Home Price ‘The Biggest Mystery’ In Arizona
The Arizona Republic has this update from the Phoenix area. “Real estate agents need to be ‘brutally honest’ with sellers today, as there is about a six-month supply of unsold homes, agents were told at a panel discussion. Many clients are still holding out for last year’s prices and not trusting their agents, but agents were advised to teach sellers how competitive the market is and not just tell them what they want to hear.”
“‘You are not going to sell a property at market value. You are not going to sell it for its appraised value,’ said Paul Pastore of Re/Max in Chandler. ‘You are only going to sell it for what someone is willing to pay.’”
“There is an 18-month to two-year supply of unsold homes in Surprise and 2 1/2- to three-year supply in the Johnson Ranch area near Queen Creek, said Russell Shaw in north Phoenix.”
“The biggest mystery for agents today is how to price a home. You can’t count on city or town medians or appraisals but have to look at what comparable homes in the neighborhood are selling for, they said. It is common for prices to be reduced several times if a house isn’t selling. Pastore said he even quit putting prices on fliers because they are so flexible.”
“Although appraisals serve as a general guideline for what houses can be priced, they aren’t always hitting the mark. Agents talked of houses selling for $50,000, $80,000 or other amounts below appraised values. One agent said she has a home priced $100,000 below appraisal that isn’t selling.”
“(Realtor) Caryn Shannon in Gilbert said, ‘I hope people in the next month who don’t have to sell will drop out of the marathon.’”
“Sometimes clients don’t believe it when agents advise them to lower prices because they are remembering the run-up over the past two years. Bruce Fraser in Chandler remembers an Ahwatukee Foothills man who insisted that he be able to set the price and commission and wanted a price in the $500,000s. Fraser recommended a lower price. ‘The man shook my hand and said, ‘OK, it’s time for you to leave.’”
“Teresa Anderson, a Mesa resident, said, ‘If I pick up that someone is draining my energy and that of my team, I walk away from it.’”
“Bill Ryan said agents have to be honest. ‘Mr. and Mrs. Seller, I would rather turn you down than let you down.’ He said sellers need to keep things in perspective. He advised one woman who had reduced her price to lower it more. She was reluctant until he pointed out that even with the lower price, her investment had earned about 40 percent in 36 months. She accepted the lower price.”
‘her investment had earned about 40 percent in 36 months. She accepted the lower price.’
I’m glad the Republic included this info, as it points out how potentially overpriced the area is, even with these tiny reductions.
“(Realtor) Caryn Shannon in Gilbert said, ‘I hope people in the next month who don’t have to sell will drop out of the marathon.’”
I bet she does but it’s not likely. If sellers see a big profit possible from the run-up, they are not likely to take it off of the market.
You sell at X price even if it is lower than the peak and you walk away with Y dollars. You wait for another year or two and you are underwater. No brainer.
If you can find some mullet who will buy it, that is! Not easy these days!
Ha, ha, ha! Your posts are always the funniest txchick.
This last week the truth on the ground is finally coming out. It’s going to get worse that’s for sure.
I saw my first foreclosure/Notice of Trustee’s sale for a flipper come across my screen from realtytrac.com. It only gives the street if you are not a member but I think I found it on ziprealty. They say that the amount of default is 280,000. The house is listed for 650,000. It will be interesting to see how that turns out.
Well, there goes the flipper’s FICO score :/
It’s amazing what people want to believe. One of the ladies I play golf with heard what we were saying about the slow housing market and said “my house is selling for 275K and several have sold in the last month.” I have been over to this house several times. 20 yr old patio home in NW Phoenix. I looked up the county records and the houses are selling for 215K. It’s hard to tell a 77 yr old women that her house really is not worth 275K so I kept my mouth shut.
I’m always amazed when a 77 year old gives a crap about the value of their house. They should just be glad they woke up this morning. It’s not like they can take it with themselves when they die.
