All Forum Posts by: Steve K.

I'd start the refinance process right away, or just pay it off, or sell. 

Quote from @Nicholas L.:

@Steve K.

totally agree. my point was that we won't see continued population growth going forward like we did from 1990-2020, and even in the absence of that growth, housing demand will remain strong.  

LA county lost several hundred thousand residents from 2020-2024.  did that cause the price of housing to go down?  it seems not to have.

 Looking at LA county specifically: I just checked quickly and it looks like you are correct about the population there being down by ~3.8% from 2020-2024 (which is about 450,000 people, however there are still 9.6M people there and it is still the most populated county not only in CA but also the entire US). 450,000 is a lot less people. But when I google "why are housing prices still rising in LA despite population declining", all of the answers start by explaining the imbalance of supply and demand. "Limited supply due to tough zoning and restrictive permitting process, high construction costs, and expensive dirt, and population increases (guess AI hasn't gotten the memo that population has actually decreased)". We know supply is a big issue with low inventory across the whole country. But with that many less people in LA county now than 2020, you'd expect the decrease in demand would be enough to correct the supply/demand imbalance locally... So, good question... 

Perhaps supply and demand were so out of whack before 2020 that 450,000 less people still isn't enough to create a balanced market? Foreign investment? A demographic shift with more wealthy people buying there? Record-breaking high prices in the upper end of the market skewing the entire market upward? Perhaps many of the people leaving have held on to their property and rented them out instead of selling? The lock-in effect of the period from 2016-2022 when interest rates were super low, causing owners with those low rates to not want to sell? Prop 13? More detached single family homes changing hands than attached leading to higher average sales? Prices adjusting for inflation? The fact that LA county has a high number of investor-owned properties? A combination of the above factors?

I really don't know the market there well enough to guess the definitive answer but I know when I break down the data in my own market, I see a wide variation in price trends in the individual price bands. For example the "entry-level" price point almost always has high demand and trends up, whereas luxury is much more volatile and just a few sales in the very upper end of the market can skew the overall averages upward or downward drastically month to month. So I think in order to pin this down we'd have to have someone intimately familiar with the various factors at play weigh in, especially demographics and market trends in the individual price points. Maybe more lower-income people are moving out due to affordability, while wealthier people are moving in/ foreign investors are buying things up, driving prices up? I would think foreign investment would be a big factor for both LA and San Francisco at least, which could keep prices high despite losing population. 

Quote from @Nicholas L.:

@James Wise

one thing that has been interesting to me is that even as CA's overall growth has slowed / stopped, RE prices have remained high.  so there is still a tremendous, tremendous demand component even without the same population growth.

@Dan H.

thoughts on this?

 I think the "population decline" is falsely reported and exaggerated by certain media outlets that have a political agenda against CA. There were only a few years of population loss during covid and it was minimal, more like flat than a decline and probably covid-related because immigration wasn't really happening as much during covid. Then in 2023 the population began growing again by around 75,000 people, and last year 2024 that number was 233,000 net population gain which is second only to TX, and more than double AZ at 109,000. So the raw numbers and the sensational headlines about an "exodus from CA" seem to contradict each other.  

Quote from @David Spurlock:

Quote from @Kevin Sobilo:

Also, keep in mind that not all rentals are subject to fair housing law. So, landlords of exempt units don't even have to be concerned at all. 

 I'm interested. What rentals are not subject to fair housing law?

From google: 

"The Fair Housing Act (FHA) does not apply to certain types of rentals, including:

• Owner-occupied buildings: If the building has four or fewer units and is owned by the person who lives there
• Single-family homes: If the owner rents or sells the home without using a real estate agent, and they own no more than three homes
• Religious organizations: If the property is only available to members of the organization's religion
• Private clubs: If the property is only available to members of the club
• Senior housing: If the property is designated for people who are at least 55 years old

Even if a property is exempt from the FHA, it must still comply with the law's ban on discriminatory statements, notices, or advertising. Many state fair housing laws cover properties or situations that are exempt under federal law. You can check with your state fair housing agency for details."

Quote from @Tom Gimer:

You can't take an element from state X such as "uniqueness" and try to apply it in state Y where that appears not to even be part of the analysis.

Let's see how this turns out.

 Tom so you wouldn't be as concerned about that element? I defer to your expertise here. 

Both loan servicing companies and insurance companies can be such a nightmare to work with even under normal circumstances. That is an uncontrollable variable. The loan can be sold on the secondary market at any time, or loan servicer switched or new sub-servicer taking over, insurance dropped, etc. Adding in the layer of not being on the loan but holding title just sounds like it will eventually lead to problems like OP experienced. It had better be a great deal to be worth dealing with all this headache and taking on this risk. 

I definitely see what you’re saying about the seller backing out being a violation of your good faith agreement, and what is the point of a contract if the seller can just change their mind… However in my experience most people do end up settling for monetary damages incurred rather than trying to force the sale.

I have seen two cases where it went the distance and the buyers successfully sued for specific performance. The first was a $10M historic property in Downtown Denver that was truly unique due to its location and age. There are no other properties like it. The buyer had performed at closing, delivered funds to the title company, signed closing docs and everything. Seller decided to back out at the last moment for some arbitrary reason and just didn’t show up to closing to sign the docs. Closing funds were held in escrow, buyer decided to sue for SP. Eventually after about 3.5 years the buyer did prevail. I’m not sure who paid legal fees but they must have been significant.

