Work Out A Short Sale Or Hand Over The Keys
A report from the Arizona Republic. “A growing number of homeowners behind on their mortgage and facing foreclosure are finding a way to sell despite the glut of Valley homes for sale. They are turning to ’short sales.’ ‘Short sales are the buzz in the market now,’ said Tom Ruff of a research data firm based in Glendale. ‘With foreclosures climbing and homes prices falling, short sales are bound to climb.’”
“A brother and sister from California recently approached Phoenix real estate agent Brett Barry about their house here in the Valley. The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005. Now, they can no longer afford to keep it. And with a record number of Valley homes for sale, their chances of selling the home for what they paid are slim.”
“‘I ran the numbers, and the house won’t sell for more than $495,000 now,’ said Barry. ‘They didn’t put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500.’”
“He told them they could do one of two things: Work out a short sale or call the lender and hand over their keys.”
“At a recent foreclosure-prevention town hall meeting in Phoenix, the director of National Initiatives for mortgage giant Freddie Mac encouraged housing advocacy groups and lenders to steer people toward short sales if their only other option is foreclosure.”
“‘We have an investment to protect as well as a moral responsibility to help people avoid foreclosure,’ Christina Diaz-Malones said.”
“A few years ago, most Valley homes to go to the foreclosure auction block enticed multiple bids from investors. But now, lenders are taking back 80 percent of the homes they are foreclosing on. Investors have stopped bidding on many houses because they can’t make money on a resale.”
“‘Almost everyone we are seeing now for default counseling owe more than their house is worth,’ said Joann Hauger of Community Housing Resources of Arizona.”
The Rocky Mountain News from Colorado. “The Denver-area resale housing market in June had its strongest performance this year, as expensive homes drove up the average sales price of all those that sold and closed to a record $304,055. The median, or middle, price of a single-family home was $263,008, also a record.”
“The records were set because of the mix of homes being sold, not because most houses are appreciating, said independent broker Gary Bauer said.”
“He said many prospective sellers are unwilling to put their homes on the market because they would have to compete against a record number of foreclosures, which is putting a lid on the supply.”
“Karen Easton, Metro Brokers’ board president, agreed. ‘I see the higher end selling and the lower end sitting longer,’ she said. ‘There’s a glut of foreclosures (at the lower end) and from what I am seeing, they are not priced well.’”
“She said one client sold a home for $340,000, which would have fetched $350,000 to $359,000 18 months ago. But the seller turned around and bought a home out of foreclosure for $530,000 ‘that is probably worth $100,000 more than that. … So if you lose $10,000 on your sale, who cares, if you’re making $70,000 or $80,000 or more when you buy? People are getting great deals at the upper end. It’s a great time to be a buyer.’”
“Sales of new homes in the Denver area were down 36 percent in the first five months of the year, compared with the same period in 2006, according to DataQuick. ‘I think we shouldn’t be building very many houses in the state right now, given some of the foreclosure issues and the current supply of homes for sale on the market,’ said University of Colorado economist Richard Wobbekind.”
“The FBI took Colorado off its nationwide list of top mortgage fraud states. Instead, the FBI lists Colorado as one of nine states that are ’significantly affected by mortgage fraud,’ according to the bureau’s 2006 Mortgage Fraud Report.”
“Experts said they were encouraged that Colorado moved off the list, but they have not seen any drop in foreclosure filings or in apparent fraud. ‘I guess that is good news, but I’m not sure it has all gone away,’ said Carol Snyder, public trustee for Adams County.”
“‘Unfortunately, we’re still seeing a lot of problems,’ she said. Foreclosures are up 48 percent in Adams County in the first six months of the year, compared with the same period in 2006, she said.”
“Earlier this year, Colorado legislators adopted laws that they hope will stem the tide of record foreclosures. Colorado is expected to have at least 37,000 foreclosures filed this year.”
“‘It is way too early for the laws to have any impact’ on foreclosures, said mortgage lender and consultant Jim Spray.”
“Spray said he doesn’t think the flurry of new laws will slow the ‘tide of fraud,’ though he said licensing brokers will make them more accountable.”
“‘However, this will not remotely impact the out-of-state rip-off artists,’ Spray said. ‘This is something our legislators do not understand. For the bad actors, it is still full speed ahead, and there is not enough money to prosecute them.’”
From KOAA in Colorado. “Real estate appraisers in Pueblo are under the microscope. The Colorado Division of Real Estate says it’s gotten a number of complaints claiming that dishonest appraisers have overvalued the price of homes, which they say is contributing to a high number of foreclosures.”
“However, one appraiser in Pueblo say predatory lenders deserve some of the blame. ‘They want us and pressure us to get the value as high as possible and they’ll go somewhere else for appraising if they don’t get that value,’ said Randy Hartman, an appraiser in Pueblo.”
The Dallas Morning News from Texas. “Mario Ramirez’s mother had never met his two sons. But in 2005, the 84-year-old woman lay dying in Colombia, and Mr. Ramirez knew he had to take his 7- and 11-year-old sons to see her. He just didn’t know how to pay for the trip.”
“A local lender from Ameriquest Mortgage Co. suggested an answer. The value of Mr. Ramirez’s two-bedroom home near Garland Road in East Dallas had risen perhaps $30,000 since he bought it for $48,000 in the late 1990s. He could refinance his mortgage and pocket thousands.”
“Two years later, payments on the adjustable-rate subprime mortgage Mr. Ramirez and his wife unwittingly signed up for have ballooned to more than $1,250, the result of past-due taxes and a hefty 10.25 percent interest rate, vs. the $540 a month he paid under his old loan. The Ramirez family is in danger of losing its home.”
