Cutting To the Chase And REO’s
Readers suggested a topic on foreclosed homes that have been taken back by the lenders. “If anyone knows, share approximately what a bank with REO’s wants to hear (and what they do not want to hear).. along the lines of: ‘Mr. Banker, you and i both know those properties are depreciating fast and will eventually reach 1998 price levels, so let’s cut to the chase and deal now.’”
One replied, “The problem is that Mr. Banker will never sell at the price you both know is reasonable because he is waiting for (and may still get) the greater fool. As soon as the banks start to sell for reasonable prices; in a word, the gig is up. The comps will adjust to what the market will support (and no, a market will obviously NOT support the prices if you have a 60 month inventory; ala Palm Beach) and the banks will take the losses.”
“Unfortunately, the banks have little incentive to blow out their repoed properties; it will just decrease the values of the homes they are going to repo next week right down the street. However, how long with the bank’s investors allow them to keep a huge amount of RE on the books?”
Another said, “From time to time, I look at the REOs listed on line by various banks and other institutions. Usually, the contact is a local realtor in the area. The realtor who handles REO for one of the banks in this area (Tampa Bay) is very realistic. I had a conversation with her a few months back and she said that the bank she deals with has not yet adjusted to the reality of the bust and so the REOs are priced high.”
“Realtors who deal with repossessed property have a much different view of the market. They’ve been through it all and seen it all: the trashing of the property, squatters, stolen appliances and wiring, etc. My experience is that you can have a frank conversation with them. They will present your offer to the bank and will do the talking for you. They just have a hard time convincing the bank that the POS REO ain’t worth what the bank thinks it is worth.”
One was skeptical. “The banks consider ‘a good enough deal’ to be a price fairly close to what is owed to them when in reality (because loans were offered close or above 100% LTV) the market price is well below this price point.”
“The banks are refusing to feel the pain and are putting off the day of reckoning. I say screw the banks. Understand that there IS a cost of holding REO’s. Taxes, Assoc fees, maintenance to name but a few. Let these suckers let these languish through the summer and watch the maintenance issues mount.”
“Anyone buying right now is completely clueless on how bad this is going to get and how far prices are going to fall.”
The Modesto Bee. “Another home foreclosure auction is headed to Modesto, and it’s got potential bidders hankering for a bargain. The next big auction (is) scheduled by Hudson & Marshall for July 19 at Modesto Centre Plaza.”
“And more auctions are expected to be held later this summer and fall. That’s because lending institutions have repossessed thousands of Northern San Joaquin Valley homes, and they’re eager to sell them any way they can.”
“‘It’s definitely a buyer’s market and everything’s on sale right now,’ said Ken David Elving, co-owner of Matel Realtors. He is representing the sellers of five homes that will be auctioned July 19 in Modesto.”
“To determine a home’s value, Elving said, don’t rely on what homes sold for in the past because prices have been falling very quickly. ‘Focus on the prices being asked for homes for sale now,’ Elving said.”
“Current asking prices often are substantially less than previous sales prices for identical homes. Example: Elving said a home in the July 19 auction in Oakdale sold in May 2006 for about $550,000. By this spring, that 2,784 square-foot home was back on the market for $394,000. No one bought it, so now it will go to the highest bidder.”
“A search of properties for sale in that neighborhood shows several slightly larger homes priced about $360,000. So that $360,000 price may be a more logical bid than $550,000.”
“It can be easy to get caught up in the excitement of competing to buy a home. Auctioneers are good at getting buyers to up their bids. ‘Set your limit and don’t get swept away by the moment, because you may find yourself bidding more than the property is worth,’ cautioned Catherine Cooper, a Modesto real estate broker who attended last month’s auction.”
“Cooper thought many of the bid prices at that auction were too high. By the time the 5 percent buyer’s premium was paid, many of last month’s auction prices were full-market value, agreed Jason Rivers of Rivers Realty, who also was at the event.”
“‘Those buyers didn’t get any better deals than you can find right now with regular houses listed for sale,’ Rivers said. He is representing banks that have foreclosed on about 20 properties, he said, and those sellers are offering good deals.”