I see a lot of the stuff going on in the condo conversions. This segment is going down the tubes fast. I was in a condo bought by a couple in Ahwatukee where they bought the unit as is. They put in the expensive flooring, state of the art appliances, granite countertops, and shutters. Probably somewhere around $15,000 in upgrades. After completion they put it on the market. They now have a for sale sign and a for lease sign in the window. All of those upgrades to rent it. Rent to the wrong person and you could be in trouble. I’m not a realtor nor do I claim to be one but basic common sense tells you that if you are buying these things now at these high prices you wil never recover that money. This condo conversion thing here in Arizona is going to be huge for the next three years. Not huge as far as people buying them but the disaster that is left from all the investors buying them and the few suckers that bought one to live in. All I have to say is if you own a company that did any type of work on one of these conversions shut it down soon and start a new company because the lawsuits are coming.
lawsuits for what?
many of the lawsuits will be frivolous just because people lose money.
the only grounds are if their was appraisal fraud, lender fraud (violations of TILA, doc fraud, etc), or predatory lending. which we know a fair number of these will surface related to the bubble.
But many people will lose $ due to their own greed and ignorance and will have no recourse in getting it back by via lawsuit unless there was a clear violation of illegal or, possibly, unethical behavior. I wouldn’t be surprised to see new, tighter legislation come out regarding the conduct of lenders, appraisers, and realtors before this thing is over with.
my realtor had me sign a statement that she did not tell me about market condtions. eather up or down, talk about covering your ass.
This will help set the comps lower. There is no reason people who bought before 2001 can’t lower the prices by 50% from the 2005 peak. That’s why I think we won’t have a catastrophic recession if home prices tumble.
I know a lot of people that bought homes a long time ago. Most of them think they’re rich and have spent accordingly. When they find out they are not as rich as they thought they will quit spending. There’s no way out of a recession at this point.
A recession is unavoidable at this point, best we can hope for is to avoid a depression.
or hyperinflation.
ka-poom
http://www.itulip.com/kapoomtheory.htm
Good one chick….
Hmmm. Somewhere between depression and hyperinflation. Kinda wide spectrum, doncha think?
Depression first, hyperinflation shortly thereafter.
In a chaotic system, having to choose between boiling and freezing doesn’t mean that you can split the difference and get room temp comfort. Economics doesn’t work that way…
I also know a lot of people that didn’t take any equity out.
And never planned to?
Except for the fact that most already taken out that equity out with a HELOC and already spend it for paying down credit cards, new cars, vacations, remodeling, pool, etc… Once the bill comes due and they figure out that the HELOC equity is no longer there but they still must pay it, the fun starts. The true panic bottom in this RE bubble won’t happen for at least another 36 months IMHO. Hold tight. The panic selling has not even started yet. Let them sweat, bills pile up and exotic loans reset. The bubble crash fun is just beginning. This is just the 1st inning. The greedy stupid ones that are holding on for dear life now will be the ones selling at the bottom at the end. Happens every time.
I so agree with Paul’s post. I want every potential buyer in CA out there to know that we are NOT buying in this market. So, relax, wait a few years, and let the sellers sink themselves. DH & I see no reason why we should subsidize seller financial irresponsibility.
California deserves to implode. We were watching “Flip this House” yesterday. They were running a marathon but you could tell it was many months old. An investor in California bought a complete piece of junk. Yes, this guy is an investor. They take junky houses and make them real nice. They add value so they are not true “flippers” any where.
The investor seemed like a real good guy. He was a middle-aged black guy that seemed very sharp and decent. I had nothing wrong with anything he did. I just couldn’t believe that he bought a 980 sq. foot piece of junk that was dripping with mold and had to be completely gutted. The price he paid for this falling down, moldy monstrosity was $540,000. Yes, that’s right. He paid over half a million bucks for a house that was just wretched and was only 980 square feet. California’s next big tremor will come from what is above the ground, not below.
I saw that flip ,and that was one of the flippers fix up guys that I respected .First, he does a good job in a good time span .Second ,he did the right improvements .Third, he had a team of skilled workers that knew what they were doing .Yep,this guy took a piece of moldy junk and brought it up to the value of the neighborhood so it wasn’t a eyesore or a health and safety violation anymore .I liked this guy alot . This pro flipper guy was giving paychecks to alot of people also .
NYCity Boy. Not that I don’t agree with you that California property is really overpriced , but what about New York City ? Do you think New York City prices are cheap per square foot?
I agree with the content of your post, but I believe the panic will start in the next 6-18 months.
Virtually all of these “sellers” articles are referencing what agents are saying to sellers. I would really like to see/hear what they are saying to buyers.
I imagine there are some pretty funny lines being thrown about.