“Just a few years ago, economists might have pointed to people like the Ramirezes with pride. A boom in the national homeownership rate, from just under 65 percent in 1995 to nearly 69 percent by 2006. Interest rates were the lowest in decades. And rapid appreciation in many home markets seemed to practically guarantee that these new buyers would build equity fast.”
“Now, Texas ranks third in the nation in the number of foreclosures, according to RealtyTrac. Homes posted for foreclosure in the Dallas-Fort Worth area rose nearly threefold between 2000 and 2006, according to Addison-based Foreclosure Listing Service Inc.”
The Houston Chronicle from Texas. “Rising foreclosures and the near-collapse of the market for home loans to those with bad credit triggered a flood of proposals from Texas lawmakers during the past legislative session.”
“One bill that passed, HB 716, is designed to thwart mortgage fraud by creating reporting requirements and a task force to fight fraud, and making sure buyers get notices warning them against committing fraud.”
“Lawmakers focused on brokers instead of the banks because the state can’t regulate all banks since some are nationally chartered, state regulators said.”
“Reporter Purva Patel recently spoke with Olga Kucerak, head of the Texas Association of Mortgage Brokers, about recent legislation and the state of the industry.”
“Q: Legislation proposed this past session would have created a fiduciary duty between the broker and buyer. Do you think there should be such a duty?”
“A: The fiduciary duty we have, we have an obligation and contract by our wholesalers on what we have to do. We also have a mortgage broker’s agreement that tells the client exactly what we do and that we are a retail shop. You can shop around. The answer is no, but I’m trying to give you an explanation because we can’t really serve two masters.”
“Q: Are there any kinds of loans that you think shouldn’t be made? A:…There may be some people who shouldn’t have bought homes, who weren’t educated. I think the underwriters are reviewing everything and the ones that are considered high risk, if you will, they’ve tightened it up. Certain credit scores, they won’t do those now.”
“The pace of apartment rental in Dallas-Fort Worth has ground nearly to a halt this year. And the dramatic slowdown in apartment demand in North Texas has left industry analysts scratching their heads.”
“‘It’s pretty ugly,” said apartment consultant Greg Willett. ‘Results for the second quarter fell way below expectations,’ he said, with virtually no increase in apartment rentals.”
“For the first half of 2007, net apartment leasing has added up to only about 300 units. Compare that with the more than 7,000 net apartments leased in the first six months of 2006.”
“Mr. Willett blames a combination of homebuilder giveaways and for-rent homes for stealing the apartment market’s thunder. ‘While there are lots of new jobs in Dallas-Fort Worth, the associated housing demand just isn’t going to the apartment sector,’ he said.”
“Instead, renters are snapping up new-home bargains or renting houses put up for lease by investors. ‘The number of single-family homes available for rent appears to be way up, even though many aren’t getting rental rates that actually cover mortgage costs,’ Mr. Willett said.”
“Unless apartment demand recovers, developers could be headed for a train wreck with almost 13,000 units in the construction pipeline, according to M/PF YieldStar’s latest estimate.”
“‘What’s saving the market’s overall performance from cratering is that Dallas-Fort Worth leads the country in teardowns, mostly to create redevelopment sites,’ Mr. Willett said. ‘Because removals have been so numerous, total inventory actually dropped by about 400 units during 2007’s first half.’”
“More than 3,500 D-FW area apartments were demolished in the last six months. Even with all the demolitions, overall vacancy rates inched up to about 7 percent. And average monthly apartment rents in North Texas at the end of June were $716 – up about 1 percent from a year ago.”
“‘This pattern isn’t seen just in Dallas-Fort Worth,’ Mr. Willett said. ‘Atlanta looks like the most extreme example.’ Tenants moved out of almost 5,000 net rental units in the Atlanta area so far in 2007, he said.”
‘Atlanta looks like the most extreme example.’ Tenants moved out of almost 5,000 net rental units in the Atlanta area so far in 2007, he said.”
And they’ll be moving back in, soon. Or not. Here’s an interesting twist on the rental market:
http://tampa.craigslist.org/hou/365659808.html
So, many people will not be able to move into managed apartment complexes because of credit issues. They will be looking for “private landlords”.
Need to live in an upper middle class neighborhood, as I meet with clients in my home and “image is everything”.
Yes, don’t let the reality of your life interfere with your Martha Stewart self-image. Talk about deluded.
Reminds me of the old Billy Crystal/Fernando’s Hideaway SNL sketch. “You loooook maahhvellous. And remember, it’s not how you feel, it’s how you looook that counts”.
wedding photography is all word of mouth, slow to build up business…. who would leave a 70-100k a year… especially in Ohio, where you could live very well on that much
And where you could take December thru April off! This definitely seems fishy.
I have to agree with imploder… wedding photography is tough to get started in… Once you have an established business, you stay put.
Got popcorn?
Neil
Something fishy with that story. Single mom with kid, but ‘we’ have a dog.
Making 70k-100k a year and in bankruptcy?
WTF is up with that CL post?
You make 100K a year and want to rent an “upscale” home for 900/month? Something is fishy about that whole post, big time!
I also like her dicatating her terms. I have 900 bucks to spend, want to be in an upper class area, have a 400 FICO, want to put no money down, no flood zones (huh?). The sense of entitlement is still there even after the BK (or maybe more so?).
I think most apartment complexes will rent to credit problems, but require a larger deposit. It might depend on the state and how difficult it is to get deadbeats out.