“Foreclosed houses can have construction problems that inexperienced buyers may not spot, said Matthew Irion, owner of M.K.I. Home Inspections in Modesto. ‘I’ve been doing some inspections on bank repossessions, and they’ve been in pretty bad shape,’ Irion said. He’s seen walls kicked in, appliances removed and recyclable metals such as copper, steel and brass pulled out.”
“Irion said bidders would be wise to arrange for home inspections before committing themselves to buy.”
“Many newer homes are in special taxing districts that require owners to pay additional property taxes each year. Such Mello Roos fees or community service district fees can add thousands of dollars a year to the cost of a home.”
“Few investors are able to buy homes, then immediately rent them out for a profit. ‘The rental market is soft right now,’ Elving said. ‘You have to offer very aggressive rental rates to get homes rented. If your price is above $1,000 (rent per month), you’re in trouble.’”
“A couple of years ago, many investors made big bucks buying fixer-upper homes that needed relatively minor remodeling. Flipping a house…works great when the real estate market is hot. Not now. ‘Flipping is financial suicide now,’ Elving warned.”
“That’s because buyers these days expect bargain prices, and they no longer have to pay extra for homes in great condition.”
Banks have to book their REO’s at lower of cost or market. It appears they are going to have to obtain a ton of updated appraisals for their CPA firm,so that their REO can be booked correctly for the financial statements. Banks will be taking it in the axx come December 31st 2007.
Are they allowed any exceptions for this in an “illiquid market”?
No
David, one of the problems is the lenders are no longer banks. The sales are being handled by the servicing entity of the MBS bonds. There are no reserve requirements for additional lending, no federal oversight, no limiting factors. The only factor is the potential for the rating agencies seeing the loan value at 75% market (or less) and downgrading the bonds. No one wants this, so it is a slow motion grind. Until the hedge funds get margin calls, based on “marked to market” values of the bonds, the banks have no pressure.
I think the MBS factor is going to cause the market to take much longer to unwind, and it will drop further in the end. I see servicing companies with no idea they even own a house, and it has been vacant and foreclosed for 6 months. GMAC is one of the worst. Countrywide seems to be willing to blow inventory out the door. If you look at the Countrywide REO tracking blog http://countrywide-foreclosures.blogspot.com/2007/06/9495-reo-offered-for-sale-on.html and go deeper into the California REO at
http://www.streamfx.com/CW/6-29-2007/REO-California.html
you will see CFC keeps marking down their houses every couple of weeks by 5-10%. They do know how to keep interest in the homes and find the bottom sooner, rather than later.
“There are no reserve requirements for additional lending, no federal oversight, no limiting factors. ”
Actually, there often are explicit limits, but they are often a bit on the loose side. To find them, you need to read the sales and service contract under the foreclosure section. The MBS holder often has to wait for the foreclosure sale to get the principal, so that the contracts put an upper bound on the amount of time the servicer can hold foreclosed property. I have seen 3 year limits, other contracts might have tighter limits on the maximum contractual time that the servicer can hold the property.
Note that a complexity with Countrywide is that they sometimes sell their mortgages off and service them, and other times they issue their own MBS and hold title to the houses. In the former case they might have less flexibillity. Certainly it will be hard to keep losses off the books if the MBS holders are clamoring for their principal.
“…and other times they issue their own MBS and hold title to the houses…”
Ooops. I should have said hold the liens and mortgage documentations…
I see servicing companies with no idea they even own a house, and it has been vacant and foreclosed for 6 months.
BINGO!
The foreclosure, reclaimation, and liquidation process for the thousands of POS beat-up junkers out there could take years.
Make no mistake-Dealing with foreclosured properties is a dirty rotten business.
hehehe…the scale of this is way beyond any servicing company’s wildest imagination.
I’ve been watching one particular foreclosure in an older established upper middle class neighborhood. All of the landscaping has died, the weeds are 4 feet high, and the house is deteriorating. It’s been vacant nearly a year.
I’d guess that this is less of a problem than generally thought. After all with all the sub-prime crap being peddled lately, nobody was under the illusion that there wouldn’t be any foreclosures. The illusion was that they would be at the very low rates of the 2003-2005 timeframe. Picture one or two people who are supposed to handle the avalanche of REO. They’ve been swamped as the foreclosure rate has gone up. Now picture them going to some VP of the company that’s in trouble and explaining that they need to hire more people so that they can realize losses more quickly. Now THAT’S a tough sell.
