6 million in 2005 for $900,000 about a year ago in a short sale and moved to Texas.
"The home was probably too expensive for us, but the main reason (we sold it) was the loss of equity," the consultant said. "It will never go back to that in the near future. We're sort of like Japan. The prices never recovered over there, and I don't see that home going back to $1.6 million for 10 years. It was better to short sell it and get rid of it."
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At last some rationality in our little detbae.
A foreclosure is when the leednr sues you for the title of the house for breach of contract on the mortgage and promissory note. The leednr then liquidates the property in order to recapture as much of your debt plus the fees accumulated as a result of the foreclosure. If the sale (and the mortgage insurance, if applicable) does not cover this amount, the leednr retains the option to seek your other assets or future assets in most states.A short sale is an agreement by the owner and the leednr to sell the property in lieu of foreclosure for a value less than the original debt in that the leednr will excuse the outstanding balance.Another option is to offer the deed to the leednr in lieu of foreclosure. This results the same way as a foreclosure, but without all the added fees associated with foreclosure that can get quite hefty.A short sale doesn't destroy your credit as bad as the other two, but you can't be a candidate for a short sale if you aren't already in credit trouble. But the best route is to avoid all three and do anything to keep the property including refinancing the property with a HARP loan
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