Just Sold: 2305 Oak Ave Manhattan Beach
My Buyer clients just closed escrow on a Single Family Residence located at 2305 Oak Ave in the Manhattan Beach Tree Section and there are a lot of valuable take aways from this sale.
But before we get to all that…..
WHAT’S THE “TREE SECTION”?
Real Estate in Manhattan Beach, well the Beach Cities in general as well as most of the South Bay, is defined by a number of “micro-markets”. Think of these as distinct neighborhoods that may have different pricing structures from other homes in the same city or zip code. In other words, expect to pay more for a similar home in the Tree Section which is west of Sepulveda (PCH) than you would for the same home in East Manhattan.
The MLS separates Manhattan Beach into 6 distinct neighborhoods.
Area 142 The Sand Section
Area 143 The Tree Section
Area 144 The Hill Section
Area 145 Manhattan Village
Area 146 Manhattan Heights / Liberty Village
Area 147 Mira Costa
If you want to learn more about the Manhattan Beach neighborhoods and the other Beach Cities micro markets, follow this link.
If the above section looks familiar, truth be known I did cut and paste it from my recent Hill Section sale.
HOW DO YOU GET INTO ESCROW THESE DAYS?
My Buyer clients had previously lost out on another Tree Section listing and they were determined not to have that happen again. So they went all in on a super aggressive offer.
What does super aggressive mean these days when you are often competing against cash buyers?
No Appraisal Contingency
No Loan Contingency
Escalation Clause
In competitive situations, waiving the appraisal contingency is almost mandatory. I wrote about appraisal contingencies on my Socalistings site and you can read the full article here.
WHAT DOES IT MEAN TO WAIVE THE APPRAISAL CONTINGENCY?
With prices going up faster than appraisers can keep up with, from time to time properties do not appraise for the sale price. The issue being that the bank will make the loan based on the appraised price or the contract price, whichever is lower.
Whether the Buyer agrees or not to have an appraisal contingency, the lender will still need to order an appraisal to establish the value of the collateral. But technically if a property does not appraise at the sales price, the Buyer would have to cover the difference out of pocket. In other words, the Buyer can not cancel the contract because the property does not appraise.
I want to mention at this point that some agents are mistakenly telling their buyer clients that if the property does not appraise the Buyer can still cancel the contract because they can’t get the loan. I think that is entirely incorrect but am not going to address that here because a) it involves legal issues that I can not advise you on and b) it is beyond the scope of what I want to address in this post.
The short answer you need to know is that by waiving the appraisal, your down payment may be tens or even hundreds of thousands of dollars greater than you were planning on.
Unless the Buyer is paying all cash, this is not something I often advise Buyers to do unless:
They were planning on putting down a lot more than 20%, and / or
They have the liquid funds to cover any shortfall.
And in most instances, it is still a very risky move.
WHY WOULD YOU WAIVE THE LOAN CONTINGENCY IF YOU NEED A MORTGAGE?
This is a move I’m not entirely in favor of but in some situations the risk is fairly limited (and don’t ever do it for a property with a HOA).
If your file has been through underwriting or pre underwritten before your offer has been accepted and the only remaining conditions are an accepted purchase contract, title prelim and appraisal (even if you have waived it), you can risk this (as long as you trust your lender. And not every lender will do this because it requires more work on their part.
I participate in a limited agent program with Chase where they will fully underwrite my clients. This not only puts them in a position to close in 21 days if need be but also in certain circumstances allows my clients to waive the loan contingency. But it is risky so don’t do this unless your lender and agent are totally on board and really know what they are doing.
WHAT’S AN ESCALATION CLAUSE?
With an escalation clause, the Buyer offers to pay a fixed amount higher than the highest competing offer the Seller has received. You really need to have a ceiling on your escalator because if another Buyer also has an escalation clause, then in theory the price could become infinity (which will never appraise).
These don’t always work for reasons I won’t get into here.
In order to get this property into escrow my clients used all three of these approaches.
WHAT DID I SELL?
The property is a 3 bedroom, 2 bathroom 1722 Sq Ft Single Family Residence (SFR) in the Tree Section. The Seller had added a second floor after they had purchased it and made numerous other updates over the years. There is a detached 1 car garage that is more usable as man cave than for a garage.
Let’s take a look at some pictures.