Buyers agents are certainly not going to say to their prospective buyers “Hey, look at the falling prices. Better not buy until it bottoms out. Don’t worry about me…..I won’t make any money for a couple of years, but at least I can sleep with a good conscience.”
even if you are a competent and honest appraiser,it is pretty hard to come up with a realistic “most probable selling price” and accurately account for differences in incentives and special financing in a market like this.there are some interesting discussions at appraisersforum.com about the problems in the appaisal biz,some of which are inherent,and some of which have to do with regulatory and compensation factors.flaky appraisers are called skippy’s.
Probably that it’s a buyer’s market, and to buy before the house prices take off again and they get priced out forever for the second time.
…her investment had earned about 40 percent in 36 months.
Don’t fall for this lie. If she put down 20% her return was 200% and she had a place to live for 3 years free.
“Flat” returns would be original purchase price plus taxes and insurance MINUS the OER (owners Equivalent Rent).
This is why I have no qualms at all about offering them a price which includes NO profit, or even a loss.
Isn’t a six month invnetory of homes considered a normal market? This does not sound right. Is all of the data about 50,000 homes just six months worth?
Simmssays…Help Your Carpal Tunnel
http://www.americaninventorspot.com/speech_to_text_helps_carpel_tunnel
I think many buyers and sellers are still under the influence of the mania psycology that persisted the last few years. There are still clueless buyers who feel a sense of urgency to buy and sellers who think they are entitled to massive profits on their homes. It will be interesting to watch the psycology change, the next couple years. I think the next 12 months will see the biggest change. It seems to be happening fast, but there are still many people out there “Hopeing and Wishing”. It’s going to take a lot of blood and pain for these people to let go of their delusions. Some people need to be beat into acceptance.
It is not in the best interests of the NAR and CAR to educate the buyers! Lareah and LAY keep up the pretense that its a soft landing and it’s never been a better time to buy. They’re still plenty of sheep out there to shear. Bah Bah Bah. Get a cute one.
OT..
When looking at properties currently for sale, can we presume that price reductions at the upper levels will force price reductions at lower levels and vice-versa?
I was looking at the flyers next to the for sales signes yesteray to see what’s going on in my Broward market, and a lot of the for sale signs had the tubes with the fancy ads,and the price would be crossed out with a pen and lowered by 30k.
Then I picked up a flyer that was sprinkled with perfume!! I was laughing so hard I had to pull over.
Of the 53,694 houses in Maricopa County AZ listed on ziprealty.com 22,186 have ‘Reduced’ prices. That’s almost half. It seems the buyers have just revolted, I haven’t a single person at any of the many open houses in my neighborhood. There is no housing market right now, at least in AZ.
Wow! Those are some serious numbers! I wish we had that problem in the NYC metro area and suburbs, but it is just not that bad. (The jobs are here)
“‘You are not going to sell a property at market value. You are not going to sell it for its appraised value,’ said Paul Pastore of Re/Max in Chandler. ‘You are only going to sell it for what someone is willing to pay.’”
Market value = what someone is willing to pay. Mystery solved.
Some agents are getting “particular” about their listings. Friends in FL told us every agent they talked to says they won’t take the listing unless it is below ALL of the many other houses for sale in their neighborhood.
If I were to take a listing in this type of market my list price would be “Best Offer, AS IS, from a preapproved buyer”….At the very least, it would generate traffic and likely a number of offers….Getting a seller to accept may be the more difficult problem…
I think that would be called an “auction”.
I’ve saw a few ‘Auction’ signs when I was driving home from work on Friday. These type of ‘fire’ sales should lower comps really quick.
You beat me to the punch. This should qualify as one of the most moronic statement ever.
The situation reminds me of the stock market. You have a stock that’s trading at $100 a share on speculation. Overnight, news comes out that’s a reality check and the next morning the stock opens in the $80’s. The recent comps were $100 a share, from the day before, but now nobody want’s to pay more than $80 a share. Perceived value took a sudden hit . It looks like that’s what starting to happen, buyers perveived value changed as it became apparent that prices were no longer going up and they may lose money on declining prices. It suddenly became a lot riskier to buy.
This is exactly what is happening right now only it’s not an overnight process like the stock market. It was this exact concept that lead me to finally realize what was going on about 18 months ago. It took me an additional six months to convince my wife of this and not without periodic reinforcement thereafter.