“A search of properties for sale in that neighborhood shows several slightly larger homes priced about $360,000. So that $360,000 price may be a more logical bid than $550,000.”
Wait…. houses are listed, but not selling for $360K, so I should be willing to pay $360K. BULL!!!!!!!
What could it rent for per month? Multiply by 100… maybe 125. MAX!
Depends on mortgage, property taxes, HOA, insurance and other homeowner fees and you have to factor appreciation(negetive? none? 3%? 4%? 6%? more?)
If the rent to own is 1:200 or more, it almost always a better deal to rent. If between 1:125 and 1:200 you must decide carefully taking said factors into consideration. If 1:125 or less, go ahead and enjoy home ownership.
One thing I want about ownership is the ability to landscape and grow my own garden and get to keep it instead of my landlord getting to reap the benefits of my hard work. I will just wait for house prices to drop then buy one with 5-20+ acres of land for under $100k and live in it long term.
I agree that lowballing the bank now won’t work. They don’t want to book the loss. They don’t want to lower the comps and kill the calue of their portfolio. They don’t want to kill the possibilites of short-sales. They don’t want to increase the number of foreclosures from people walking from underwater houses.
They are looking for containment, and that is acheived by taking houses off the market and praying. It is not acheived by putting those houses back on the maket at great loss.
“I agree that lowballing the bank now won’t work. They don’t want to book the loss. They don’t want to lower the comps and kill the calue of their portfolio. They don’t want to kill the possibilites of short-sales. They don’t want to increase the number of foreclosures from people walking from underwater houses.”
I think what would be interesting is by the time everyone is willing to lower their prices back to what people can afford based on what their income is, will there be any buyers? What if all this never lowering your price more than $10k just starts to upset the last remaining pool of qualified buyers and they just get fed up and stop looking completely.
HELOC - Don’t call it a loan
It will be the homebuilders leading the way down.
Agreed. The home builders are already offering 25-30% off peak prices in Phoenix, while existing market is down closer to 10%.
But then again, you’re looking at a low-budget stucco box in a neighborhood that is about to be hit will mass foreclosures.
New homes around Phoenix are often near dairy farms as well.
What? Dairy Farms in Phoenix? Its so hot out there right now the methane in the cows would be causing them to spontaneously combust.
I grew up in Phoenix and used to drive by the dairy farms out in Western Glendale. In July, occasionally you can hear a gassy cow popping in the afternoon heat. Loud. Not pretty.
They eructate; they don’t pop.
You make it sound like cows are standing around and explode in the air with bits of hamburger flying everywhere.
What if all this never lowering your price more than $10k just starts to upset the last remaining pool of qualified buyers and they just get fed up and stop looking completely.
Buyers might stop looking, but not because they get fed up. Prices will continue to walk their way down to where they should be, hopefully a bit less. This will not go unnoticed by potential buyers who will then see real estate as a sure-fire way to lose money. When nobody wants to buy, that’s when you want to buy. That’s when you get the rock-bottom lowest price.
I await that day eagerly.
But banks can’t loan out more money if their portfolios are tied up with housing inventory and unpaid mortgages. They still only have a certain percentage they can loan out on mortgages. It doesn’t do them any good to hold paper that doesn’t pay.
Most reo properties are listed for what is owed to the bank and then the price reduced slowly as low ball offers come in or no offers. This price reduction has (in some areas) has started to speed up. Buyers (non-investors) might want to consider renting vs owning costs/writeoffs to determine their bids. Whether or not rents will go up or come down is a tough call for me but each area is probably different depending on jobs/building stats, etc.
Our backward, rural county is finally starting to put their real estate records on line. As time goes by, they post older and older records, but at this point the viewable records only go back to 2004. What we’ve been able to find about our own house was surprising to me.
The house we bought from the bank in May 2005 had been foreclosed in July of 2004. It was REO for 10 months. The mortgage was taken out in 2002. The price we paid was about 90% of the original mortgage amount. However, the bank paid to have the house painted throughout (one color) and new carpeting (low-end Berber) put down everywhere except the kitchen and baths. Add in some legal fees, almost a year’s worth of property taxes and insurance, the realtor’s commission and seller’s settlement costs, and I estimate they probably lost somewhere in the range of $20K to $30K.
