“Willing To Walk” In Florida
The News Press reports from Florida. “The price of a home in Lee County has almost doubled during the past five years, despite a softening of the market throughout 2006. Liz Paul, a real estate agent in Fort Myers, said it’s important to put the turbulence of the past five years in context.”
“‘Prices didn’t go anywhere for the longest time,’ she said. ‘Some people bought in 1988 or ‘89, and they were sometimes taking a loss if they sold in 1996 or 1997.’”
“For some local homeowners, it’s already too late. Teresa Tarr lost her job with a title company last year when the housing market slowed and hasn’t been able to get work since. She and her husband would like to move out of Florida but know it won’t be easy to sell their northwest Cape Coral house, which they bought in 2003 for $129,000.”
“In late 2005, it was worth about $300,000 based on sales of comparable houses nearby, Tarr said, but now ‘it’s a buyer’s market’ and she’s not sure what it will bring. ‘People are being disillusioned about so-called paradise,’ she said.”
“Ed Bonkowski, a Fort Myers-based real estate broker, said it’s not clear how many speculators will default on their loans for houses and condominiums. He noted that many banks failed in the early 1990s when they lent money to developers who went under after prices fell in the late 1980s. Condominiums were the hardest hit.”
“‘I guess the question is whether that’s going to happen again. We’ll see where the banks will be if there’s a rapid foreclosure run. How many foreclosures are we going to have? That’s still unknown,’ Bonkowski said.’
“Chuck Novy retired and bought a condominium off Beach Parkway in Cape Coral 19 years ago for $60,000. Novy, who spends four months a year in the Cape, doesn’t intend to sell but said he sees signs of stress on some of his neighbors. He worries that rising property taxes spurred by higher values will drive some off.”
“‘I think Florida’s going to find the goose that lays the golden egg is gone,’ he said.”
“‘It’s been my experience watching people buy and sell that you can always tell the ones who are looking to flip a house — they’re bitching about what prices were six months ago. I’m not going to complain about something I never had in my hand,’ (said) Frank Alexander.”
“Nowhere were prices more volatile than in Lehigh Acres. John McWilliams, broker in south Fort Myers, said a typical quarter-acre lot went for $2,000 five years ago, spiked up to $50,000 in mid-2005 and now would go for $11,000 to $13,000.”
“The main difference between Lee and Collier is that Collier buyers are more likely to pay cash, said (realtor) Keith Hopkins in Naples. As a result, he said, owners in Collier are less likely to sell at bargain basement prices now that the market has gone south.”
“‘The people who have cash to put down have more wiggle room. They usually have more income — they can get some breathing room,’ Hopkins said.”
“Hopkins said one house in Stoneybrook in Estero sold for $250,000 early in 2005 and was appraised at $380,000 at the end of that year. The same house now would sell for about $310,000.”
The Herald Tribune. “The allure of a handy profit with no money down was too much for some of those now caught between Bradenton’s Coast Bank and St. Petersburg’s Construction Compliance Inc.”
“Mike Wood, a Zephyrhills resident, is one of those investors who might just walk from his unfinished homes. Wood contracted with CCI to build two houses in North Port neighborhoods in 2005. He was told about the investment possibility from a friend who worked for American Mortgage Link in Tampa. Wood then told 20 friends and relatives, who also leapt at the chance of making $30,000 to $40,000 with no money down.”
“‘All I had to do to complete the deals was to show that I had 10 percent of the value of the home liquid,’ said Wood. ‘I was never asked for the money. I never paid one red penny out of my pocket.’”
“American Mortgage Link processed all the paperwork and handled the closing, and the loan was financed by Coast. Wood said the deal was a no-brainer because he would be getting a house for 10 percent less than its appraised value and would have no out-of-pocket expenses.”
“‘With the market going up, there was a built-in profit of 10 percent and the potential to make 15 to 25 percent more based on appreciation rates at that time. I could make as much $40,000 on the flip, and in the worst case I would have to hold the property for a while,’ he said.”
“Equally important, nothing would show up on Wood’s credit until the house was completed and transferred to his name. ‘At this point, people have no idea that I have $400,000 in liabilities from a non-income-producing property in North Port,’ Wood said.”
“The company sent out e-mail progress reports. But when Wood visited the properties, he found the company’s statements were inaccurate. ‘They have never touched a blade of grass in the second home,’ Wood said. ‘Two years out and $80,000 drawn against my credit, and all I’ve got is a lot that is worth $20,000 to $25,000.’”
“He said he might be better off walking away from his obligation. ‘I’m not going to convert $80,000 in credit into a lot worth $20,000,’ Wood said. ‘If I walk away, it won’t help my credit. If I was foreclosed on, it would be a bump, but it wouldn’t slow me down. I know a lot of other people in the same position. They are also willing to walk.’”
“Closing costs and interest were paid from the loan itself, Wood said. The initial draw of around $50,000 from Coast was used to pay all the commissions to mortgage brokers, title agents and others associated with the closing.”
“Additional money from subsequent draws went to pay subcontractors. But in the case of Wood’s second home in North Port, CCI withdrew $80,000 from Coast and has not spent a penny on construction. ‘The lot hasn’t even been cleared yet,’ he said.”
“Michael Pacheco got involved in a large, Long Island, N.Y., real estate investment club in 2005. Members of his investment group began talking about the incredible deals being offered by Seashore Real Estate, a Bluffton, S.C.-based real estate investment firm.”