And the analogy for removing your home from the market: “If somebody doesn’t pay me $100 / share, well then I’m just going to take my shares off the market.”
Like it makes a difference.
Every seller thinks that his home is special and is worth more than the market. I used to sell RE in Florida around 1990 and every seller wanted to list his home too high and several of them said :I know there is one buyer out there who is looking for my exact house and will pay my price for it” of course there wasn’t. My girlfriend who was also a realtor used to say “typical seller” thier home is always worth the most! Ah, memories.
And this despite the fact that many of them are selling a cookie cutter house with no appreciable difference from any other on his block. A commodity.
EXACTLY.
Why is this so hard to get across to some people?
Yes, but try to explain to a realtor the differnce between trailing market value and present market value.
I am waiting to read the story where a seller goes postal on a buyer for offering 30-50% off.
I remember last year when the Money mag. article came out on the “RE boom” it featured a young guy from Minneapolis I think that had bought sseveral condos in AZ sight unseen and considered these so called “investments”-NO BRAINERS. I would love to see an update on this guy now to see how his investing turned out.
Recalling that he was Turkish or Arabic of some sort, my guess is he’s left the country and the lenders are holding the bag.
Sad but true. Probably figured out some sort of scam to bolt out of the U.S. w/ a suitcase full of money, too.
I believe this was the article? “Cuckoo for Condos”
http://tinyurl.com/mrwqx
Today he is doing the R/E seminar thingy:
… Estate & Land With up to 105% Financing with Chris Cowen coming 08/24/2006 … contracts, deeds, options, taxes, leases, condos, co-ops, fixer-uppers, …
http://tinyurl.com/o36fr
Don’t know who I feel sorrier for the people who spend the money on these seminars or those that actually go out and try what they snake oil seller are preaching. On who am I kidding, they will all get thier just desserts, they just won’t be able to eat them….
Interesting comment. They will just keep selling their wares until the ir market wears out. Meanwhile a lot of prospectives will be wiped out.
I’m sorry but this guy has to be toast, or will be toast soon. The date on the article was September 1st of 2005, one month short of the top. Says his equity was $868,000 at the time. I doubt if he cashed out because he was expecting the equity to rise to $6.2 million. Perhaps I am missing something…just my two cents.
“investments”-NO BRAINS!
So, my sons coach wants to buy a house in the LA area. We’ve talked about the housing bubble and he knows it has peaked. I overheard him ask an acquantance, who is an RE agent, for advice. During the conversation - and I am not making this up, I heard the RE guy say ALL of these sentences in response to the coaches logical train of questions:
“Right now is a good time to buy.”
“Interest rates are going down, you should really consider an ARM.”
“They are not making anymore land.”
And the one that I really had to grip myself to keep from jumping out of my chair:
“You don’t want to insult the seller by lowballing”
Ugh! I just said to the coach, “You know, when asking for advise, you should always consider the source.”
Sorry, make that ’son’s’ and ‘advice’. Me and my spelling error typos.
Yeah, I am in LA too and it is crazy that as well known as it is that RE is going south there are many people here that are 1)oblivious to the impending bust and 2)still think thier home is gaing in value. I was listening to 97.1 on the radio yesterday and there was a RE show on and a caller said he bought a home in the valley 6 months ago and thought it had gone up 30K already-can you say BRAIN DAMAGE?
I know the inland empire is going down but where i live on the west end, the prices are still sticky.
What I hear a lot in LA is “prices can’t drop more than 10%.” But that’s progress — six months ago it was “real estate never goes down.”
It’s like asking the devil if he likes warm climates
lmao!
“Right now is a good time to buy.”
“Interest rates are going down, you should really consider an ARM.”
“They are not making anymore land.”
And the one that I really had to grip myself to keep from jumping out of my chair:
“You don’t want to insult the seller by lowballing”
Ouch! One would hope they could do better than that!
“Sometimes clients don’t believe it when agents advise them to lower prices because they are remembering the run-up over the past two years. Bruce Fraser in Chandler remembers an Ahwatukee Foothills man who insisted that he be able to set the price and commission and wanted a price in the $500,000s. Fraser recommended a lower price. ‘The man shook my hand and said, ‘OK, it’s time for you to leave.’”