Yes, most apartment complexes will rent to credit problems, IMHO. However, the tradeoff is, you have to have an employer and verifiable income. At apartment complexes, lousy credit with a steady “job” trumps stellar credit but self-employed, although exceptions will be made if they are having a tough time renting units. Mom and Pop landlords seem to care more about credit than the job aspect.
I wouldn’t think most people would have any problem. You just a rent a condo or a SFH from an individual, low credit score, high credit score, good job, under/self-employed, whatever. Avoid management companies and complexes. There’s plenty of supply, so all you generally need is to make a decent first impression and have the ability to write a check for whatever is required. My guess is that she may not be able to do either of those, which would explain her leading with the ad rather than her own person.
Renting from an individual is more risky these days. You don’t know if the landlord is a FB who has stopped making the mortgage payments and is just a few months from foreclosure.
I guarantee there is much more to this CL poster than explained in her post. Apartment complex WILL rent to people with horrible FICO scores. They’re willing to take the risk.
What they won’t take risks with is people who have one or most evictions on their credit. That’s the kiss of death in apartment complexes. I bet you the poster has a few evictions and that’s what preventing her from leasing.
I’ll never rent from an amateur landlord again. The last one simply refused to make any repairs. I eventually moved - and moving sucks.
Although now is not the time to buy, renting as a lifestyle only makes sense if you are a pimply-faced recent college graduate who can load the sum total of his or her possessions in the trunk of a car.
Try renting in a CA college town…. every LL is a PITA. They never fix anything and try every trick in the book to swindle you out of money. The interesting thing is that the vacany rate for rentals in going up a lot here, even in “prime” Davis.
We used to get a steady influx of parents who would buy a condo or house for their student child while they are in school and then flip the property to pay for the tuition. This doesn’t seem to be working anymore and the flippers are now reluctant LLs that have no clue what the market here is like or what they are getting into. A three bedroom house will be occupied my 9 students. It’s like living next to those homes bought by hispanics that turn the home in a seasonal migrant worker hotel.
I’m also seeing quite a few MFRs and homes that were long time rentals on the market now as vacancy rates go up. Now that the flipping opportunity is gone, the dorms are looking better and better to parents since they cover food costs as well.
Or, you’re a NYer, where renting is a way of life. I was priced out of my own building 4 years ago. I have a stabilized lease, and when the tax incentives for this landmarked building expired, all the new tenant leases went to market rates…upwards of 3 times what I pay.
I’ve rented from a bunch of different private landlords. The best was a woman that wanted to get into real estate management (typical - her husband had a ton of money, she was a tired stay at home mom). She gave me a month free because she was in a hurry, did a simple one page lease, never asked for employment information or anything. I gave her all that, references, and the check in a standard package I keep around to make renting apartments easy. She said “people do employment checks and credit checks?”
She was actually a good landlord, but she could have got real burned by a dishonest tennant. She even let me hire a friend (a licensed plumber) to fix all the faucets that dripped, the running toilet - all so she didn’t have to drive 30 minutes into the city to meet a plumber. Heh. I image she is toast by now.
Honestly, the Craigslist post is not that bad. It’s true that the woman is a deadbeat, but you can’t fault her for not wanting to live in a trailer park.
She may end up in a trailer park, of course, but you can’t blame her for looking for alternatives first.
I flagged her deadbeat ass.
LOL, so cold.
Her deadbeat ass should be flogged.
txchick57-
http://tampa.craigslist.org/hou/368038532.html
Evidently she didn’t like that, she reposted.
gee, Atlanta and Charlotte were on the Forbes ? hot list
Nice sample of her work. Maybe she could be a mascot on this blog.
You know — those photos look like stuff off the internet. I can’t imagine a lot of wedding photographers would just throw up a couple slick pictures devoid of personality. Also — if she’s an Ohio wedding photographer, why is one of the shots a tropical looking beach shot. (C’mon - that ain’t Lake Erie)
The whole thing sounds bogus to me.
When the waves are up on Lake Erie and if there’s no trees in the shot it looks just like the ocean. Beaches, waves,and no shoreline in sight.
So if you lose $10,000 on your sale, who cares, if you’re making $70,000 or $80,000 or more when you buy? People are getting great deals at the upper end. It’s a great time to be a buyer.’”
Spoken like a casino pit boss. The house loves it when you double down.
The problem is the doubling down is being done with the casino’s money. When the bet is lost - the gambler walks away - perhaps with a physical beating - but the casino doesn’t make any money. It’s only a good deal for the house if the gambler has the $$ to pay the loss (i.e. see hedge fund collapses).
Should clarify the reference to hedge funds:
The problem is the doubling down is being done with the casino’s money. When the bet is lost - the gambler walks away - perhaps with a physical beating - but the casino doesn’t make any money (i.e. see hedge fund collapses). It’s only a good deal for the house if the gambler has the $$ to pay the loss.
When these people go to the store and buy something they can’t really afford just because they want it and its on sale, does that also count as “making” money? Like those homes were ever worth $80,000 more to begin with?
Exactly. the 10k loss is real, the 80k gain is paper profit which has probably already vaporized.
This is just more of the carni, three card monte claptrap that we’ve heard here for months. The market price IS the value of the home, not what some sucker paid for it a year ago.
The dolts they quote in these articles have all the business acumen and common sense of a 2 year old and it shows.
To recap, they lost 10K on their first purchase but were not satisfied to get out with only cuts and bruises. Now they purchased yet another rapidly declining asset with borrowed money which has lost 80K over the same timeframe. I’m sure that this will work out just swell for them.