“For an initial investment of $10,000, Pacheco could get a team of real estate, mortgage and home building experts to build a house and sell it at a $40,000 profit before construction was finished. Pacheco put in orders for two houses in early 2006.”
“‘I never saw the properties,’ Pacheco said. Pacheco said he never expected the real estate market to tank or to be sitting on overpriced property.”
“Pacheco said he is not waiting to see whether things pick up again. ‘I’ve hired counsel to see what the repercussion of walking away from that one,’ Pacheco said of the Advantage property. ‘A lot of other people in the investment club are also seeking counsel to get out of their houses.’”
The Naples News. “When Collier County commissioners decided a few days ago to kill a proposal to charge linkage fees on new development, Commissioners Donna Fiala and Fred Coyle both made statements that suggest they don’t believe there is an affordable housing crisis in Collier County.”
“Coyle said there are homes on the market that aren’t being sold that qualify as affordable housing.”
“Fiala said her problem with the affordable housing situation is that she doesn’t know how big a problem it really is. Everywhere she goes she sees homes for sale, and ‘for rent’ signs, Fiala said. ‘There’s a glut of homes on the market,’ Fiala said. ‘Golden Gate, Immokalee and East Naples have hundreds, maybe thousands of people living in affordable housing that we don’t count.’”
“The views of Fiala and Coyle appear to have ticked off fellow Commissioner Jim Coletta, who does believe there is an affordable housing crisis in Collier. ‘There wasn’t any staff to correct what was being said,’ Coletta said.”
“While home prices have dropped, it’s unrealistic to think prices will continue to drop long-term, Coletta said. ‘I know it was a crisis up to six months ago,’ Coletta said. ‘I can’t say what it is now. But it’s still a problem that a lot of smart people are working on.’”
‘For example, Hopkins said, one house in Stoneybrook in Estero sold for $250,000 early in 2005 and was appraised at $380,000 at the end of that year. The same house now would sell for about $310,000.’
And what would the house have sold for five years ago? Notice this realtor did not (nor did any appraiser) say ‘I will pay $310,000 now.’
Hehehe… that’s a great point. If I was buying, I’d ask the realtwh*re to be the ‘middle-buyer’ instead of just middleman and offer an instant 1% profit as an end-buyer myself. So if Hopkins is willing to buy the house for $310k now, I’d be happy to buy it from Hopkins for $313.1k - instant 3.1k profit for the shill if s/he is willing to put their money where their mouth is.
““‘It’s been my experience watching people buy and sell that you can always tell the ones who are looking to flip a house — they’re bitching about what prices were six months ago. I’m not going to complain about something I never had in my hand,’ (said) Frank Alexander.””
Amen. If sellers would stopped hanging on to illusions of unrealized gains and just lower the prices, their homes would sell.
Home sellers = cargo cult
http://en.wikipedia.org/wiki/Cargo_cult
Too funny. FBs and GFs are also Cargo cultist, or is that most Americans today?
From the Wiki:
Cargo cults have been recorded since the 19th century. The cult participants generally do not fully understand the significance of manufacturing or commerce. They have limited purchasing ability. Their understanding of western society, religion, and economics may be rudimentary. These cults are a response to the resulting confusion and insecurity. They rationalize their situation by reference to religious and magical symbols they associate with Christianity and modern western society.
REIC - real estate industrial complex
RECC - real estate cargo cult (all the FBs, GFs…)
She and her husband would like to move out of Florida but know it won’t be easy to sell their northwest Cape Coral house, which they bought in 2003 for $129,000. In late 2005, it was worth about $300,000 based on sales of comparable houses nearby…
Exactly chillin. What’s the problem here? They have 170k of reductions to play with. List it at 300K and knock 10k off each week until you sell.
Ugh.. You could sell this house in about 25 minutes if you were not being so dam** greedy!
130K in 2003? Lets say 10% appreciation per year (I am being kind, and don’t want to compound it correctly, so sue me).
130+13K (04)
143+13K (05)
156 (06)
Let’s call it an even 160. Put it on the market for that price, and it will be gone in 20 minutes. Stop being so damn greedy. Even at 190K it will sell in a week.
And, if it was really worth 300K in 05, if you were living it or not, your an IDIOT for not selling it immediately. You really think that you house is going to double in value in 2 years and stay there? You could have walked with 150K in the bank for owning a home for 2 years. Your greedy, and your an idiot. The bus for GF/FB is over there, don’t look for sympathy in your situation.
It is only greed making them hold onto that home. Selling for $260 would net a nice profit. I think the strategy of listing and dropping the price by $10k at predetermined intervals is their best bet.
But they won’t do this.
Got popcorn?
Neil
We know the purchase price, but not the amount of HELO financing that they took out of the home. If the couple got in several years ago at a low price and market prices seem logically higher, my guess is they used the house as an ATM. The depth of this bubble is breathtaking
I imagine it is a serious problem because I see it everywhere around me in the Netherlands. Like those people a few streets from here who purchased their homes in the early nineties for 200-250K guilders (100K euro) and have been trying for years to get rid of them for 1-1.5 million euro. Until a few years ago they would boast at every party about how much their property had appreciated. Now they are complaining that the market is not so good and that the government has to do something (probably something like lowering rates significantly below current near-4-century-lows or inventing another tax incentive for the rich).
The good news is that as long as they don’t lower their price and nothing sells, valuations in the area (based on the few properties that sold in previous years) remain sky high, so they can at least enjoy their virtual wealth a little longer.