————————————————————————–
financial ruin is too good a fate for this seller
Exactly! The job of realtors is to move the Market, not cater to the demands of the mentally ill.
“Real estate agents need to be ‘brutally honest’ with sellers today, as there is about a six-month supply of unsold homes, agents were told at a panel discussion.
Oh this is rich! They start off telling them to be brutally honest and then they LIE to the realtors about how much inventory there is! Hahahahaha, biggest bunch of friggin dolts in history!
Funny, they use real estate agents and brutaly honest in the same sentence.
“The biggest mystery for agents today is how to price a home.”
Just got off the phone with my husband, who is in Vegas. He was hiking on Saturday and met a realtor on the trail. She was saying the same thing about the Vegas market, but for a slightly different reason. According to her, here’s really no way to accurately price homes in many Vegas neighborhoods right now because nothing is selling.
She went on to explain that she is semi-retired, which prompted my husband to ask why she even bothers to try to sell in such a tight market. She answered, “It beats playing bridge.”
According to her, here’s really no way to accurately price homes in many Vegas neighborhoods right now because nothing is selling.It’s true. How can you determine the true value of a home without dependable comps?
My friend is buying a $300,000 to-be-build 4-bed house in Buckeye, AZ. I asked him why he wanted to buy there. He said high appreciation was the reason. Plus, the agent told him all these nice things about that area that he could not resist. Like sport stadium, golf course, nice freeway, hot new growing community, etc. According to my research, inventory in Buckeye is swelling and price is about to go down (or has already gone down?). Further, rent for a 4 bed new house is only about $1400/mo. His mortgage alone could be up to $2000/mo. I advised my friend not to buy for these reasons. He insisted on high appreciation. If anyone of you lives nearby Buckeye and knows about the city, please advise. Thanks.
By the way, it is Ameritage Home & the house is to be completed in April.
someone wrote about that area a month or so ago. I tried to find the post but it was a while ago. They said they had gone out and looked at new houses in Feb. in the Buckeye area. The houses were something like 369K for a 4 bd rm. They went back six month latter and the same house was offered in a 48 hour sale by the builder for 30% less. I would not touch that area. What Talen is saying is correct. The traffic in to town is unbelievable.
He is a SoCal “investor” buying his first. By the way, is my estimate rent of $1400/mo a market price? Is it easy to find tennants?
Ben, good morning! This is to be expected after publicity. Please screen out before we are overloaded with such. Thankx.
Nice freeway? Suicide freeway is more like it. Tell your friend to get on I-10 at 6:30 AM and drive into downtown Phoenix and see if he still thinks it’s “nice.”
Ahmen! I-10 is a nightmare during rush hour. This is common knowledge.
Your friend is out of touch with reality! Pure and simple.
Plus its Buckeye…Gateway to the Gila River Reservation gang bangers. 300k?…I think not.
It’s the same as the other Phoenix suburbs only worse. He’s going to take a bath if he buys it. I bet he could get 20% off if he tells the builder he’s going to walk.
I haven’t been to Buckeye in ages, and can’t imagine why any one would go there unless they were on thier way SoCal and broke down. Have they paved the streets yet?
It’s so far out from Phoenix, I always thought of it as Far East San Diego.
Let’s have a little discusion/poll of what would be in your estimation the three worst places to be trying to sell now (leaving out blighted areas like Detroit, etc. - keep it to bubble towns)
Mine would be
Tampa
Naples/Ft. Myers
Phoenix
very little difference between the three of them.
Loudoun County in Northern Virginia
Boston
Arizona
Florida
I know that I gave four but I couldn’t eliminate any of them.
I’ll second Naples. We’ve got a relative there and have every reason to say otherwise because unless the will changes, we are going to get the house. But that market is just plain toast. Way to many houses for sale at astronomical prices.
It’s a shame. We have been going there for a couple of decades now, and I really used to love Naples. It was a cute little town in a relatively remote and quiet location. Even the humidity didn’t bother me because you could always jump in the pool or the Gulf.
Now, Naples is just over-priced suburbs and cars as far as the eye can see…until you run into the swamp, that is. It does seem to retain some attraction for foreign buyers, but I am told that’s only because they can purchase property here as a tax shelter.