Multiply that by the number of REOs the industry is dealing with today, and you can see that a huge amount of lenders’ assets are evaporating into thin air.
Is there a graph depicting banked owned properties over the last 24 months or so? I see a lot of stats regarding foreclosures, but few once they become REO or bank owned. I have been using RealtyTrac and if their figures are even close to correct I’m more concerned than ever. Many seem to have been on the books for quite some time.
I posted this in Bits Bucket (with little reply) early this morning and soon after Ben posted several related articles. How long can the banks sit on these depreciating assets? With more foreclosures in the pipeline and prices sure to decline it sure seems like they are poised to take a significant hit.
I have been watching an REO site for Twin Cities properties since about September of last year. Last September they had about 350 houses listed, now they have about 580. The number has been pretty flat for the last couple of months, but I have a feeling it will start a new leg up soon.
I know I’m just one among many on this blog who wonders, when will the NRT be reformed. I know of a few people who were asked to send in resumes… but it seems like nothing happened.
I understand that as long as you believe in a soft landing, its best for the banks to hold onto the homes for ~1 year and then sell them at a trivial discount. So I can understand them still having hope in where I want to buy (south bay, LA). But what the &*%! about Palm Beach, Miami (heck, just throw in the rest of Florida), Sacramento, Sand Diego, Phoenix, Las Vegas…
That is enough of the nation to tighten credit on its own. But we all know that everywhere people are having trouble paying their mortgages (hello OC… or as one poster put it, now call “O’ F&%!” And it doesn’t matter if you’re talking CA or FL…)
It will be interesting to see how they untangle all of the CDO’s, CMBS’s, etc. as part of this REO process.
With so many of the mortgage/CDO hedge funds now restricting disbursements… I cannot imagine that there are even 10% of the buyers that there were 18 months ago for ‘A’ rated and below CMBS’s. (AA and AAA will do ok). And forget the hedges taking the first ~20% risk. I stick by my prediction that FHA will be the only way around a 25% downpayment during the darkest days of this downturn.
I love how the media ignores the ratios that we bloggers talk about.
Got popcorn?
Neil
Exactly! Who the heck is going to buy mortgage backed securities when it looks like certain loss? Without mortgage buyers, who is going to lend money, again, for what looks like certain loss?
Do I have to change my name to Sand Diego RE Bear?
I have been looking at new and repo homes in Maricopa and Casa Grande Arizona. So far, asking prices for new builds are usually cheaper. This has a long way to go. I may put in some stink bids 1/3 or so of asking to see what I get. We shall see………….
Why would you want to buy in the middle of nowhere, into a neighborhood that will be hit HARD by foreclosures, in cities that are most certainly going to be bankrupt in a few years. Maricopa was pushing their school bonds HARD. I wouldn’t touch a Maricopa city backed bond with someone elses 10-foot pole.
I would recomend a home inspection on any new home out that way.
Why so far out?
D.R Horton is selling new homes in the city of Phoenix; some less that $100 per square foot.
I have no idea of the home’s quality, HOA fees and T&I.
http://www.drhorton.com/corp/GetCommunity.do?dv=E8&pr=42141&start=0
If your price is above $1,000 (rent per month), you’re in trouble.’”
I don’t know where these people live but you won’t be able to rent a house in So Cal for $1000…you’d be lucky finding a STUDIO apartment for that per month.
I really want LA to crash and burn. Yeah sure, people may call me a bastard but there are SO MANY arrogant losers running around here with free money that it’s time for them to get a reality check and let hard working people who far more deserve to have a home get one. Either that or just leave LA….which is probably a better “life” choice in the long run anyway.
I’m beginning to notice that “leave L.A.” chant starting to really pick up steam.
And after 1 summer in PHX or Vegas, or 1 winter in Seattle or Denver, a lot of those ex-L.A. people will be heading back home. (spoken as an L.A. native that lived in Colorado and now lives in PHX, but consideres myself much more hardy than the typical L.A. bimbo or manbo.