Rates at four century lows? That would be right around the time of the tulip mania, no?
They can’t sell it for less than 300K, because they probably HELOC’d all that so called equity out of it.
I would say that would be MY first order of business, is to get a refund from all of these people for scamming Mike Wood, and then convert the Remaining $30K credit to the property.
Imagine a Real Estate Agent having to refund his commission on a fraudulant closing…………….lets hope.
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“Closing costs and interest were paid from the loan itself, Wood said. The initial draw of around $50,000 from Coast was used to pay all the commissions to mortgage brokers, title agents and others associated with the closing.”
Right the first $50k is all fees! And notice that the mortgage firm that initially approached him got a piece.
These people tought they were so slicker than snot. Look who got screwed and is hiring a lawyer as if they were the “victims.”
But, but, but, it was a no-brainer? Oops, a brain was actually needed on this one….Sorry!
This is the kind of article that I have been waiting for because there had to be investment groups set up like this with builders and their “special lenders’ .Notice how the scum mortgage people and realtors got paid first (out of the loan proceeds from the credit line ).
Not only is it a conflict of interest for the lenders to be involved with such a no down cash back of fees scheme ,the mortgage/investment realtors scum people involved were making sure the credit line didn’t show up on the credit report ,which is fraud .
Another problem with deals like this is on paper it looks like individual investors were investing but it was really parties that wanted limited liability that ended up with all the liability .
The point is , how many deals went on Nationwide ,that on paper it looked like a individual investment of a purchase or construction of a property ,when it was really a investment group scheme with a builder and mortgage company .
I think I said it a long time ago that these sort of set ups must of been going on to avoid normal requirements .
$50,000 in fees! OMG! How do you look at a closing statement, see $50K in fees and conclude you are not getting hosed? Anyone that stupid is getting what they deserve.
The thing is , we don’t know what actual papers these investors were shown . If a crooked mortgage company/realtors/builder were in on it , how do we know buyers were even shown true documents ,until way after the fact, maybe. Who knows ,the investors might of known everything and were just gambling . That the interesting thing about these cases is trying to discern the “victims” from the crooks .
Doesn’t this just say everything about the “investment” mentality of Homeowners over the past few years:
She and her husband would like to move out of Florida but know it won’t be easy to sell their northwest Cape Coral house, which they bought in 2003 for $129,000.”
“In late 2005, it was worth about $300,000 based on sales of comparable houses nearby, Tarr said, but now ‘it’s a buyer’s market’ and she’s not sure what it will bring.
She’s afraid she won’t be able to sell her house…..
Let’ see…….try about $150k - 160k. You can probably sell at a substantial profit.
B..b..but…………I was supposed to get 300k. I can’t just give it away.
You know the drill, probably heloced and the money spent.
Yep, forgot about that. It’s the case with everyone around here whose house has been sitting for weeks/months.
TX,
I posted about this idiot above, but didn’t even think about this possiblity. I wonder if there are 2 new GS430’s sitting in front of this home. That would have gotten rid of the eqiuty at nice pace.
That’s the only answer. These people could sell this home in 30 minutes if they would just accept 10% appreciation YOY. How in the hell do you feel entitiled to 100% appreciation after 3 years? Come on… If you can get it, great. But bitching because you can’t? That’s investing you idiot, be it what it may, crybabies need not apply.
I know some realtors in my area who have an easy way to calculate the asking price for a home: they simply start with 2x the last sales price from a similar home (usually from 1-3 years ago). 100% appreciation in 2 years, a home seller in the Netherlands should not accept anything less.
Unfortunately, there are still enough idiots here who are willing to buy at such elevated prices (or maybe I should say that there are still enough idiots to lend them the money).
I have a neighbor whose house is in that situation. They bought it in ‘95 for $130k, it’s listed at $350k, in pre-foreclosure and nobdy will even look at it, but they can’t lower the price because of the heloc that paid for her Benz coupe, and ’stangs for each of the kids, and a bunch of other junk. They are average people with average jobs living way beyond their means, and payback is coming.
Most likely spent on the vacation rental propery that’s not moving either.
“In late 2005, it was worth about $300,000 based on sales of comparable houses nearby, Tarr said, but now ‘it’s a buyer’s market’ and she’s not sure what it will bring.”
This is why the REIC would better serve its interests by doing all it can to make prices from bank REO sales and foreclosure auction results public information. Because this is where the market prices currently lie, and when you hide this information from view, sellers have no clue what their homes are worth or what list price will eventually attract a buyer.
“the REIC would better serve its interests by doing all it can to make prices from bank REO sales and foreclosure auction results public information. Because this is where the market prices currently lie, and when you hide this information from view, sellers have no clue what their homes are worth or what list price will eventually attract a buyer. ”
Great point GS. Somehow it seems like the REIC has succumbed to a myth, “Real Estate always goes up”, that forms their entire perspective on their business. Their business shouldn’t be “investment”. It should be building housing and selling housing appropriately for a given person’s MEANS.
I think you can trace this attitude back thirty years ago when the myth du jour was “always stretch yourself into a bigger property than you need”. While inflation was hot, sure, this worked. But even then, how many stretched themselves and lost jobs, got divorced or otherwise found themselves screwed by this “advice”?
Had the REIC focused on housing vs “investing” would there ever been a “bubble”? Had they understood housing financing and affordibility would they have ever counseled no doc, 100% leveraged loans? I doubt it. They deserve this nightmare, they created it.