For over priced, I would say Naples too. Friends of mine who were speculating have just taken two of their condos off the market because in their own words “they are impossible to sell.” They used to be quite relaxed about hurricanes but with Ernesto bearing down on them and the rest of the southwest coast they have started saying that perhaps they bought in the wrong part of the state.
Even more specific to Phoenix is Surprise, Maricopa, and Queen Creek.
Specific to San Diego - downtown. Cranes a’plenty still building condos. There is a guy tracking downtown condo losses and the latest is one seller took a $200K bath to sell his in one of the nicest buildings. Too much inventory, too many incentives, and everyone is burned out on the area.
Florida, Phoenix and Las Vegas. The land-locked outlying suburbs that are farthest from the employment centers are most overpriced (although to many of us the better places to live).
I’m going with:
Sacramento/Central Valley CA
Naples
Phoenix
My vote:
East coast
West coast
Everything in between
LOL, Kingman Az. Southern Florida ,and right where the hurricane is heading right now .
While Florida could account for a top 10 list on it’s own, I leave it out because I am west coast. My top three are:
Reno/Sparks/Carson City
Phoenix
Sacramento
San Diego
San Diego
San Diego
What? Don’t you know - San Diego is special!
Real answer:
Coastal Florida
Phoenix
San Diego (condos - no SFR yet.)
1. Queen Creek, AZ
2. Greater Queen Creek, AZ
3. Queen up-the-Creek-without-a-paddle, AZ
In reference to my BRAIN DAMAGE post above, I wonder what will happen when all of these people who are either ignorant of the current RE market or are in denial finally realize that it is over? Will thier be panic? a consumer led recession? a total bust in the RE market? Any guesses?
They’ll never realize it. Even after they are foreclosed on, they’ll still believe their house was worth $$$$$$ and the bank screwed them out of their equity.
Spot on! Deadbeats NEVER admit culpability. It’s who they are.
The most common mistake people make in any investment is holding on too long. It is emotionally difficult to admit they made a mistake, or lost money, so they hold on until the bottom. It’s a long way down from here.
This was posted on the Motley Fool RE investing site by a mortgage broker (I wonder just how many of these kinds of situations are unwinding at this moment):
—————————————————————————-
ANECDOTE;
I can only breathe deeply and tell this tale NOW (well… actually 5 days early… but I’ll take that risk of jinx.)
I’ve never faced a situation threatening to cause a Buyback… until 2 months ago (actually… 3 months on the nose on this coming Friday September 1st.)
One of my loan officers originated a non-owner occupant investment property loan in Florida. It was a renovation hard-money take-out loan (meaning the current financing was hard money used to renovate the place, and we were replacing the hard money with a conventional program.) The borrower is a Florida real estate investor with a complicated portfolio of properties in her name, in various Trust names, in LLC names, and in jointly-Titled names with spatterings of direct and jointly financed leverage arrangements… THUS the poster-child purpose for tru “Stated Income” financing.
PROBLEM: She HAD had the property listed on the MLS for sale… and lending guidelines (all factors considered) required any immediately previously listed Non-Owner property to have a secured, signe lease agreement in place to support sufficient cashflow on the debt carry costs (even though the rental revenues were already considered in the “Stated Income” scenario.)
PROBLEM: She had no lease in place because it was vacant while she & her partner had ripped it apart and renovated it, using the appropriate equity-based hard money funding.
PROBLEM: The hard money had a 6 month term only, which was “up.” She had been perfectly ON TIME in making her payments… but “balloon is due” thus it was a foreclosure if she failed to refinance the hard money out. Balloon timing was literally getting cut down to the day, and a “Notice Of Foreclosure” would immediately eliminate ALL workable solutions, effectively causing immediate shortsale even though she’d paid all on time and legitimately improved the property quality and market value.
(Are we starting to see the Catch-22 yet?)
PROBLEM: She wasn’t getting success in showing it for optimal rentals while still finishing the renovations (and yes, by the way, our independent appraiser confirmed and provided pictures that the renovation work WAS quite good quality and in completion stages,) and thus couldn’t fulfill the “signed lease” underwriting requirement to get the take-out financing.
SO… unbeknownst (still, to this day) to the borrower, I pledged a $5,000 risk bond to the lender/investor to ‘bond around’ the lease requirement… basically taking a gamble that this borrower was legit, and good of intention… and would quickly fill the rental and provide the proof with a signed lease agreement and cancelled checks.