 The second case was a commercial property (an 8 unit multifamily in a complex of 6 individual 8 unit buildings), owned by a group of investors. A developer had already worked out deals with the owners of the other 5 buildings and finally got the 6th and final building under contract. Some of the owners had wanted to sell and others didn’t. I believe the owners with the majority ownership share forced the others to sell, but they weren’t cooperating. They all had their own lawyers of course and it was a mess that took 3 years but eventually the buyer (the developer) did prevail. I think the key in that case was that the property was the last one needed in a large development of a group of blighted small MF buildings that were to be torn down and redeveloped. The building was vacant and completely rundown with the windows all smashed out by the end of the lawsuit. The owners were essentially slumlords. The buyers had invested a lot into the deal (~$100M) and purchasing the property was critical to complete their development.

In almost every case involving vanilla SFH's that I've been privy to, buyer and seller have settled during mediation for monetary damages. In a few cases the buyer has moved forward trying to sue for specific performance but eventually gave up after about a year and around $30k spent on legal fees.

The gamble is that the outcome hinges upon the courts discretion and it's rare to see specific performance unless buyer can demonstrate that monetary damages aren't enough to make them whole. As an investor looking to purchase an STR in a ski town, I'm not sure I'd feel that confident in a court deciding in my favor, personally. Seller might claim that the contract wasn't fair and equitable to begin with, or use stalling tactics, or they might say they need to move into the property because they are getting divorced/ lost their job/ need to move their ailing mother into the property, etc. and anything along those lines might make a judge more sympathetic to them than an investor buyer looking to turn the property into an STR.

I’m also not quite convinced that the property is unique enough to justify specific performance because it is typically only enforced when there is a lack of other remedies such as monetary damages. For example the property being historical or a critical part of a large development plan. You could probably just go buy a different investment property and achieve the same returns. So that will be a tricky element to this IMO. 

But I get where you’re coming from, it’s super lame when a seller backs out. Keep us posted on what your lawyer says if you can, let us know how it goes, and good luck. 

Quote from @Jay Hinrichs:

Quote from @Steve K.:

Quote from @Eric Bilderback:

What started the fires?  Negligent forest management, drug addicts, or illegals?  DEI policies along with environmental, immigration policies is not sustainable for a non 3rd world country (my guess that is the point).  I read an article I thought articulated this very well, we are seeing the collapse of a very complex system and this the fruit. 

 Or it could be an arsonist/ arsonists. 

In the northern ca fires a few years back it was downed power lines.. and PGE got massive fines for that.. Now anytime in Northern CA when winds get past a certain speed there is rolling blackouts.. 

I think PG&E actually filed bankruptcy from that. Our utility has been cutting power every time there is a red flag fire danger her now because of that, and they are also rapidly replacing old poles and requiring new lines to be buried etc. to avoid getting sued like PG&E did. I’m sure they are investigating power lines as a potential cause of the fires happening now. They’ve also arrested several suspected arsonists already and with how many fires started around the same time, many people are saying it could have been arsonists. Thankfully the lines in my neighborhood were put underground when they built our hood. We rarely lose power and less chance of catching on fire, especially considering we are close to open space/ high plains grassy meadows that are prime fire habitat. Power lines are the suspected cause of the Marshal Fire that we had here too. It’s just tricky to prove because even if evidence of melted lines is found, it’s hard to say whether or not the lines melted after the fire already started, or whether they actually started it. 

Quote from @Ryan S.:

Quote from @Steve K.:

Did you use the state-approved contract/ a contract that addresses the remedy for breach of contract and specific performance? 

Thanks for your insight. That makes sense. This is a very frustrating situation. I really want this property for so many reasons and don't just want to just walk away.

Yes. I used a Colorado state-approved contract. The contract states the below: 

20.2.1. Specific Performance, Damages or Both. Buyer may elect to treat this Contract as canceled, in which case all Earnest Money received hereunder will be returned to Buyer and Buyer may recover such damages as may be proper. Alternatively, in addition to the per diem in § 17 (Possession) for failure of Seller to timely deliver possession of the Property after Closing occurs, Buyer may elect to treat this Contract as being in full force and effect and Buyer has the right to specific performance or damages, or both.

22. MEDIATION. If a dispute arises relating to this Contract (whether prior to or after Closing) and is not resolved, the parties must first proceed, in good faith, to mediation. Mediation is a process in which the parties meet with an impartial person who helps to resolve the dispute informally and confidentially. Mediators cannot impose binding decisions. Before any mediated settlement is binding, the parties to the dispute must agree to the settlement, in writing. The parties will jointly appoint an acceptable mediator and will share equally in the cost of such mediation. The obligation to mediate, unless otherwise agreed, will terminate if the entire dispute is not resolved within thirty days of the date written notice requesting mediation is delivered by one party to the other at that party’s last known address (physical or electronic as provided in § 26). Nothing in this Section prohibits either party from filing a lawsuit and recording a lis pendens affecting the Property, before or after the date of written notice requesting mediation. This Section will not alter any date in this Contract, unless otherwise agreed.

Good that you used the state form. So yeah Jay is right (as usual), first step is mediation. Unfortunately enforcing specific performance on a seller is a rare remedy, as most often compensating the buyer for any monetary damages they have incurred is seen as an adequate remedy. I'm not sure that the property being perfect for your investment criteria makes it unique enough to warrant a judge forcing the sale, especially considering that it was not listed for sale to begin with and that you're going to be using it for an investment property not a primary residence. STR investors aren't really looked at that favorably in our mountain communities these days, putting it lightly. Seems like an uphill battle and as Jay pointed out it would be a long, expensive process that tends to favor the seller (judges don't take forcing people to sell their property lightly). I'd hazard to guess that you'd end up settling for monetary damages in the end, which being only a week into the contract you wouldn't have that many. Good luck though, I definitely see why this is frustrating for you! Maybe through mediation you can get some more money out of the seller for your troubles.

Did you use the state-approved contract/ a contract that addresses the remedy for breach of contract and specific performance?