Of course they deserve this nightmare ,but the problem is they created a nightmare for all of us . Look at all the people who were priced out of the market . Look at all the people who were minding their own business and got their taxes and insurance raised that need to sell now . Look at all the pain and suffering of foreclosures and people that will lose great sums of money over this ,(some of which might be pension money or bank deposits).Look at all the money that is directed toward inflated RE payments rather than the general economy .
You are so right when you say that the REIC should of been focused on affordable home ownership and solid investments,(that’s what the lenders should of been focused on also ).
It should of reached a point where the appreciation was capped because people could no longer qualify for the higher amounts ,and at that point sellers would not of been able to get their inflated list prices because of low demand . Instead the market correction was delayed by about 4 or 5 years ,so you have 4 years of appreciation that was bogus ,thanks to the lenders and cheerleaders .
It should of taken 20 to 25 years for the prices to go up this high, not 3 to 5 years . The RIEC is still trying to keep the party going and they are becoming more and more fraudulent every month with the cash -back /incentive deals . We need public service announcements to stop them .
well, you can be assured it’s even worse in Europe …
if interest rates and lending standards go back to normal values over here, even a 75% price drop would be insufficient to keep housing ‘affordable’. On the other side, even a 25% drop in home prices would be a disaster for the taxpayer (= people who currently don’t own a home, because homeowners hardly pay any income tax here) because many homeowners have already spent all their capital, so there is no money to be found there.
But how do you solve the problem nhz ?
For example in July of 1929 ,(4 months before the stock market crash in America ), how could the crash of been prevented ? Ok, let see ….the margin caller would decide to not call their loans and never require payment until the stock market prices caught up with true value .
“We need Public Service Announcements to stop them”.
OMG, Housing Wizard, what an idea! ..Could be a good one too….
“He said he might be better off walking away from his obligation. ‘I’m not going to convert $80,000 in credit into a lot worth $20,000,’ Wood said. ‘If I walk away, it won’t help my credit. If I was foreclosed on, it would be a bump, but it wouldn’t slow me down. I know a lot of other people in the same position. They are also willing to walk.’”
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I saw my neighbors walk away in the early 1990’s in Cali and go on to buy much nicer homes while the bank had to deal with the abandoned Townhomes. Not good for property values.
At some point some creditor (who may be buying the debt for pennies on the dollar) will come calling. Even so, it is usually easier to negotiate with the guy buying the debt from the bank than the bank. It is normally possible to get the buyer of the debt to take 20-30% and the whole thing goes away. ON the other hand, you need the 20-30%
‘If I walk away, it won’t help my credit. If I was foreclosed on, it would be a bump, but it wouldn’t slow me down. I know a lot of other people in the same position. They are also willing to walk.’”
Is being foreclosed on not that big of a deal? If not, then why wouldn’t you jump on the gravy train?
Or more precisely, why wouldn’t you have jumped on the gravy train of the Florida real estate investment craze a few years back, knowing the foreclosure law would make it easy enough to jump off about the time the train was derailing.
‘If I walk away, it won’t help my credit. If I was foreclosed on, it would be a bump, but it wouldn’t slow me down. I know a lot of other people in the same position. They are also willing to walk.’”
Sorry boner breath, you forgot about the debt relief tax bill you’ll get from the IRS.
“‘I think Florida’s going to find the goose that lays the golden egg is gone,’ he said.”
It’s gone, all right — murdered by the REIC.
Economics 000: Don’t kill the goose that lays golden eggs.
Florida is about to discover, again, that its priced itself out of its niche in the global economy. Its been done with home prices and taxes.
I’m in disbelief. You see, I lived in Florida a while ago back when it was a low cost state to live in. Now… its going to be losing population and business for a long time…
Got popcorn?
Neil
It still is a low cost state to live in, as long as you didn’t drink the kool-aid.
It sounds that way. If you can rent a $600,000 home for $1,500 a month. That is pretty low by my standards. Plus, renters don’t pay hurricane insurance or property tax. It seems like renters, strangely enough, will be the big winners in the Florida boom/bust cycle of the 21st century.
But those owners get to deduct the interest from their income tax. So, they have something to hold on to.
“It seems like renters, strangely enough, will be the big winners in the Florida boom/bust cycle of the 21st century.”
Nothing strange there, IMO — renters are the ones who figured out how to reappropriate J P Morgan’s timeless advice to real estate: “Rent when everyone else is buying, buy when everyone else is getting foreclosed.”
“‘It’s been my experience watching people buy and sell that you can always tell the ones who are looking to flip a house — they’re bitching about what prices were six months ago. I’m not going to complain about something I never had in my hand,’ (said) Frank Alexander.”
Damn, Pet.com was worth a helluva lot 6 years ago.
“Pacheco said he is not waiting to see whether things pick up again. ‘I’ve hired counsel to see what the repercussion of walking away from that one,’ Pacheco said of the Advantage property. ‘A lot of other people in the investment club are also seeking counsel to get out of their houses.’”
Ya gotta love these people, they otta appear on comedy central. They take the bait of easy money on blind faith and then pay big bucks for legal council when hooked. Question is “Did they pick their legal council like they picked their investment choice, word of mouth from friends?”