Well said
That comment drew my frustration as well. How much longer will we have to keep reading such ridiculous statements? Will people ever understand that until you close escrow on the sale of your home (assuming you are above water), you haven’t made jack $hit! The denial/delusions running through our society has reached epidemic proportions. Let this sucker crash!
Unbelievable retards, of course losing $10K and then renting is so low class.
This is what makes me cry…they have jobs…..people hire these morons, and i sit home begging ….because all employers want today is the morons. Its he11 being smart in America.
Gotta respond again: Nobody owes you anything. Employers generally don’t care if you’re smart. They are making a formulaic decision about whether you will add value over the long run. They are looking for: loyalty, personal stability, team player, puts job first. Those outside the mold do best to forget about employers and do their own thing. You can make a living doing anything, even if it’s being a bicycle messenger. Or, if you’re not too old, get a PhD. and teach.
Haven’t heard from you yet if you’ve taken any of the many suggestions that have been posted for you over the past few months. Have you tried any, and if so, what happened?
Heck, I have a physics degree and a year of engineering grad school, and I drive a bus. I had specific reasons for picking that job–I didn’t just fall into it. Otherwise I could be doing something far easier while I try to find a “good” job.
(White collar jobs are the refuge of the lazy and scoundrels, and I’m not eager to go back, except that I LOVE DATA! Drool!)
Anyway, you don’t even need a GED to qualify for this job, only 8th grade diploma. Some of the drivers are pretty good most of the time but have really poor communications skills and this comes out when something goes wrong.
It’s all what you make of it. Determination went a long way with me. Lots of drivers are former cops or military; I was a bit of a candy ass. I wanted to keep that job too badly to give up. I don’t think I’ve ever been that serious about anything in my life. Pretty powerful stuff.
Part of the reason I strived to leave the conventional workforce is because I got sick and tired of dealing with moronic coworkers and bosses. Life is so much better for me now as I have more control of how many morons I have to deal with on a daily basis. Glad I saved and invested, it was well worth the sacrifice.
Got 10% down?
But if they had no money down on the 1st house and the banks aren’t making 100% loans, how can they finance the 2nd house.
I’m a little unclear on the difference between a short sale and a foreclosure - can someone clarify? Is it:
Foreclosure:
- “Owner” hands over the keys to the bank
- Owner forfeits the contract, but owes nothing subsequently
- Owner’s credit rating takes a big hit
Short sale:
- Owner “sells” the house back to the bank, for less $$ than the mortgage balance
- Owner then owes the difference - presumably paid back as a loan (at what rate typically?)
- Owner’s credit rating doesn’t take a big hit (though maybe a small hit?)
Thanks for asking. I also dont understand short sales.
I’m probably wrong but my understanding is that borrower finds a buyer that pays less than what is owed to the bank. The bank eats the the difference between the amount owed by the borrower and the sale price.
I think this works for the bank when the repossession/auction value is less than what the short sale price.
I believe the bank does “eat” the difference but also reports that difference to Uncle Sam as income for the short-seller, sending them a 1099 form.
So if you get the bank to agree to a short-sale and sell your house for 100k less than you owe, you will have to pay taxes on that extra 100k of “income” at tax time.
After a foreclosure, you may still owe the lender the difference between what you owed and what the house fetches at the subsequent foreclosure sale. Depends on whether your state allows “recourse” or not, which can depend on whether the mortgage is the original one or if you have refinanced. Not cut and dried.
Yes, that is what happened to my brother in Colorado. He offloaded his house in a short sale, and the lender sent him a $50,000 1099.
Obviously, he is not an avid reader of the HBB.
Alex: What we were after now was the old surprise visit. That was a real kick and good for laughs and lashings of the old ultraviolence of bad finance.
Hobo said it right.
If you find a buyer, but the agreed price is less than you owe, then you ask the bank to forgive the rest of the loan. The “forgive the rest” is what makes it a short sale. Banks will go for it if the loss from the short sale is less than the loss from foreclosure (which it usually is) and the bank can afford to book the loss (which they seem willing to do at this point).
“Unless apartment demand recovers, developers could be headed for a train wreck with almost 13,000 units in the construction pipeline, according to M/PF YieldStar’s latest estimate.”
- Why not import all of the Hurricane Katrina victims to Dallas and subsidize them in these vacant apartments?
big gov already did that w over 50,000 trinies
I think the people of Houston enjoy their company way too much to let them go.
I am a Houstonian for 28 years and HELL NO, I am not enjoying the crawfish company…
They already are.
“…But the seller turned around and bought a home out of foreclosure for $530,000 ‘that is probably worth $100,000 more than that.”
Fantastic! Karen, why didn’t you just buy it yourself?
Nope Karen, it was worth $530k at best… it was worth what someone was willing to pay for it. Apparently no one was willing to pay more than $520k. I use past tense deliberately as the value of that $530k is dropping as I type.
Compulsive buying is evidently an “addiction” right up there with those zombies pulling the levers in Las Vegas…..
Sadly, they both end up in the same place.
“But the seller turned around and bought a home out of foreclosure for $530,000 ‘that is probably worth $100,000 more than that.”
No, it is worth 530K. Maybe.
This is exactly right. A property is worth what a buyer will pay. I doubt we were hearing stories three or four years ago, when things were really nuts about how sellers were paying $300K for homes worth $200K- no then they were “suddenly” worth more…
Rents are indeed stagnant in DFW. I have not raised the rents on any of my properties — I am just happy enough to have the tenants renew and I even offered one week of free rent who asked for a rent reduction (she reasoned that the house was now one year older). I have one vacancy that was renting for $1,100 and the property manager tells me I will be lucky to get $995. I am not actively in the market to buy more houses, but I am surprised at the fact that there still seem to be investors buying new construction even at prices where rents are significantly less than 1% of the purchase price.