I would have my $5,000 released when the borrower completed her “trailing documentation.”
Lender accepted my faith money to back the borrower…
Deal closed Thursday, May 25… 1st payment due July 1st.
June 1st comes…
GOOD news… borrower makes 1st payment (1st payment default is an “instant buyback” for my firm per our contract with the lender… I’d have to come up with over a quarter million (just like a margin call on a stock account) within 2 days if that were the case…
Good news… Borrower has a lease, faxes it over.
Bad news… tennancy doesn’t start until July 1st…
No cancelled check proving tennancy till July… my funds remain hostage.
July arrives… no response from Borrower… after days & days of pursuit, FINALLY we get the story;
Tennant has abandoned lease, apparently… (I am getting suspicious…)
Borrower says market’s getting soft (uhh… yeah….. we knew this…)
Borrower says she can’t cashflow with rents (uhhh… again, this is a surprise to who???)
Borrower says she’s throwing it back on the market to sell…
(OK… was I conned into simply providing a bridge loan???)
OH… there’s more to this story….
The loan has a 3 year Prepayment Penalty of 6% of the balance attached to it.
The GOOD news; If she sells & triggers the PPP, I also get my $5k pledge back (since the lender’s received their revenues.)
So… even more yet to this story….
By my wholesale funding contract… If I solicit or cause the borrower to refi or sell away from the lender within the initial 3 month period, I am “at cause” and due for a loan buyback (yowch!!!) THUS the holding-of-breath now until September 1st… 3 full calendar loan-servicing months after the May 25 closing…
YES… if she sells without any influence from ME I am technically and theoretically “off the hook”… but I’ve been in those ambiguous legal cat & mouse games before… no fun, and no financial picnic!
SO… at this point…
September 1st clears my risk of being “at cause” for a sale…
IF/WHEN it sells (and triggers the PPP… regardless of price or payoff,) I get the release of my bonding funds…
MY STINKING SUSPICION NOW… is that I may have been potentially defrauded or duped into making this loan, and this borrower is now trying to creatively transfer the burden WITHOUT triggering the PPP, and WITHOUT documenting a tennancy… in which case she would cause my bonding funds to remain in hostage.
IF THAT IS THE CASE… I am unsure HOW I will gain the release of the funds I put up in her support. Perhaps I would likely have to document some investigative work showing occupancy, etc. Even that isn’t a sure thing (regardless of what I find) in forcing appropriate action…
TWO LESSONS:
A) No good deed goes unpunished (a mantra of the brokerage industry,) and,
B) The larger the loan, the greater the risks, and the more the revenues are ABSOLUTELY deserved!!!
Brad ….You were conned into providing a bridge loan .The red flag ……the investor had the property on the market before, which should of alerted you to the fact that her intent was resale and she just wanted some fix-up money . Now she made you into a nervous bagholder . Your other red flag clue was the fact that people usually don’t do major fix ups to rent, but rather to sell.
Hi Wizard,
I’m not the mortgage broker, I just re-posted his tale for the board.
Oh sorry ,I missed that Brad .
It’s really is starting to go into a dead market now . Buyers are holding out ,sellers are reducing ,but still not getting offers .
Of course the buyers see all the listings and they see the price cuts ,so no more urgency .It’s a pretty hard sell for a realtor right now ,plus the realtors are taking the people to new home tracts because they are being paid referral fees and big incentives .(You don’t need a realtor to go to a new home tract ). A actual buyer is worth their weight in gold right now to everyone .If your a buyer ,builders are paying big bucks as referral fees to get their hands on you ,(better to get it in price cuts rather than someone making money off of your head .) Next time a friend insists that you go to a new home tract, beware that they might be getting money .
I think a number of bloggers said it a long time ago ,that the big builders would lead the market to the prices they will go to .
This post is a attempt on my part to take away the greedy aspect of people feasting on each other . Better for buyers to get a deal on the house rather than paying for the price on their head .
Really great and informative comment. Excellent.
Bob Dylan, modified:
Once upon a time you dressed so fine
You threw the bums a dime in your prime, didn’t you?
