Foreclosures usually mean that mortgage commitments are not being honoured. Often the owner stands to lose some equity in this process as well as costs for legal fees. Many times the lender will also lose depending upon the loan to value of the property. What is interesting here is that even though the listing price is below the assessed value, there is still a gain to be had on this property of around $200k by the current owner over the price it was purchased at, if a sale goes through anywhere near its asking price.
I googled the address of the property on Gibbons and note that one real estate blogger whose musings I read from time to time (Whispersfromtheedgeoftherainforest) commented on this property back on October 10, 2012 as if to highlight the downward trajectory of our real estate market (see http://whispersfromtheedgeoftherainforest.blogspot.ca/2012/10/richmond-for-those-outside-b.html). There, the observation was:
"What did they just call Gibbons Drive - area of million dollar homes?
It would appear that Million Dollar Homes aren't what they used to be, at least in terms of financial value.
Richmond, BC: a real estate disaster unfolding before your very eyes"
Now if one were to cruise the net in search of opinions on local real estate, it is my experience that couched in the protection of anonymity, language is pretty strong, bearish and prophesizes the impending bubble burst. It is certainly enough to keep readers away from investing in real estate. There is no doubt that current conditions require buyers to be cautious and for the most part, I would recommened that they actually desire a home to live in as the primary reason for parting with their cash as opposed to trying to make money flipping a property. Things are a lot less certain right now than in 2009.
What is the important take-away from this listing and from Whisperer's comment above is that Gibbons IS in an area of expensive Million dollar plus homes. It IS quite a desirable area. Unfortunately, the use of an assessed value as a barometer for real market value is incorrect when the subject property is the poor sister on a very wealthy street. You buy a dog on an expensive street and you can be sure the assessed value will far exceed the fair market value. So my fellow blogger's conclusion about "a real disaster unfolding before your very eyes" is based upon the false premise that the loss in market value should be calculated from an assessed value as opposed to a more exact measure. Sure the government number was wrong, but we shouldn't base much on that unless the property was homogenous in value to neighbouring ones.
So, about a year and a half later, I can hardly call it a market disaster when the purchase price of the foreclosed property was hundred of thousands below the current asking price of the lender having conduct of sale. It certainly does not look like the lender will lose money here, and the mortgagor as well, may come out whole. And, what sayeth the bears to this listing now at $1,049,000? We won't know until it is sold, but I am sure the bears will say that there is always another treasure seeking fool to pick up another's trash. And I guess, if one's forecast is not correct, simply as economists do, extend it for a longer term.
I will keep you posted on the outcome of this one...
As I have said before, I do not advise "the internet", I advise clients. These blogposts are simply observations of property and market trends and I am not in either a bear or bull real estate market camp. But as I noted in yesterday's post about foreclosures, a .8% of active listings as a foreclosure rate does not seem too worrisome at this point.