TWO copper beeches tower over Rudy and Ann Mittasch’s shingled colonial on a pristine half acre in the gated Legend Yacht and Beach Club enclave of 46 homes here. Set on rolling terrain with 26 acres of communal space, their home has distant views across the Long Island Sound from the city to Connecticut.
Amenities in the private community include a clubhouse decorated à la Ralph Lauren, a dock with boat slips, an outdoor pool, an indoor tennis court and a lake with two fountains.
But the grand setting of this cluster of luxurious homes built a decade ago on the site of the former estate of Marcus Loew, a founder of Metro-Goldwyn-Mayer Studios, belies another reality.
The Mittasches’ four-bedroom four-and-a-half-bath home, with 3,600 square feet of space, has been on the market since June 2008, according to Zillow.com. With a two-story foyer; a 20-foot living-room ceiling; granite counters, two dishwashers and two cooktops in the kitchen; and a plush master suite, it was first listed for $2.125 million.
Recently, it was reduced to $1.085 million and listed as a short sale.
Saddled with a $1.3 million mortgage, along with more than $28,000 in annual property taxes, and $1,450 in monthly common charges, the Mittasches, both retired and in their 80s, had hoped to sell the house and move to a rental apartment with “no more obligations.” But last fall, with prices still tumbling, they “went underwater” and “sank to the bottom,” owing their lender more than the value of the home.
That was when the couple listed the house as a short sale, hoping to work out a deal in which their lender would accept less money than the outstanding mortgage balance. Short sales in expensive areas may seem a dissonant idea, but they are increasingly common. In Nassau, 22 houses exceeding $1 million are listed as short sales; in Suffolk the tally is 12.
Over all, short-sale inventory hit a record high in April, said Richard Halloran, the managing broker of Coldwell Banker’s Babylon office, who cited 2,430 homes in Suffolk listed as short sales and 1,042 in Nassau. In December 2008, the short-sale inventory in Suffolk was 1,541 homes; in Nassau, 633.
With the courts at a standstill and banks not foreclosing on properties, Mr. Halloran said, “the banks are getting better at doing short sales, so more people are doing them.”
Before 2006, the term short sale was well known only to “agents who were active in the last market adjustment, back in 1988 through 1995,” he added. “There were very few short sales, and most real estate agents and attorneys had very little knowledge in the process of negotiating the mortgage lower.”
Similarly, bank-owned properties were scarce, because “values were increasing at such rapid rates it is most likely that 100 percent of the homes were valued higher than the mortgage amount,” Mr. Halloran said.
These days, some banks are giving owners who owe more on their mortgages than their homes are worth “a bonus for selling as a short sale.” Other homeowners facing foreclosure or bankruptcy “are being proactive” by trying a short sale.
The Mittasches’ broker, Michele Gottlieb of Brigitte Green Realty’s office in Lattingtown, described their house as the “buy of the century.” It is certainly more reasonably priced than four other homes now listed in the homeowners’ association, ranging from a three-bedroom model, at $1.199 million, to a five-bedroom on the waterfront for $2.849 million.
Ms. Gottlieb also said the house had recently been “preapproved” for short sale by the lender — a practice cited by Mr. Halloran as increasingly frequent. “Preapproved short sales now stand out,” Mr. Halloran said, adding that when appraised by the bank, “they are priced well.”
Debra Quinn Petkanas, an associate broker with the Locust Valley office of Daniel Gale Sotheby’s International Realty, closed a short sale in January on a 6,800-square-foot five-bedroom French provincial home on 4.75 acres with a pool and tennis court in Lattingtown. It, too, had been on the slippery downhill market slope. Listed for $3.999 million in 2008, it was relisted in March 2010, for $2.750 million, then for $2.495 million. When the price dropped to $1.995 million, it became a short sale and a buyer snatched it up for $1.6 million.
“The short sale was attractive because they perceived it to be a great value,” Ms. Petkanas said. “You do need a buyer that is flexible” and not bound to a specific time frame. “There are no guarantees and you have to be patient.”
“In this part of the North Shore Gold Coast,” she added, “we would never have anticipated that we would experience short sales and foreclosures, but they are more of a reality than they have been in the past.” Homes bought at the height of the market “aren’t worth what they paid for them, and in many instances the house isn’t worth what the current mortgage is.”
The highest-priced short sale on the Island is an Upper Brookville Tudor, at $6.75 million. In Oyster Bay Cove, a contemporary home marketed in 2007 for $4.3 million has dropped to $1.99 million in a short sale.
Richard Klein, a residential real estate lawyer with the Diamond Law Group in Mineola, handles at least one short sale a week, negotiating the debts with the sellers’ bank.
The incentive for the seller to opt for a short sale, Mr. Klein said, is above all the “credit ramifications” and “embarrassment” of a foreclosure. “It’s a private transaction,” he said of the short sale. “You can leave with your dignity.”
But that is only if you price the house right. Gary Baumann, a sales agent with Prudential Douglas Elliman in Ronkonkoma, runs a Web site called LongIslandShortSale.com. He said the 34 homes listed as million-dollar-plus short sales were competing for buyers with a glut of luxury homes — 1,493 listings exceeding $1 million in Nassau, 1,057 in Suffolk.
Though short-sale shoppers can expect, on average, to save “at least 10 percent off a traditional sale,” Mr. Baumann said, there is so much inventory out there that unless the short sale represents a “compelling value,” buyers are not going to sift through the litter and “pick one that is a short sale.”