People’d call, say, “Beware doll, they’re bound to fall”
You thought they were all. kiddin’ you
You used to laugh about
Everybody that was holdin’ out
Now you don’t talk so loud
Now you don’t seem so proud
About having to be scrounging for your next meal.
How does it feel?
How does it feel?
To be without a home
Like a complete unknown
Like a rolling stone?
You’ve gone to the finest school all right, Miss Lonely
But you know you only used to get juiced in it
And nobody has ever taught you how to live on the street
And now you find out you’re gonna have to get used to it
You said you’d never compromise
With the mystery tramp, but now you realize
He’s not selling any alibis
As you stare into the vacuum of his eyes
And say do you want to make a deal?
How does it feel?
How does it feel?
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
You never turned around to see the frowns on the twirlers and the clowns
When they all come down and did tricks for you
You never understood that it ain’t no good
You shouldn’t let other people get your kicks for you
You used to ride around in the Mercedes with your broker
Who carried in his pocket a crooked appraisor
Ain’t it hard when you discover that
Flipping really wasn’t, where it’s at
After he took from you everything he could steal.
How does it feel?
How does it feel?
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
Princess on the steeple and all the pretty people
They’re drinkin’, thinkin’ that they got it made
Exchanging all precious gifts
But you’d better take your diamond ring, you’d better pawn it babe
You used to be so amused
At renters in rags and the language that they used
Go to him now, he calls you, you can’t refuse
When you ain’t got nothing, you got nothing to lose
You’re invisible now, you got no secrets to conceal.
How does it feel?
How does it feel?
To be on your own
With no direction home
Like a complete unknown
Like a rolling stone?
Hey Mort , my favorite Bob Dylan song ,(I like your additions ). They should play the song at real estate auctions . Matter of fact ,I think I got that tape somewhere around here ….I think I’m going to listen to it .
There are a lot of talented musicians that could take material like I’ve seen presented on this blog and burn a CD for some bucks. I know that I’d buy one. I like the idea of piping it into real estate auctions as well!
The beauty of that song is that I only had to change a few words.
OMG - phoenix is toast. burnt, hot, dry toast. toured a couple of open houses downtown today. never saw another soul other than the bored realtors. there ARE NO BUYERS! if you want a taste of reality in phoenix, look at the “high” rise condos about. orpheum, a bust. tapestry, a crappy bust. optima, can’t sell an overpriced unit in that place if you cut your price in half. portland place, about to go under. 50% of the original sales were canceled. buildings 2 & 3 are iffy at best for approval due to low sales. and the king of crap, regency house. several crappy condos for sale from 435 up to 699. the elevators are slow in this 1964 building, when they work, that is. the pool is green, and the AC went out last summer for 3 months. the penthouse has been reduced from 949K down to 699K. it is worth about 300K. another unit was bought by a vegas FB for 305K and they’re trying to sell for 607K on craigslist. the place has not had a thing done to it, yet the vegas-babies think it has gone up 100% from 2005. my guess is that it will drop to below 300K soon. just too much for sale, and like i said, NO ONE IS BUYING. peace.
Wow! Don’t be a stranger! Let us know what happens!
Tucson will be toast soon but like the tsumani lookers everyone is out to sea wondering where the water went.
Everything hits here in Tucson last. Last to go up, last to go down, What a scam…..
Agree with you on Tucson. Yesterday, I took a spin around the block and saw:
One house (new construction) that was up for sale recently. Yard’s now overgrown with weeds, and there’s a new “For Sale” sign out front. Hanging off the “For Sale” sign is another one that says “For Rent.” (Do I detect a FB here?)
An existing home for sale, and, behind it, new construction. Both are way overpriced, in my not-so-humble opinion.
A house listed by the same agent who was the seller’s agent on the house I bought two years ago. This guy was so clueless that my agent had to help him do his paperwork.
And, finally, up the street from me, another house for sale. This was purchased in an all-cash deal back in March. Some cosmetic touches were applied, and it was re-listed for almost $80k more than the purchase price. Unfortunately, it’s just sitting there. Weeds are growing in the yard, and I have yet to see anyone who resembles a potential buyer checking this place out.
Thus ends my neighborhood Bubble Tour.
It’s the house of broken dreams.
We’re finally debt-free, and ready to look for our first house. Should we look for a foreclosure now, or rent for six months and wait for prices to drop more?
Rent until you can buy for less than the rental.