The investors might have a legal point on a concept of “voidable contract” because the deal was set up in a fraudulent manner . The investment groups greed makes you sick . The question is did the Investment people know they were party to a contract designed to avoid down payment requirement with illegal cashbacks for realtor,builder and mortgage broker fees ,fraud to lender on the credit standing of the borrower etc.?
It amazes me that we see stocks continue to climb for home builders; that the worst is behind us; that this thing bottomed months ago.
I think too many people are lining up to drink the KOOL-AID again! I see a banking crisis, I see job expansion slowing, I see job cuts coming as companies have to deal with higher costs from runaway inflation that Bernanke, Bush, and Greenspan put into place.
Don’t forget Hank Paulson at Treasury that runs the printing presses. Who do you think is buying all those government bonds and funding the PPT?
I have gotten so little useful done this weekend. The CFHI story is so juicy. And I don’t even live in FLA!
I honestly think this is just the first, though. Kinda like thie first snowflake of winter, or the first daffodil of spring. It’s the first thrift failure of the RE bust.
Most people look at a bank like Coast Bank and see that they have $531 million in outstanding loans. They figure that a $50 million hit will hurt but not be the end of the world. If this bank takes a $50 million hit, it is done. All of its working capital just went out the window. How many other banks will then get dragged down by this?
Banking is a dominoes industry. If one goes, it can take a lot of stuff with it. If a KFC closes down, it typically doesn’t take down other KFCs with it. I keep wondering how many small banks bought into the madness and are going to find themselves in serious jeopardy. My unscientific answer is, “a $hitload”.
I think I’m going to get some KFC and watch this unfold. Neil can have his popcorn. I want Extra Tasty Crispy with a side of mashed potatoes and cole slaw.
Someone posted this on the Yahoo message boards in regards to COAST bank. I think it predicts how the banking side of this whole Real Estate Bubble Burst will feel the pain.
“This situation was common in the go-go days when the S&L’s blew up. Like today, lots of “investors” (flippers) thought they could make easy money. Builders would build a house, a bank would finance it, a realtor would sell it and all would cash in. The builder put the deals together and often agreed to pay the interest on the loan until the house was done. The “investor” put in a tiny amount of cash-maybe $5,000-and borrowed the rest from the bank. The bank charged a lots of fees and a fat interest rate. The builder drew down on the investor’s loan as work was done and paid his subs. The house was finished and quickly sold. Everyone went away happy–at least in the house flipper fairy tale. In reality in most deals that go bad, the builder sold the investor a lot for more than it’s worth and built a cheap house on it. The bank, anxious to make money, advanced money to the builder and never verified that the work was actually done or that the subs were paid and added it to the investor’s loan balance. Often, somewhere in the process, a crooked appraiser put a high value on the deal. When the music stopped, too often what happened is that all of the subs who weren’t paid by the builder filed liens on the property and refused to do any more work. The investor got lien notices and the bank finally figured out that someone wasn’t following its procedures (at best) or was on the take from the builder. The builder went BK, leaving the investor with a half done house that had more liens against it than it was worth. The investor went to the bank to find out why the liens have been filed when the bank supposedly advanced funds only after work had been completed. Getting no good answer, he renegged on the loan. The bank threatened to foreclose and the investor, in turn, sued the bank for negligence and fraud. Meanwhile, the real estate market imploded because it had been supported by ever escalating prices caused by greedy flippers playing chicken. Finally, realizing that the game was over, the remaining flippers tried to sell their houses at the same time and real buyers, who actually want to live in a house, took their time because of the massive glut and falling prices. The market took a year or two to adjust back to balance. In bubble markets in TX and AZ, values were cut in half between the peak and the bottom in the mid-to-late 80’s. The banks ended up with a lot of property that declined in value and suffered big writeoffs as its regulators swooped in. Any good bank staff left because their work environment became hell and any options they had were worthless. Depositors with any amounts that weren’t covered by FDIC insurance bailed out. The bank regulators, who should have been on top of the situation, came down hard on the banks and any loan that was questionable was required to be written off. By the end of the deal, the banks charged off a big chunk of their net worth, the best people have left and the regulators had permanent offices in some of the banks. If there was anything of value left to the franchise, another bank bought it for a low-ball price, with the regulators’ blessing. In my opinion, there is fraud involved at several levels in the Coast situation. The real book value is unknown given the potential losses on the loans in question (and probably on a bunch more that haven’t been disclosed yet), but it is certainly much less than what was stated at the end of the third quarter. The bank hasn’t made a profit in the last three years. In that same time, there have been three CEOs and a revolving door of lending people. Most of the bank’s offices are leased and despite the fact that the market area is good, most of the branches are one’s that other banks shuttered. All-in-all, traders can make some money in this stock if they don’t get greedy, but I think the bank will be bought by another bank for a price of less than $8.”
Thanks Tom, great post.
And just as a little postscript:
One of the lingering effects of the S&L crisis was the deregulation of interstate banking. It used to be that there were very big legal limitations on interstate banking. Most consumer banking was done at banks limited to operations in one state only. But then came the S&L crisis. To avoid having to liquidate and pay off depositors, the banking regulators prefer to sell off banks if they can. To enable this they were allowed to sell thrifts to out of state banks. THIS is why banks were willing to buy insolvent thrifts, the right to do business in other states. This become so common in the post S&L crisis world that the limitations on interstate banking were eventually largely eliminated.
“Wood then told 20 friends and relatives, who also leapt at the chance of making $30,000 to $40,000 with no money down.”
