Why Homes Sit on the Market Unsold

So, you disconsolate home seller, has your house lingered on the market so long the “For Sale” sign has grown roots? Even though the real estate market shows signs of revival in 1997, is your home still sitting?

If you think you’ve got problems, consider this:

An owner in Beverly Hills has had his 11,000-square-foot mansion on 20 acres on and off the market for 10 years. At a cool $30 million, he just hasn’t had the right taker yet.

In Bel-Air, an 8,000-square-foot house on three-plus acres closed escrow in January for $7 million, after also sitting on the market for a decade with an original asking price of $12 million.

These two homes hold the local “long listings” record, according to sources in the Westside million-dollar-plus real estate community. They say the average selling time for homes over a million is eight months; it’s a year for estates priced at more than $5 million.

Given the small pool of big-bucks buyers, it’s understandable that a multimillion-dollar estate will take longer to sell.

But high-end properties are not the only ones languishing on the Southland market. In every bracket, there are homes and condos that took six months to several years to sell.

“If a property has been sitting on the market, the cause is usually the price. Either the seller was not motivated enough, had offers and didn’t want to sell or the property is in the wrong location,” said Cecelia Waeschle, broker for Rodeo Realty.

Added Elayne Barten, broker for Fred Sands Pacific Palisades office: “In the current market, if the house is perceived to have value in line with prices of other houses, it sells quickly.”

Here are some of the region’s longer listings, and the lessons they hold for all home sellers:

* Unrealistic expectations. With the 1997 market warming up, sellers are once again salivating over the top prices of the late 1980s.

“Chasing the market” is a phrase often used by brokers to describe owners who have initial unrealistic expectations about their homes’ selling prices. They start high and finally reduce their asking prices but, by that time, the home has grown stale and agents are reluctant to show the home.

In Whittier’s Hadley Hills area, nine years ago the owners of a house spent $100,000 to add a fourth bedroom, family room, skylights, new carpets, drapes and shutters, then listed the 2,400-square-foot house for $339,000 in 1995.

“The typical house we serve has dropped [in value] between 20% to 35% in the last six years,” said Jim Emery, owner of Prudential California Realty in Whittier. “The owners still thought the $100,000 investment in this house made it worth more than other houses in the area.

“But you don’t get your entire return [on the remodeling], and it was difficult [for them] to accept today’s market value,” Emery said.

“There was not one offer on the house and little activity,” recalled agent Jeanie Melcosky, who finally sold the home a year later for $295,000.

* Knowledgeable buyers shop for bargains. Buyers’ price awareness is also greater today, said Annette Graw, owner of South Bay Brokers in Manhattan Beach.

“People have access to the Internet. They know what houses have sold for,” she said.

Graw recalls listing a two-bedroom condominium in Torrance originally purchased in September 1988 for $185,000. At the end of 1990, the owner had an all-cash offer of $200,000 but rejected it, insisting on $220,000. The condo is still unsold today, while foreclosures in the same complex sell for as low as $140,000.

Bargain-priced foreclosure properties in the same neighborhood can drag conventionally marketed homes into longer times on the market, noted Carl Romeo, with John Aaroe & Associates, West Hollywood.

“Because the market has dropped about 40% over the last five years, there are a large number of bank foreclosures still there. We have two people in our offices who do nothing but foreclosures,” he said.

* Motivation makes the difference. “Realtors dream of working with the owner who must sell, whose company has moved elsewhere, who’s divorcing, in bankruptcy or simply want out. They’re the most cooperative,” says Pat Zicarelli, broker-owner of Style Realty & Investment in Tarzana. He says only 40% of sellers fit this “motivated” profile.

Two Mar Vista homes that came up for sale during the 1992-93 slow market period illustrate the importance of motivation.

One sold in three weeks. It was a 2,300-square-foot home with four bedrooms and pool. It was listed for $495,000, but the owners snapped up the first offer for $410,000 because they had made an offer on an ocean-view home in Pacific Palisades.

The other Mar Vista homeowners listed their 1,650-square-foot home for $449,000. With no action, they pulled it off the market. In 1994, using different agents, they put it back on the market for $389,000, as they leisurely searched for another home and declined two offers in the low $300s. The house finally sold in June 1996 for $320,000. By that time, the owner had been long since transferred out of town, and his employer sat with the house unsold for two more years.

* Competition from newer homes. In Newport Beach and North Laguna, resale properties face competition from new homes built on speculation by developers and from Newport Coast and Pelican Point, two new areas where prices range from $300,000 to $5 million.

“New is often more exciting than resale unless the resale has things like marble, granite and limestone to bring it into 1990s design,” said Bill Cote, principal of Cote Realty Group in Newport Beach.

The same issue is at work from Hollywood Hills to Malibu. “In the Mulholland Corridor, three or four gated communities compete with older homes that need renovation,” said Linda May, Fred Sands Estates office, Beverly Hills.

* Awkward floor plan. A home with water access in Long Beach has been on the market for five years. With bedrooms downstairs and its living area upstairs, “it has a floor plan that is simply not popular,” said Phil Jones, broker-owner, Prudential California Realty of Long Beach.

Jones said the property went on the market in the mid-$500,000 range. It is now listed at $349,000.

* Natural disasters. In Laguna Niguel, entire hillside areas have become suspect. “Soil slippage taints the whole neighborhood,” said Frank Di Lauro, with Regency Real Estate Brokers in Mission Viejo, who also serves as an expert witness in real estate lawsuits.

One home has visible cracking on the slab, and Di Lauro said no one knows what it will take to correct the problem. It’s been on the market since January 1996.

“Even in today’s strengthening market, this one hasn’t sold. There are still alternatives that are better and safer investments. It’s just not worth the risk for most people to buy something that you can’t make livable,” he said.

* The “no show” house. Probably one of the oddest reasons for a long listing was the inability of listing agents to show the property for three years.

A 6,100-square-foot home on three acres in Malibu came on the market through bank foreclosure in November 1993. At that time, the house was occupied by a renter.

“The tenant turned into a wily squatter and was able to remain there until February 1996, living rent-free,” said Tom Dawson, with Prudential Coldwell Banker in Pacific Palisades.

“The house was up for sale, but because he was in possession, we were not allowed on the property without his permission,” said co-agent Audrey Ann Boyle.

Nevertheless, the bargain-priced fixer-upper has had 19 offers over the last three years. But long delays caused the would-be owners to back out. First, clear title could not be secured while the squatter was there. Once the squatter left in February, the Coastal Commission would not permit the property to be sold till the home was brought up to code.

Today, the property is finally in escrow at close to its asking price: $1,399,000.

But just to be on the safe side, Dawson and Boyle will continue to show it until escrow closes in early May.

So what’s the real bottom line?

“A buyer will buy anything and will compromise on everything if the price is right,” said Waeschle.