As of today there are 9 active or pending properties in Los Altos that are either short sales or bank owned (REO). Of those, 7 are single-family homes and 2 are townhouses/condos. The best deal in the bunch is a 3078 sq.ft. home on Lincoln Ave that went pending with a price of $799,000. That's an incredible deal in Los Altos, even though the home needs significant work to become "livable".
The one short-sale property that stands out the most is on Miramonte Avenue. This home was purchased to be flipped and all sorts of things went wrong in the process. First, it was purchased in April 2006 for $1.595M (now listed for $1.490M) and it wasn't back on the market until December 2007. That's about 1.5 years to remodel the home (way too long). Having done full home remodels myself (and I mean gutting them), the fastest I've done was 40 days. If you know what you're doing and plan well, you should target 60 days or less to completely remodel a home to flip.
Second, the starting price on the home was $2.95M for a home with only 2,688 square feet. Way too high! A completely new home up the street (literally) with 3,560 square feet sold for $2,495,000. That's about $700/sq.ft. Translated into the short sale on Miramonte the value is about $1,882,000. The seller priced the home wrong in the first place and as a result is now forced into a short sale.
This short sale sends a poor message to the market. While it looks like the home has taken a huge price reduction, in reality it is priced about 20% below what the value should have been in the first place vs. about a 50% price drop from the original list price. The perception of a huge price drop is not in line with reality.
When looking at short sales in Los Altos, consider that the price will most likely still be in line with nearby comps and don't expect a fire sale. I'll address the trends for the overall number of short sales in Los Altos and Los Altos Hills in future posts.