This post started as an extended comment on the comments to one of my previous posts about Issue 106 - vote on Point of Sale Inspection in South Euclid. As a REALTOR who supports the position of Cleveland Area Board of REALTORS on Issue 106 (Vote NO!) I received the harsh comments from the anonymous poster. The main point of the comments is that REALTORS care only about easy commission and only the City wants the South Euclid housing to prosper.
I hope that the main concern of the City of South Euclid is to improve the housing stock. However, the offered solutions are so poor, that they may have an adverse impact.
Let's review the statistics and do some math. South Euclid belongs to two different Zip codes and to two different schools systems. Kids residing in 44121 attend South Euclid-Lyndhurst Schools, 44118 - Cleveland Heights Schools. Two areas of South Euclid have two different housing prices. That's why we do separate analysis for 44121 and 44118 Zip codes.
There are currently 301 active listings in 44121 Zip code of South Euclid and 27 active homes in 44118 Zip code. Average asking price for 44121 is $123,267, and for 44118 - $78,337. There are 13 contingent listings as for today, all in 44121 area. Average asking price for the houses on the contracts is $75,715, which is much lower than average sold price for the houses sold in 2008. It was already incredibly low $83,776 for 44121 Zip code, and $37,575 for 44118 Zip code.
Let's say, the buyer is buying the house in South Euclid today. He more likely brings no more than 5-10 % down payment. FHA allows 3 % down payment today - and this program is very popular! Remember, average asking price for the houses on the contract is $75,715. Even $1,000 of minimal escrow requirement is more than 1 % of the price! And it's accessible mostly after correction of the violations, which means that people actually need available funds to spend on correction of violations, which brings unnecessary burden on the new home owners! Plus there is a time frame for correction and penalty for non-compliance.
The buyer may think, Isn't it easier to buy in Lyndhurst - the same schools system, nice neighborhood, comparable houses, and NO POS. That's how City may lose new residents.
Homeowners in South Euclid have already lost a lot of equity even BEFORE the mortgage crunch started, especially at Zip code 44118. That was due to partially tax increase, partially to additional school levy at 44118. Mortgage crisis and high foreclosure rate contributed to loss of value, too. Let's review the data from our local MLS.
|
|
Total
|
44121
|
44118
|
|
2008 (up to 10/20/08)
|
273
|
244
|
$83,776
|
29
|
$37,575
|
|
2007
|
309
|
287
|
$115,219
|
22
|
$61,309
|
|
2006
|
368
|
343
|
$127,487
|
25
|
$69,096
|
|
2005
|
386
|
363
|
$132,654
|
23
|
$91,708
|
As you can see, the prices dropped dramatically. There is a real serious problem, especially for decent, honest homeowners who care about their homes, do improvements, maintain them inside and out, and - pay property taxes timely and regularly. Many of honest homeowners may be caught in situation of necessity to short sale, as their mortgage balance is higher than current property value.
Here is real problem: Who will fix the violations or escrow required funds in the situations of short sales?
Short sale is the worst scenario for implementing POS, as there is actually NO responsible owner. One who is on title, has no ability to make even monthly mortgage payments. Bank approves the short sale but is not responsible for anything in the house! Who will be responsible for correction of POS violations? Right, THE BUYER - the one whose interests are declared as the principle for the City of South Euclid.
Most of the buyers who agree to go through all the obstacles of short sales are the investors. Investors are people who buy with the intention to fix, remodel and rent out or resell the houses. Investors are ones who have a freedom to chose where to move in and where to invest their money and efforts. Again, there is a high risk that investors will ignore South Euclid if they will need to hold extra money for correction of POS.
Many of the houses sold in 2008 were bank owned or REO properties. It's very unusual for the banks to correct anything prior to closing. How can City of South Euclid force the bank which may be located in India, or Germany, or even Dallas, TX to cut the grass or replace the old garage? I don't think they have enough power to do it.
Sounds like POS is not the most exciting idea of how to fix the situation in South Euclid. Vote NO on issue 106!
How we, the REALTORS, help our sellers or buyers in South Euclid is the topic of separate post.
Need to sell or buy the house in Greater Cleveland?
Do not hesitate to call Svetlana Stolyarova, Local-n-Global Realty
216-548-4663
You may call any time 877-770-5551. Local-n-Global Real Estate hotline is available 24/7