I agree. Everyone can tell a story about at least one family that headed back south to Cali after a winter in the PacNW. Some even use the same movers.
or 1 winter in Seattle or Denver, a lot of those ex-L.A. people will be heading back home
Wimps! You want cold? Try Wisconsin or Minnesota, that’s cold!
FWIW, I was pleasantly surprised at how mild winters are on Colorado’s Front Range. When i moved here I was expecting to be buried in snow from October through Spring. Imagine my surprise when I learned that there is snow on the ground only about 10% of the time, and that it could be as warm as the low 60’s in January. Is it colder than San Diego? Sure, but its pretty nice otherwise.
Wimps! You want cold? Try Wisconsin or Minnesota, that’s cold!
- Yeah, but it’s a ‘Dry Cold’.
Try Las Vegas or Phoenix, ‘But it’s a dry heat’. BS, Hot is hot like the Jerry Reed song eh?
Visited Northwoods Wisconsin a few Christmases ago, -35 degrees, and three feet of snow. Coming back we left a day early to fit ourselves between the storm breaks.
That is a balmy day in the winter (not). LOL Did you manage to get out onto the ice with your Lienie’s? Last winter we had only 12 inches of snow by Jan 25. The ground was brown and dingy - really depressing - Normally we have ~ 100 inches by Christmas.
Ill take the cold over the hurricanes, crime, taxes, insurance, overpriced shacks, bad drivers, etc in south FL. I will be visiting Toronto, Cananda this winter and if I can handle it bundled up, then northwest PA probably will be my future location. Toronto averages about 10-25 degrees and rarely gets below 0. This isnt too bad compared to Minnesota, Montana, North Dakota, etc where those areas can easily get to -20, -30 or even -40 and throw in windchill and last winter there was windchills of as low as -70, now that is brutal! Any exposed flesh freezes within 10-30 seconds and you can freeze even with a triple layer in those kinds of temperatures. My friends say you haven’t experienced what cold is like till its below zero. Therefore 30, 20, even 10 degrees is tolerable, at least for a short time it certainly is. I have been out in 45 degrees with wind in Wyoming in summer night in short sleeves(didnt know it would get so cold) and I was shivering but in no danger of hypothermia.
Oy, northwest PA!. Can you spell “lake effect snow?” We lived around Harrisburg (south central PA) for six years. Two of those winters had over six feet of total snowfall, and one winter the snow covered our yard (north facing slope) from just before Thanksgiving until mid April.
Never again.
About 50 miles south of Erie, PA. I heard lake effect snow wasnt much of an issue this far away from Erie. But I will find out for myself when I visit this winter(and Toronto)
If it was so bad, why do many, many people live up north? Well let’s hope house prices drop enough so ill be able to afford one in north Georgia or east Tennessee. I can get one(a nice one) in NW PA for $50k today and it may be even cheaper in a couple years.
I hope that you find Toronto as warm as you think it is. They do have record lows in the -25 to -30 area.
If it was so bad, why do many, many people live up north?
A lot of people like the changing seasons. I live in Las Vegas, but was born and raised in western New York State - Chautauqua County. We got temps as low as minus 25 in the winter. What I did back east is the same thing I do when the temp in Las Vegas in 116, stay inside.
At 20-25 below zero F, the plastic frames of sunglasses will get so cold they feel like they are burning your face. I delivered newspapers to the student mailboxes from 8-10 AM one winter in New Hampshire. Two weeks of 20-25 below. It got better when the sun was well up. Hat and a scarf won’t do it. Balaclavas work.
As long as the heater works(will have an emergency space heater as well as firewood in the basement) I can stay warm indoors. Frankly I am tired of south FL and want seasons. East Tennessee sounds good without it getting too cold(usually stays above freezing) but im willing to live as far north as NW PA if its a better value(which seems to be the case)
The worst thing about living near NW PA is the lack of sunlight. Plenty of sun in June-August, almost none in the winter. You’ll forget about the snow when it’s been overcast for three straight weeks. I adapted by buying extra high intensity lighting for my living room, 500 watts of halogen & 300 of fluorescent lighting. When I open my front door on a winter’s evening, the whole neighborhood lights up. The lighting gives off so much heat I can afford to turn down the thermostat for the rest of the house.