Something tells me the Super Bowl party will not be at Mark Wood’s place this year. What a classic Ponzi scheme this has turned out to be.
____________________________________________________________
Like the worst case was really beneath his consideration. Like $ 40,000 was “in the bag” and all he had to do was quickly sign here….and here….and here.
I hope he chokes on his “investment”.
I’ve worked hard, saved my money and actually have some skin to put into this game…..but I ain’t playin’ ’till these “no-money-down” asshats have defaulted on their “investments” and are purged from the market.
Till then I’ll continue to rent and save here in Polk County. We’ll see who blinks first.
Good Plan.
I’m in much the same position and plan to sit on the sidelines till I see 2002 prices plus 4-5% inflation added. In other words, I know what the neighborhoods were going for in 2002 when the bid-wars started and I will add about 20-25% for the “new price”.
Not 100k-150k which is what I have been seeing for the past 3 years.
Incidentally, I know Polk County is melting down about as fast as Sarasota and Collier. Here in Hillsborough I am seeing more and more “INVESTOR SPECIAL” ads and signs. I have been meaning to call a few and ask what would be the Return-on-Investment? What are the annual rental receipts?
What is the vacancy ratio?……etc. etc. I’m sure it’s not an “Investment” at all. They simply want to sell it as such. It’s like advertising “commercial potential”. If it’s got potential, then get it rezoned and we can talk about the higher price. You don’t get commercial valuations for “potential” that may not be realized.
Well there’s been so much overbuilding in some markets that may still lead to buying early in the crash. I really think that you have to look at rent/purchaxe ratios to see whether purchasing your housing makes economic sense.
Bring On The Housing Slump:
http://www.latimes.com/news/opinion/la-op-kotkin28jan28,0,708324.story?coll=la-opinion-center
Interesting take on the SoCal market. This brings the mass of current home sellers “to Jesus” in a palatable way… We can all agree on one thing– prices are goin down. How this all shake out, I’m not sure but it wouldn’t surprise me that it was somewhat orderly. SoCal is so big… the flushing process will be made with a lot more financially “healthy” individuals/families than we may know really exist.
What if the local economy tanks, because of job loses from the housing bust? What then?
My bro has been realestate bottom feeder for 12 years now. He tells me that there has been a seller-buyer stalemate for a year now. He may have to get another job soon. Here is the funny thing. The positive is that prices in LA have not gone down much (Forgetting incentives, cashbacks, etc…) I tell him, gee, do you think that is why there is stalemate? Sellers refuse to lower the price. He tells me…Yep, but most of the people he is selling homes for can’t sell for less because they have zero equity and are trying to break even. Geez, he may be a Realestate SOB bottom feeder, but he’s my Realestate SOB Bottom feeder. All these properties will go to foreclosure eventually because most of these people will not write a check to the bank. He told me himself, that he will strongly advice against giving a bank a check for the difference. He will advice, and he’s fellow SOB Bottom feeders will also, that the seller go into foreclosure rather then take the hit! I guess foreclosure will be the next black…..
And since when are realtors suppose to be lawyers/CPA’s who can counsel people on serious matters like foreclosure or bankruptcy . Not only have realtors played the role of market soothsayers ,they are now going to tell people how to go down the tubes . Makes you sick .
This is why Japan could have 14 years of malaise. The Japanese have too much pride in their reputations, to default.
We will have a gut wrenching recession as all this bad debt percolates into IOUs from borrowers, to banks, to bond holders, to consumers, to trades people.
“Haaaa-lo….Yeah….Yeah, I saw that Pets.com number….So they’re losing money, so what?….Look, if you’re going to hold stock you’ve gotta know that stocks are for the long term….I’m tellin’ ya, the fundamentals mean nothing. This company’s goin’ places!….I know you need the money quick, but the next wave of speculation is on its way. You can count on it!….Yeah….Yeah, I understand….Yeah, wives are like that. Hey, look, I gotta go. Don’t worry, pal. It’s all gonna work out….Yeah….Bye. [click]
this particular story has the familiar scent of private placement deals that started to come out in early 2000-01, that bilked millions from hardworking aging boomers, grasping at the last gasps of the tech bubble…
PIPE’s - Private Investor Public Equity
More like a pipe up the stock bagholder’s rear end.
““While home prices have dropped, it’s unrealistic to think prices will continue to drop long-term, Coletta said. ‘I know it was a crisis up to six months ago,’ Coletta said. ‘I can’t say what it is now.
But it’s still a problem that a lot of smart people are working on.’”
Wow! Sunday sets the tone for the coming week for me….now I feel great knowing that “A Lot of smart people” are working on the real estate collapse.
Yeah, problem for those folks is most of them are over here.
You’ve noticed that too, Quirk? It sure seems to me that the smart people are on this side of the fence. At least the smart & honest people are on this side of the fence. The other side is hoping the smart crooks can bail their a$$es out. Good luck with that.
We’ll see where the banks will be if there’s a rapid foreclosure run. How many foreclosures are we going to have? That’s still unknown,’ Bonkowski said.’
It seems as if banks are currently willing to hand out NOD’s and foreclosures like free samples at Costco. And let’s face it, when the banks put these houses back on the market they aren’t exactly screaming ‘fire sale’, yet. But I’m wondering what the impact will be on the banks when it’s a rampant epidemic. We all know that banks would rather not have foreclosed houses on their books (especially in huge numbers) so in the future will they work harder with homeowners allowing more short sales or more leniency on becoming current on the loan than they do now? And when they do acquire foreclosed properties will they adopt a more ‘Everything must go, Sunday Sunday Sunday’ attitude on the price?