I am just happy enough to have the tenants renew and I even offered one week of free rent who asked for a rent reduction (she reasoned that the house was now one year older).
Someone with that kind of smarts and moxie is definitely worth having around.
She asked for a reduction on the basis that the house was one year older…and then was satisfied with one week free rent? If she had done a little research she could have leaned on you for the ten percent monthly rent reduction that your property mgr. sees on the horizon.
Dingbat.
Nah, she probably wasn’t ready to just up and move if she didn’t get what she wanted.
Moving has certain costs. Plus, it’s annoying.
“but I am surprised at the fact that there still seem to be investors buying new construction even at prices where rents are significantly less than 1% of the purchase price.”
Don’t be surprised….
There was a “Flip This House” marathon this past week that ran pretty much all day on the 4th of July. I guess it our “patriotic duty” to flip houses.
If you are serving up pure crap and ring the dinner bell loud enough, some moron will show up hungry…this is America! Land of opportunity!!
I get the two shows confused. There is “this” and “that”; one is on A&E and is an hour with people who often know what they are doing; the other is on another channel, is 30 minutes, and the people are clueless. The 30 minute one is much more entertaining. I actually saw one recently where they went back and got the actual sales price, not the realtor’s suggested list price. It cut the profits in half.
says the gov bueracrat “as well as a moral responsibility to help people avoid foreclosure,
by taxing an innocent bystander soon
“She said one client sold a home for $340,000, which would have fetched $350,000 to $359,000 18 months ago. But the seller turned around and bought a home out of foreclosure for $530,000 ‘that is probably worth $100,000 more than that. … So if you lose $10,000 on your sale, who cares, if you’re making $70,000 or $80,000 or more when you buy? People are getting great deals at the upper end. It’s a great time to be a buyer.’”
Uh… How exactly are you making any money here?
1) You sold one house for 340k.
2) You buy another house for 530K.
3) You are down 190K.
At this moment you are down 190K, not up 100K. Idiots.
Future income from selling the house for 100K more? If the house could have sold for 100K more, it would have.
When will the house sell for 100K more? I’m guessing these clowns have no idea. But the Realtor makes the commission regardless. And so does the loan originator.
It’s like the concept of ‘Get money out of your house! Put the money in your house to work for you!” That’s equally idiotic. You are not “Getting money out of your house!” You are going into debt, using your house as collateral.
I guess the old saw holds true - “A fool and his money are easily parted.”
This is still a prevalent line of thinking here in Colorado. People think they are playing with poker chips. I can’t even have a RE conversation with people anymore, or even a macroeconomic one for that matter. They would rather talk about their sweet mtn. bike ride. IMO, this will end worse for CO economy than dot.bomb/t-com blowup. It will just take use 1 or 2 moire years more than the coasts.
“who cares, if you’re making $70,000 or $80,000 or more when you buy?”
Wow ! I made money by buying ! Quick sell me more houses so I can make even MORE money ! Wheeeeee !, What ?! They won’t sell for $70 or 80K more ? Then how did I make money Mr. Realtor.
you made money for the mr. realtor. LOL
The same thing with tax deduction. You save $5K a year off your taxes! Oh BTW, you need to pay the bank $20K in INTEREST…Oh and I forgot, you need to pay $5K in property tax as well…
“A brother and sister from California recently approached Phoenix real estate agent Brett Barry about their house here in the Valley. The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005.
Just what kind of idiots would have looked at this and thought; “Definetly a sound investment, We’re sure this place will sale for at least $1 mil next by 2008 even though most families around here are earning less than $80k”?
Because they bought into the hype, and let me tell you when everyone in California is driving around in leased cars that they would never be able to purchase and flash their equity around town….you can easily get caught up in this nonsense. I believe something like 1 in 6 people in Cali work in or related to RE industry, so if you threw a rock into a crowd not only would you hear a thud and a scream, but you probably would hit someone in RE. So, think that there is all these people who are all wrapped up in this and you can see all the cool stuff they own and you want to be part of it……however some of us *ahem* with own self worth and economic reality in their minds know that this was all smoke and mirrors and wore the tin foil hat and told them all to go pound sand for a half a million dollar home.
Here’s the part I like:
“They didn’t put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500.”
How on earth does this qualify as “owning”? They have zero - no - negative equity. About all they “own” is an option to sell at an uncertain price.
It also doesn’t qualify as “investment”, which to me means buying something so you get income from it.
These clowns paid over 300x monthly rent for their “investment” house. You should pay no more than 120x rent for an investment property. Even at the current alleged market price of 495K, it’s way overpriced. Like by over 100%.
Even with an IO loan rent is less than half of the interest payment. Now add in insurance, taxes, maintenance, vacancies, etc… These fools are out $2,700/mo on a deprecating asset IF they can rent it out at $1800/mo. And since they didn’t even bother to rent it out for the first two years, they are already out $100k in interest, insurance, taxes, maintenance, etc… PLUS $40k in transactions costs assuming they can sell at $500k.
All told these morons are AT BEST probably out $150k with an additional $100k of “forgiven” income to be taxed.
In Arizona loan owns you !
Apologies to Yakoff Smirnoff
An article on affordability:
http://money.cnn.com/2007/06/28/real_estate/most_affordable_housing_markets/index.htm?postversion=2007070114
Of particular interest was Colorado Springs and Denver. According to the article the median price to median income ratio is only 3x, and yet they are getting clobbered with foreclosures.
