Ready, Set… Broker Caravan!

(pictured above: the exclusive, glossy MLS guide for Brokers only)

Every Tuesday from 11 am to 2 pm, the Eastside Los Angeles real estate community is in a frenzied spell, and rightly so:  it’s Tuesday Caravan Day!  Newly-minted homes listed on the MLS as “active” open their doors to realtors from all brokerages… and the lucky passerby who leisurely have Tuesdays off.  If you’re a writer-producer-trustafundian-homemaker-entrepreneur with motivation and a specific home in mind, this day is also yours.

Broker Caravan serves as an exclusive preview of the weekly real estate inventory, homes that have just come on the market or are newly reduced in price.  As the name implies, a caravan — ensconced in Porsche, Benz, BMW, the inveterate Prius, in lieu of camels and elephants — encourages us within the community to take a peek at homes.  If you spot a sleek European sled meandering through the Hollywood Hills, Mt. Washington or the Moreno Highlands of Silver Lake, it’s most likely a vehicle full of  real estate agents with several purposes in mind:

(1) sign the guest registry, (2) walk about the house with discriminating tastes, (3) nibble on lunch, (4) socialize with other agents, (5) appraise the market value of the home and, (6)  ideally, make the call and set the appointment to have a client take a private tour of the home shortly after.

Each home visit takes 10 to 15 minutes.  After 3 hours of open houses and traversing the Eastside, exhaustion creeps in.  There are Tuesdays when the inventory is slim, while there are other unexpected days where 3 of 10 homes shine out of the pack — in price, fit and finish, desirability.  Those are the days I delight in, and the ones that end with a phone call.

Greed, Misdeeds Surround Stalled Echo Park Project

330 N. Union Avenue (also 1700 W. Temple Street)

I remember the mid-1980s when this V-shaped strip of Echo Park real estate housed cute Victorian and Craftsman bungalows.  No longer.  The homes have long been bulldozed and verdant greenery grows alongside rebar on the vacant lot.  Today, its makeshift boarded walls are littered with movie and TV posters, while the below-ground concrete pillars lay open to graffiti talent.  So much for the “No Entry Without Permission” sign.  I drive past daily and, in response to inspired queries from clients and friends alike, here’s the rundown on the little-parcels-that-could:

  • since 2000, the property has transferred ownership 5 times
  • an erstwhile owner and officer of 1700 Temple LLC died in a 2007 plane crash
  • a 2007 mechanics  lien was filed on the property
  • a notice of default and foreclosure sale occurred in late 2008 and early 2009
  • Although permits are filed with the LA Department of Building & Safety, the last permit expired in August 2008
  • ADI (Advanced Development and Investment Inc.) purchased the land from Union Bell Partners (an REO  private lender)  in June 2009 with plans of finishing Temple Union Apartment Homes, a 52-unit, 4-story project subsidized by public agencies for low-income housing

Like other classic Los Angeles real estate stories, enter the true game-changer: divorce.  The civil proceedings of ADI’s former president, Salim Karimi, and Jannki Mithaiwala, the daughter of company founder Ajit Mithaiwala, opened up federal and city investigations into the company’s (and its subcontractors’) improper use of taxpayer money for substandard housing projects, totaling millions, as well as fraudulent invoices, little-to-no bookkeeping, and extraneous contributions to public officials.  The LA Times noted that ADI “received $29 million in subsidies for 15 projects and built dozens of other developments using state tax credits in neighborhoods such as South Los Angeles, Echo Park, Westlake and Historic Filipinotown.”  In October 2010, a court-appointed receiver traced 400 bank accounts and gold bullion (valued at $600,000) to the company’s assets.

Pending litigation, the Echo Park project is stalled.  At present, the only activity on the vacant lot is the application and removal of advertisements.  Banksy, if you’re still in town, have at it on the concrete.  The value of real estate is sure to appreciate.

Echo Park Via Park Encino

I call it the “perfect short sale storm. ” A Buyer calls saying she’s in the market to buy, we preview numerous properties within her parameters, and — lo and behold! — we find the perfect condo community in Encino.  Yes, that’s a neighborhood located very northwest of Echo Park and in the San Fernando Valley.  The 2+2 penthouse unit, with loft, shares no common walls and has its own private rooftop patio.  To my client’s fancy, it also has 4 spacious closets.