In Texas many lenders are listing the REO’s on the MLS at higher than market price. I think they are trying to prop the market up. If they undercut the market, it will create a domino effect that ends up causing more foreclosures.
I have found two so far that are 40% under the tax appraisals. Nice houses too.
I agree there are a few listed at very good prices, but most of them make me laugh. I saw one listed 15-20% above the comps. The listing agent told me they might shave 10% off the price. LOL
This tells you how out-of-touch with reality banks are.
“What!? you mean the appraisers were fraudulent?”
The banks themselves are in denial.
I agree, around here (douglas county oregon) the foreclosures (which are up over 100%) are also listed on the MLS at absolutely ridiculous wishing prices relative to the big monkey builder in town, but the courthouse steps is becoming a lot more lively..which always has the same slew of those long in the market and first trust deeds in hand…
In general, they’d rather carry them on the books as an asset at their appraised value, than sell them at a market price and have a 20-30 loss on their books. That’s where bank regulators come in. They’re supposed to be very skeptical of REO since nobody really knows what the value is until the property sells. After all, if it was REALLY worth what the appraiser said, and the loan was at less than 95%, they probably wouldn’t have needed to foreclose. I’m betting a year from now when things are getting REALLY ugly and there’s an odor of “systemic risk” in the air, there will be a much more liberal attitude by the regulators on the issue.
In Texas many lenders are listing the REO’s on the MLS at higher than market price. I think they are trying to prop the market up.
Um, you prop the market up by buying, not selling. Well reality will come knocking on the door pretty soon.
Rainman18! Missed you! Where’s BTC??? We REALLY need a fix!!!
If you read the Herald articles closely, they are a little humorous, in a mildly mocking kind of way. The writer (Michael Braga) may have spent some time on the blogs… and I bet he knows who Casey Serin is.
“Sweet Deals Gone Sour” - Heh.
I’ve been reading these posts for the last couple of months and thoroughly enjoy some of the intelligent offerings. Still as a contrarian at heart (who was gobbling up gold at $350 an oz), I do believe its going to be much worse than any of you might believe. Sorry to say so, but with another 8 years of the bush/clinton crime cartel looming in the form of Hitlery winning (a done deal I’m told) the middle class has no chance at all of surviving the coming fall. My advice is similar to what I’m reading here and thats to get your financial house in order.
Daniel John,
Sadly I agree. There was a discussion on NBC News of all places, that Hillary’s machine is telling the Big Money, that donating anything to Obama is off-limits. Her team is strangling any other candidates before the first primary. It’s a pre-emptive strike, even more than the Rovian smears that knocked McCain out of the primary in S. C. back in the day. With the Clintons and the Bushes thick as thieves, the prospects are disheartening. Culling presidents from a pair of entrenched political dynasties is not democracy, imo. I just wonder if the explosions from the housing crash, the foreclosures and bank failures and the resultant unemployment pileup/recession will be enough to blow the usual suspects off the podium while something unexpected rises from the landscape.
I do believe its going to be much worse than any of you might believe.
Not so fast. There’s quite a number of us in the so-called “depression camp” (and we’re talking “Greater Depression”).
The 1930s saw the rise of some out-there whacky political ideologies. I fully expect Hitlary to win given the historical precedence of the 1930s. I also expect her to run things even further into the shitter a la FDR style.
Hi Rainman ,you have been away for a while .
I think if the banks/lenders have to many foreclosures ,they might start making deals with homeowners to re-write the loans to avoid foreclosures . This will only work with owner occupied situations because the investor isn’t even living in the house.
The Banks/lenders might make deals that restructure the payments for the foreclosure -bound borrower and add the interest on down the road ,or something like that . The borrower would have to agree to what would be a “new contract ” or new loan with the lender . It would be a sticky situation however because the question would be again ,”did the lender take advantage of the FB on the rewrite on the loan .”
Unfortunately, once it becomes known that bank X is willing to write off debt in order to keep borrowers, then word gets out — and lots of borrowers want to do the same thing. That’s why notices of default usually result in a sale, refinance, or a foreclosure.
The key clause in your premise is “too many” bad loans. If a lender has “too many” and does this, then there is an even greater underlying problem.
So right Moso Maz . I thought of your point also that if the lenders re-write for one borrower ,than the other borrowers claim discrimination. They/lenders/final bagholders , will come up will new rules for qualifying for re-writes .
Also another point is that so many loans were obtained by fraud on the loan application that this throws a twist in the remedy . This is why realtors should not be advising people on how to handle the mess they got into on a loan .
Does anyone else agree with me on this one ?
How can you re-write a loan that has been already packaged and sold off ? These banks know their loans are toxic and hold a few as they can on their own books.
It can be done, but you have to “make whole” the secondary market investor.
This is one of my confusions. Just exactly who does have the authority to do this, or to approve a short sale? The Issueing bank? The servicing bank? The purchaser of the sliced and diced MBS tranche?
Hi Wiz, nice to see ya! I’ve been here reading from the sidelines just about every day, just posting less. Partly because since around Oct/Nov it seems we’ve been in a sort of holding pattern as far as any real movement on the bubble goes, kind of a same story, different day type of deal. I realize that this is likely to be a slow motion disaster with pockets of rapid ugliness but I was ready for the next thing and it seems that with the foreclosure numbers earlier this week it has arrived, which seems to have reinvigorated my desire to enter the fray again.