The ratio in Ft. Worth Arlington is even lower (2.5) and they too are getting pounded.
That is interesting….I wonder if we are actually seeing the biggest test in economic meltdowns since the Great Depression in front of us now? I am beginning to think that this is not getting out of hand it has completely jumped the rails and plummeting, however people think that gust of wind is a gentle breeze while they toast their drinks. Just wait to the reality sets in, man talk about a panic and a run on the banks again…eeek. This will all happen once Cali slides specifically LA and OC, once those two tank so much money will disappear that there will be no turning back or we will be ok.
Just wait to the reality sets in, man talk about a panic and a run on the banks again…eeek
You mean people actually have money in the bank?
I think PHX is in toruble. 4 million poeple in 1.5 million households, with about 1 million home owners ready to lose 50% of value…. But then I think about total dollars. 1 million homes losing $100K each is only $100 billion.
L.A. metro has 5x as many houses, and a 50% loss is $250K. 5 million houses losing 250K each is over $1 trillion in loss of value there.
OUCH!!!!!
I think you are right, the largest bubble in history is deflating and we shall soon see if all the economic truisms I’ve studied are indeed true.
First to be hurt will be those who:
1. Bought on I/O loans
2. Subprime
3. Circuit city employees owing $200k McMansions
Secondly will come
1. Marginal buyers on traditional loans
2. Retailers - furniture stores, Home Depot, appliance mfg
Tertiary effects
1. Disney and adventure parks
2. Airlines as travel is cut
3. Automakers as the product mix is skewed towards cheaper cars
4. Restaurants as people eat in more
All in all, this snowball will affect us all, some worse than others. The root cause was idiot speculation.
Moman,
I think that airlines might end up in the second tier. Not only are people going to be cutting back on travel, but the airlines themselves have been cutting back (no food, fewer flights, crowded flights, devaluing of mileage programs, etc) which has resulted in some serious decreases in satisfaction. Together I think this might make air travel decline rather rapidly.
I’m not sure … I think airlines might do better with less travelers.
Heavy passenger loads seem to fubar their systems and lead to major losses every time there’s a shtf event. Plus, marginal costs per traveler are a step function because of the nature of the equipment. They might make more money carrying less passengers on newer equipment (less maintenance, less fuel, less complaints) than they do on cheap fare to fill the last 20 seats on an old creaky 747.
Part of the problem airlines are having, though, is that they are a commodity in some markets, and commodity prices ALWAYS converge to the state where profit is zero (or negative).
Capitalism in action.
Air travel will be toast due to sky-high energy costs.
Disney is aleady offering low hotel prices starting July 29th through Sept 29th. I thought Aug was the big vacation month down there for families from up North. It definitely used to be really busy. On site value resorts are now $69 a night reg $129 and moderate are $104 usually closer to $185. Tourist trade must already be hurting in FL.
Are they offering the free meal plan again this fall?
What’s bad for Disney is good for the country.
The median price to median income ratio may be ok, but most people making the median income or higher have been in their house a long time and didn’t pay anywhere close to it’s current “value” for it. The people who are being foreclosed on are the recent buyers who most likely don’t make even close to the median income.
Plus there have a been a lot of layoffs where people used to make enough to afford what they’re currently living in, but don’t anymore.
Banks don’t foreclose on averages, they foreclose on individuals. The average numbers are worthless if you’re the one in over your head.
Well put, climber. Typically younger, first time buyers with volatile careers getting stuck in something they can’t afford, but would be considered “affordable” to other stable income classes who don’t want to move.
This is exactly what’s happening in Larimer County. People working at Circuit City buying 200K houses with sub-prime loans, and every one else sitting tight.
The music has stopped and all the chairs are taken……….
Yes it goes like this- the car breaks down so they pay to have it fixed and thats 3 months mortgage payments. And they never ever catch up. When xmas comes they are in foreclosure and move back to the shiddy apartments.
job loss=foreclosure right away (12 months later)
So, think that there is all these people who are all wrapped up in this and you can see all the cool stuff they own and you want to be part of it……
No, I want to purchase it at pennies on the dollar in foreclosure or repo.
When I see sellers needing to sell within a short time of the original purchase ,I think flipper/speculator . Not enough punishment for these zero-down buyers who were gamblers that lied on their loan application if you give them a short sale .What about the refinance clowns that pulled out their equity money and now want to walk on the loan obligation while they pocketed the money or bought toys or other houses with the loan money ? It should not be easy to get a short sale .
A friend of mine was telling me about a crazy couple that bought 6 houses during the run-up and they are buried on 3 of the six houses ,but not on the other 3 houses . Should these investors be allowed a short sale on the 3 houses that went down in price yet be allowed to keep their equity profits on the other 3 houses ?
According to my friend ,this speculator couple thinks they should get a deal like that from the Lender because they can’t rent for a positive cash flow on the 3 homes they want a short sale on .
“A few years ago, most Valley homes to go to the foreclosure auction block enticed multiple bids from investors. But now, lenders are taking back 80 percent of the homes they are foreclosing on. Investors have stopped bidding on many houses because they can’t make money on a resale.”
Two words, Alcohol and Shills !!
As to the CL ad, did anybody else notice that those pictures were horrible? The first was out of focus. In the second the groom was cut out. I know weddings are all about the bride, but does she need to be that obvious about it?
Yes, the photos were really marginal. I went to a very large wedding one year ago (500 people or so). The bride’s parents paid for it and they are not wealthy. Guess how they did so: housing ATM!! I wonder if demand for high-end weddings and photographers will plummet along with housing values? My guess is yes.