After waiting months, an all-cash Buyer walked away when short sale approval was imminent with Bank of America.  Our offer was rewritten to replace theirs.  3 backup offers waited in line behind us.  After additional months of waiting for our approval, we closed escrow late March.

5325 Newcastle Avenue #302, Encino

Sold Price: $238,000 for 2+2 in 1,137 sq. ft.  The previous owner purchased the condo for $410,000 in 2005.

A Pocket Park Within Echo Park

Echo Park welcomes a new community pocket park, Rockwood Park, a triangular half acre sited north of Beverly Blvd., west of Glendale, which now houses playground swings, benches, climbers, tables, and slides — oh, my! — for the athletic, high-energy Eastsider tyke.  A water fountain,  swishy floors, and solar-paneled lampposts complete the outdoor playground.  A friend’s 3 1/2-year-old had no problem making friends and joyously swinging about.

In production since 2001, the EPA granted $400,000 from the Federal Brownfields program towards the site, furthered by Eric Garcetti’s Council District 13, the Department of Recreation & Parks, and the City Brownfields Team.  Abandoned oil extraction wells were once housed on the park’s real estate.

Location: the southwest portion of Echo Park in “HiFi” (Historic Filipinotown); hipsters and locals, add that to your urban dictionary.  Official signage for the park has not yet gone up, but take Belmont Avenue off Beverly, then head east where Rockwood and Colton intersect.  For super adventurous parents and kids, head on down the street to the Echo Park Pool.

The Long & Short of Short Sales

My blog post on has been viewed by REALTORS® nationwide a staggering 1,700 times, which compels me to reprint it below.  Having been a listing and buyer’s agent on past short sales, I find it rewarding and challenging to help Sellers out of difficult, financial ordeals and, conversely, help Buyers purchase homes at less than market value.  The neighborhoods have been highly desirable, too, with homes sold in Atwater Village, Studio City, Sherman Oaks, and Encino.

As a Buyer writing an offer on a short sale, patience is a true virtue.  The fastest approval I’ve experienced is 30 days  from the time our offer was submitted to the bank.  I have waited 5 months, alongside a nervous Seller, for short sale approval.

Please keep in mind that each transaction is different.

Short Sale – The sale of a property in which the lender consents to receiving a loan payoff of less than what is still owed by the Seller on the note secured by the property. In the transaction, sufficient funds are generated to cover all of the Seller’s closing costs (commission, title charges, escrow fees, etc.) and the payoff of any existing loans and/or liens of record without the Seller having to deposit funds to make up the shortage.

Lenders typically agree to short sales because they can avoid the following:

* spending time and money to foreclose, evict borrowers, and resell properties

* adding a bad loan and REO to their portfolio

* paying property taxes, insurance, maintenance, foreclosure fees, holding costs, and repairs for REO properties

* risking theft and vandalism to the property, either by the borrower before they vacate the premises or by others when the REO property is vacant

Not all Sellers qualify for the short payoff assistance. Lenders will require the Seller to provide them with proof of hardship.

Here is the way this type of transaction usually goes: The listing agent takes the listing and completes an estimated net sheet for the Seller to determine how short he/she will be at close of escrow. The listing agent then contacts the Loss Mitigation Department which handles the short pay for the lender(s) who hold(s) the existing lien(s) on the property and requests a copy of their criteria to submit in order for the lender(s) to consider granting the short sale.

Lender(s) usually ask for:

* a current appraisal on the property

* a hardship letter from the Seller explaining exactly why he needs to do this

* current credit report on the Seller, financial statement, employment verification

* copy of payoff statements for any subordinate liens on the property

* current statement of account from the property management company, if applicable

* Preliminary Report

The listing agent submits these items to the lender and then waits for their approval or disapproval while marketing the property with the contingency that this approval would be required prior to close of escrow.

When the Buyer makes an offer that is accepted by the Seller, then escrow is opened. The selling agent should be sure that the C.A.R. Form SSA is used as an addendum to the purchase agreement. If not, then the escrow instructions must reflect the contingency for the short sale.