As far a the banks are concerned I agree that there will likely be a shift in the rubber stamp foreclosure machine and different stratagies will be mulled over to plug the dike in more creative ways.
Anybody know of any history of bank’s “front-running”, i.e., making drastic moves to beat other banks also holding lots of REOs?
Housing Wizard:
This is the kind of article that I have been waiting for
Rainman:
I was ready for the next thing and it seems that with the foreclosure numbers earlier this week it has arrived
———–
I am in agreement. This was the week that the flesh of the bubble was pulled back, and the nasty smelling rot underneath was exposed.
Things will be picking up steam from here, and we will be reading about even more “interesting” discoveries.
“For an initial investment of $10,000, Pacheco could get a team of real estate, mortgage and home building experts to build a house and sell it at a $40,000 profit before construction was finished. Pacheco put in orders for two houses in early 2006.”
———————————————————————
Neither Pacheco or Wood bothered to ask the simple question: why do they need me? Seminar attendees need to ask the same question. Easy answer: Dude, you’re the mark!
I agree Brad. First thought is always, what makes me so special that you are telling me about this?
Like Trump and Kiyosaki want me to be rich. The concept is ludicrous.
I have just had a feeling for a long time that the seminar groups were behind alot of these schemes for the no down payment/avoid bank requirements new construction builder deals .
It just didn’t make sense that so many investors were able to buy without down payments at owner occupied rates ,or that so many purchases were made by builder/investment company inflating the appraisal and sticking it to the investors by a double escrow .
Further , in a conflict of interest way ,realtors were double escrowing property they bought from sellers when they were the listing agents ,or they would have a strawman buy the property and double escrow it at a profit . Talk about screwing your client . This practice raised prices beyond reason ,so it wasn’t always the sellers raising the prices in a short time .
And people wonder why I’m so mad at the REIC . Again ,I’m not attacking good realtors or lenders .
Miami’s “Liberty City” — I just saw an intro to this “city” on Today (NBC). Here’s a good article on it:
So will these homeless people start moving unto (”reclaim?”) all those empty “ghost” condos and homes in Miami (and surrounding area)?
Your new neighbors in that $600,000 condo you just bought are Section 8 tenants. LMAO
If you can rent a $600,000 home for $1,500 a month.
I have been looking for a $1,500/month house to rent for about two years. I find nothing on Craig’s List that even approaches that range except the ghetto that’s by the railroad tracks.
I’ve looked for other housing rental sites, but couldn’t find any that had houses for rent. I’ve driven around neighborhoods writing down the phone numbers of house for rent signs. When I call them up, they want $2500-$4500/month for a crappy little house. That’s too high to even try negotiating with.
Am I doing something wrong? I keep hearing about $1.5k/month houses, but can’t find any in Palm Beach country that’s anywhere near I95. I’m not looking for east of I95, beach front, or even water front property. I’m looking for a small 2+ bedroom house, even 1200 sq. ft. is good enough. I’m not looking for a McMasion, just someplace quiet to hang my hat.
Does anyone have advice on how I can go about finding a reasonably priced rental house in/around Boca Raton that doesn’t require driving 30 minutes to get to I95 or living on the railroad tracks? Are there any good websites — Craig’s List sucks — for finding house rentals?
What you see are asking prices. What people need to get to cover the mortgage. Right now they are getting nothing. If you make an offer, even at $1,500, they might take it to get SOMETHING.
Try it, it’sa numbers game. Throw your offer out there and somebody will take it.
Right. These people are willing to negotiate.
I have been on the fence concerning buying for some time now. We’re renting, would like to buy, but can’t justify it.
We just went out last weekend to look at rentals, seeing places that ask rents for between $1800 and $2500, all within blocks of the intercoastal in nice neighborhoods (500k+ homes). At the end of the viewing, I told each of them that I would pay no more than $1300 per month, and gave them my card.
Three callbacks so far.
Have you tried looking in the newspaper. I see plenty for rent under $1200/mo.
I usually just lurk, but this article “Ready to Walk” pissed me off.
If these people had made money on their “investments,” they would expect to reap the windfall and would scream if the bank laid any claim to any of it. But because they made stupid decisions in their “investments,” now they are ready to walk away without paying their obligations - the bank should be the one to lose the money.
OK, vent over.
Good simple direct post, Kevin.
Our law office is gearing up for increased litigation on behalf of the banks. Can’t say anything more.
One more thing: a foreclosure results in an immediate 200-point drop in a FICO score. An IRS tax lien makes it even worse (I do not know what the point-drop would be) but those do show up on one’s credit record. These FBs will not be able to get anything but sky-high credit rates. lol One of them wrote in to the LA Times last week (Kathy Kristoff or Liz Weston’s column) asking how to repair credit after a recent foreclosure.
~Misstrial
Well Kevin I’m pissed off about the “Ready to Walk ” statements also .
Lenders from prior to 2000 knew that the low down buyer was a higher risk because they didn’t have very much skin in the game .
A loan contract is a loan contract and a promise to pay and I guess these borrowers didn’t take it very serious .I’m sure a high % of these borrowers lied on the loan applications . At the same time you had the REIC telling these people ,who could not afford the loan long term, that they could not afford not to buy ,real estate always goes up . I will never stop venting about it because it’s the biggest bunch of BS I have ever seen .