Not so high-end, either - I saw on CNN the other day that the average bill for a wedding these days is around 25K!
Yeah, but a lot of those brides watched Diana’s fairy tale wedding about 20years ago or so, when they were little, and have been wanting the same thing ever since.
Hubby and I got married 2 years ago. Our wedding, including honeymoon, cost less than $5000.
We had it at a very nice hotel. We had 50 guests. We didn’t have a limo, alcohol, or a videographer. Mom bought my dress. Massachusetts will make anyone “JP for a Day” for $25, so one one Hubby’s sisters married us. Two round cakes (a 12″ tiramisu and a 10″ chocolate) from an award-winning bakery cost us $85, and we had lots of leftovers. A supermarket did the flowers.
I only wish we’d spent more on the honeymoon flight. I’ll never fly Airtran to Las Vegas again.
My niece just got married. My sister gave her $10,000 in an account and told her that was all she was getting. Anything over 10k she had to pay for herself. She spent $10,300. It was a nice wedding and a great reception, but basic. Two front pews in church had bouquets at the end. One small vase of flowers on the altar. Guess what, I don’t think anyone noticed. Weddings are ridiculous. If you don’t pay for them with cash, but ATM the house, it’s almost like to didn’t spend any money. Of course 10 years from now when you want to retire, you’ll kick your butts from here to kingdom come.
We pulled off our wedding for under $1000, and the dress cost almost $650 of that. Church + reception hall was a grand total of $80, we decorated it ourselves, did computer DJ (eight months before the iPod came out— that would have been some much easier!), no photographer, and the cake came from the supermarket.
Chocolate raspberry torte with a smooth chocolate coating and white roses with gold leaves. $20 and ohh soo tasty.
People who spend thousands on weddings usually lack imagination— or terror. We were so broke but none of it came from the wedding!
Oh, and the food? Relatives. My mother-in-law asked what I wanted and I said I didn’t think I’d notice and I trusted her judgement anyway!
There was pasta salad, I think…
No kidding. My wife and myself did the minimalist wedding with 53 guests including ourselves. Our wedding cake was the free cheesecake with the buffet. We hired four students from the local college to play some classical music right before and after the ceremony. One of our gifts was the DJ was my bro-in-law, so that was free.
To this day, both our parents insist that we had a “real” wedding cake.
The same month my boss had a daughter get married. He complained that the reception alone was $37,000. Ouch.
LOL - I’m glad I’m not the only one who had a ‘cheap’ wedding!
Ours cost us about 5K - which included our honeymoon flight, hotel room and car hire for a week. Our bridesmaid made our delicious wedding cake.
We took advantage of L.A’s wonderfully tacky Wedding Chapels for the actual ceremony, and booked the courtyard of our favourite Italian restaurant for a slap-up lunch, and then we were in the air to San Franciso by 7pm….the guests got ribbon and tissue paper to take home the flower arrangements (my only big ’splurge’)
While I was organising it, I felt SO MUCH pressure to overspend - I actually felt ‘cheap’, even though neither of us wanted a big flashy wedding.
It was only when we came back from the honeymoon that our guests told us how much they’d enjoyed the casual and intimate atmosphere, and how much they enjoyed the fact that we were able to enjoy it too, without having to run around worrying that everything wasn’t ‘perfect’.
I feel sorry for people who feel that they have to go into debt to get married, for me the wedding was only the beginning, not the end of the process…
OT, likening hedge funds to dying whales:
Eugene Linden: The Ecology of Toxic Mortgages
“My role at the fund is to look at the macro situation, and to help the portfolio managers interpret how larger trends in the economy will interact to the benefit or detriment of our investments and prospective opportunities. In that capacity, I’ve been looking at the unfolding debacle in subprime lending, a slow motion, far-reaching toxic poisoning, whose reach and impacts have been obvious for at least eighteen months to anyone not involved in making money off the origination, sale, and securitization of these subprime loans.”
And once those whales die, they can cause additional problems:
http://www.youtube.com/watch?v=0sNE9k8mZ1w
What’s up with prices in Boulder, almost crazier than CA!
What they’re not telling you is that the banks require an enormous amount of information to justify a short sale. They are, generally speaking, requiring that the house must have been listed for 90 days with no offers (or only the offer being considered for the short sale), proof of borrower’s income and assets (full financials) supported by pay stubs and tax filings, a hardship statement or explanation, and the type of thing they should have been asking for when they made the loan in the first place. The reason they’re doing that is fairly obvious: they must justify the loss to their management, investors, and/or guarantors.
Needless to say, most are not being approved, particularly if the borrower has other assets. What the bank does is it runs the financials, then tries to get the borrower approved for a different type of loan, usually an interest-only loan. They are trying very, very hard to slow down a runaway freight train, with very limited success.
Bonus: since the borrower provided all financials for this process, if no deal is reached and the short sale fails, the bank knows just where to go to collect the deficiency balance.
Yup, the banks are trying to buy time, hoping for a recovery that won’t happen anytime soon.
Kia,
sounds like folks would be better off just handing back the keys and taking the credit hit. And sooner rather than later, before housing prices fall further.
One question, when you do hand your keys back, and the bank holds back the house, rather than putting it on the market, and the comps fall much farther than when you gave back the keys…does the bank hold all the decision-making cards? I’m thinking that if you hand back the house, the bank waits a year to market it, and the comps have fallen an additional 100k, then you get stuck with an extra large bill from the IRS. Is this correct?
If you hand back the keys, there is no hit from the IRS. Only if you agree to a short sale.