Escrow will then order a Demand Statement for the lender(s) and include estimated seller closing statement (showing everything except for the payoff of their loan) and a certified copy of the escrow instructions and a copy of the C.A.R. contract and preliminary title report. The lender will want to review all terms of the transaction before even considering whether or not to participate in the short payoff.

Upon receipt of the written approval from the lender directly to escrow stating that they will accept the short payoff and still issue a full reconveyance for their trust deed, then the process really begins. Escrow will need to thoroughly read the Lender’s Instructions and proceed to comply with them.

The lender may request the following from escrow:

* delete the credit from the Seller to Buyer for closing costs

* disallow the Seller charge for the home warranty policy

* require the commission to be reduced from 6% to whatever the lender feels is reasonable

* require that termite work be paid by someone other than the seller

The lender wants to reduce the amount of their loss as much as possible. Escrow will forward a copy of the lender’s letter to both agents and ask them to re-negotiate their transaction and get back to escrow so that an amendment can be prepared to be signed by all parties, and a new estimated closing statement prepared reflecting any changes required by the lender. It is not unusual for agents and/or buyers in these types of transactions to pay some of the costs that the Seller will not be allowed to pay. Buyers need to know that repairs of the property, requested from the Seller, probably will not be approved.

Final approval must be given by the lender at this point, for escrow to proceed to close. The timeframe to close after the final approval will be determined by the lender, so agents, buyers and sellers must be made aware of this fact. The new lender will also need to be aware of this fact and must be able to perform. If escrow does not close in the timeframe permitted, the approval process will need to be started all over again by sending the lender a new estimated closing statement and a request for an extension. Written instructions must then, again, be received by escrow in order to proceed with the close.

In a transaction where there is only one lender to be paid, that lender will usually take the entire amount of the proceeds remaining after payment of the selling costs they have previously approved. Agents and escrow must be especially careful here to be sure estimates are accurate.

In the case when there is more than one lender, the listing agent will need to negotiate with each of them. There are cases when the junior lien holders will have to accept a flat amount, or in some rare cases, no money at all.

No matter how many demand statements exist, the Seller must sign approval of each and every one. The Seller will also need to approve the written lender instructions from the lenders agreeing to the short payoff.

Short Sale Approval (or “Demand Statement”) – Generally, a 1 to 2-page letter given by the 1st and 2nd Trust Deeds approving the sale of the property, which will result in a short payoff of the mortgage. It lists the criteria that need to be met.

The letter:

* approves the purchase price and identifies both the Buyer and Seller by name

* outlines the required minimum payoff amount * specifies the exact date on which Close of Escrow should occur

* includes wiring instructions

Short Sale Addendum (C.A.R. Form SSA) – This form makes any short sale transaction subject to lender approval by a particular date. Thus, this form will create an express contingency, for the benefit of both parties to the transaction, whereby both sides agree that the entire agreement is contingent on the Seller’s receipt, by a particular date, of written consent from all existing secured lenders and lien holders to reduce their loan balances by an amount sufficient to permit the proceeds from the sale to pay the existing loan balances as well as other costs, (including commissions) without requiring the Seller to place any funds in escrow. On this form, the parties would also agree whether the time periods in the purchase agreement for inspections, contingencies etc. should begin as specified in the purchase agreement or on the day after Seller delivers to Buyer the written notices of the lenders’ consent to the short sale.

BPO (Broker’s Price Opinion) – A detailed report prepared by a real estate broker, indicating the fair market value of a property based on nearby comparables and the condition of the subject property. Typically a BPO is ordered by the 1st Trust Deed once a short sale approval has been given.

Trustee’s Sale, or Foreclosure – A public auction wherein the lender of record causes the real property to be sold for nonperformance of a mortgage (foreclosure sale). The sale usually takes place outside the County Recorder’s Office or outside the Trustee’s office. The opening bid for this auction is generally the outstanding loan amount (unpaid principal balance), all accrued interest, late charges, advances (if any) and the foreclosure fees. Any one who attends with cash or certified funds sufficient to cover the bid amount may participate. The property is sold AS-IS, with no warranties except clear title.

REO (Real Estate Owned) – The term given to properties which revert back to the lender at the Trustee’s Sale. These properties become non-performing assets on the books of the lending institutions and are usually sold through either real estate brokers and/or asset management companies.