Not necessarily. When the bank (or MBS loan servicer) finally sells the place, they book the loss (what’s owed + collection & foreclosure fees - sale price). They can then send Mr. FB and the IRS a 1099 for the difference (the loss is treated as taxable “income” to you). Whether or not they bother to file the 1099 or not is up to the lender.
The issue you raise is a question of how and when the property is valued. It’s extremely tricky. Technically speaking, the value should probably be set when you hand the property back, but what is that amount? Since the question is very hard to answer with any precision, it is usually essential to negotiate a set surrender value so one has an idea of how much liability might remain. Otherwise, as you suggest, a year or two later, the bank might show up with a hungry doberman of an attorney looking to get paid.
On the AZ Republic board, I made this comment:
“They didn’t put any money into it. They have an interest-only loan. They could only rent it for about $1,800 and month, but their payment is $3,500.”
To be a good investment, a house should sell for somewhere between 100 and 150 times monthly rent, depending on intrest rate. With interest rates low, we can use the top end of that range. 1800×150 = $270,000.
“The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005.” Or, just look at cash flow I/O their payment is twice rent. NOW, who doesn’t believe me that house prices need to fall 40-50% from peak, back to 2002, adjusted for inflation, levels.
The response from a kool-aid drinker:
” To be a good investment, a house should sell for somewhere between 100 and 150 times monthly rent, depending on intrest rate. With interest rates low, we can use the top end of that range. 1800×150 = $270,000. Darrell2230, thanks for the best laugh I’ve had in a long time! If you’re going to LIE or make up calculations at least have a vague clue to what you’re doing. This is at BEST 1970’s math. THe LAND for that home would sell for more than that. I love people who say prices need to drop 30% or more. It’s a DREAM that will NOT happen. I’m sorry you’re too broke to buy here, but please don’t spread lies to cover for it. I also love the “sky is falling” mentality. Go back to your shrink, you need a LOT of sessions.
Yeah, it is me that needs the shrink…. He thinks there is some new 2007 math that makes it a good investment to lose $1700 a month?????
“I’m sorry you’re too broke to buy here, but please don’t spread lies to cover for it.”
This is a common sales ploy. Unfortunately, it can be effective.
Recently, an acquaintance told me that the high cost of housing (in N. VA) is simply “the price of admission to an exclusive club” and that “it won’t be coming down.”
LMAO, “admission to an exclusive club” in NOVA…Wow. Used to live in Fairfax County where box stores and subdivision spread far and wide, and to think it has become exclusive. I sure hope the snobby people of Fairfax put up a fence to keep us less deserving people out. I really don’t want to ruin their paradise.
Cinch
Hear, hear!
I agree, it is pretty hilarious. Recently, people have taken to describing their hovels in terms such as “half a mil” or “three quarters of a mil” etc, etc.
I suspect they picked it up from the realtors. This is a common sales ploy: when the customers start wavering, the salesperson suggests “well, maybe this is a bit out of your league…” You’d be surprised how often that is effective.
The only club I would wish to be a member of is Augusta National and they are not likely to allow me membership.
Price of admission? But I can rent for half the cost of buying. There is your price of admission.
“The pair paid $597,000 for the investment home in Tatum Ranch at the height of the housing market in 2005. . . ‘I ran the numbers, and the house won’t sell for more than $495,000 now,’ said Barry, of Realty Executives.”
It is a good thing that prices have remained stable in the Northeast Phoenix/Scottsdale area.
Darrell2230 wrote:
” To be a good investment, a house should sell for somewhere between 100 and 150 times monthly rent, depending on intrest rate. With interest rates low, we can use the top end of that range. 1800×150 = $270,000.”
Darrell2230, thanks for the best laugh I’ve had in a long time! If you’re going to LIE or make up calculations at least have a vague clue to what you’re doing. This is at BEST 1970’s math. THe LAND for that home would sell for more than that. I love people who say prices need to drop 30% or more. It’s a DREAM that will NOT happen. I’m sorry you’re too broke to buy here, but please don’t spread lies to cover for it. I also love the “sky is falling” mentality. Go back to your shrink, you need a LOT of sessions.
Yeah…. I’m the one that needs a shrink.
Sorry for the repost. FIrst one hadn’t come through and I thought it was lost in cyber bit-bucket.
I heard a rumor they’re going to have a new TV series in Dallas - “Flood this House.”
“Instead, renters are snapping up new-home bargains or renting houses put up for lease by investors. ‘The number of single-family homes available for rent appears to be way up, even though many aren’t getting rental rates that actually cover mortgage costs,’ Mr. Willett said.”
Is there a snap-o-meter out there, this is getting to be a bit ridiculous.
Easier to buy than to sell … what do we call that?
A sucker’s market.
Renting is like buying. You compare properties and pick the best bargain. No one is going to get the same as the mortgage amount they are paying, when house prices are way overvalued. When there is a surplus of properties, rents will fall farther as landlords offer more and more incentives.
In my area gas is selling for about $3/gal, which is a great deal because gas is really worth $4/gals, and hamburgers sell for about $2 even though they are worth $3. At the dollar store I purchased two bars of soap for $1, a package of candy corn for $1, and a package of four small night light bulbs for $1. Made out like a bandit, because everybody knows these items are worth $2. The more I spend, the more I save
Got 10% down?
Ah, so now buying a house that costs no more than 2.5 to 3 times gross income max is “1970’s math?”
Yeah, okay - care to explain how the “new math” works? Everyone buys houses they can’t afford on toxic loans and real estate just keeps going up, Up, UP!!
Right - have fun with that! Prices have to be inline with incomes and rents in the area, and there is no “new math” that is going to change that.