Lake effect snow is very pretty when you neither must shovel it nor commute through it. On winter mornings I’ll stand out on my front porch with a hot java & enjoy the clean air & silence.
Balaclavas aren’t enough at -25 F. What you need then is a Wiggy’s expedition parka, really well insulated handwear, and a balaclava. When the wind chill is -70 F, add ski goggles, face mask & insulated zipoff pants. I’ve gone hiking on my city streets in that kind of weather & am quite comfortable doing that. Have never met another pedestrian in those conditions.
I went crosscountry skiing 30 years ago in -40 windchill weather, really worked up a sweat, then cooled off for 30 seconds at the top of a hill by taking off my face protection. The coolness from the wind was most refreshing. Later that night my face started hurting terribly, from 1st degree frost bite, pretty much the same damage as 1st degree burns.
Then there’s cabin fever, but this post has gone on long enough.
Depends on how far N your N is. If you get up to northern Crawford county then you see lake effect snow. Venango county is very nice, I grew up in that area and am now looking for about a 100 acres with a nice view of the Allegheny river near Franklin. I’ve seen some pretty nice land for around 1500 an acre but expect to get it for about $750 per acre in a couple years.
I do not know the record for Toronto, let me research. Ok the coldest -33 °C (-25 °F) was recorded on January 10, 1859. Figures. Wickipedia also mentions global warming has resulted in an increase of several degrees(F) over the decades. Thats why the record occured so long ago. It explains that Toronto’s winters are usually mild with highs of around 30 with 40s and even 50s occuring regularly. Severe blizzards happen an average of twice per winter with very cold temperatures(probably around 5 to -10 F) the rest of the time it is mild and pleasent. I have been there once as a little boy and the first few days there was snow which melted away and it rained. Dad said it was 20 degrees. Not bad for a Toronto winter. I am sure many USA states have colder winters than Toronto. Northwest Pennsylvania is probably even milder than Toronto. I think ill adapt fine to little sunlight in winter. I sunburn very quickly and easily and don’t like to go out in the summer.
Not sure about lake effect snow this far south of Erie. I got my interest around Oil City/Franklin and will be visiting NW PA(very good price houses, nice big ones for $50k, will probably be even cheaper in a couple years) and Toronto(got family there) in the winter.
Tresho, you tolerate cold very well. NW PA is nothing like that. Rarely goes below 0 and on those days, ill still be sleeping anyway, no plans to go outside at 6am in the morning.
$750 an acre is a really good price! How much would land be in east Tennessee? How is the crime? Ill take NW PA anyday over east TN if the crime is alot lower in NW PA. Safety comes first.
I have to leave south FL due to insane prices(even a 50% off prices) will still be too expensive and south FL is full of crime and other problems. I also want some variety in seasons and a little snow for a change. Don’t need bitter cold so NW PA is as far north as ill go.
“…You want cold? Try Wisconsin or Minnesota, that’s cold!”
“…The worst thing about living near NW PA is the lack of sunlight.”
Wimps! We Alaskans LAUGH at your temperatures…
I got out of FLA 10years ago and will never go back! ever! Fla is a grate place if you speak 3-4 languages and have tons of money or a job that makes money. If you don’t and plan making a good living working for a company you are screwed. You will never save enough to get out. I live 20 miles south of Harrisburg and can say winters here are enough to let you know you have winter but it is not the tundra. Summers are plenty hot but don’t last forever. House’s and land around here are bubbly it mostly a bedroom community to Baltimore and DC so until the bubble pops or people figure out the 2-3+ hour one way commute is not worth it, housing is high compared to local wages. Totally write off Lancaster co. That bubble $ is big and getting bigger$$. I have no idea of your finances or job requirements but there is not much in NW Pa. but that has not stopped the locust from buying everything and then trying get a wishing price when they sell. I read some place ( calculated risk ? ) that PA was number 2 in jacked up appraisals right behind No.1 FLA, I agree.
I’ve had the chance to talk to several Californians who visited VT. They loved it but worried about the snow and cold.
Snow does suck but keeps out the cockroaches, both the 6 and 2 legged kind.
(My apologies to those from CA…CA has amazing natural beauty completely overrun by humanity. I would never would want live there unless somehow a few million people moved away to Alberta or something.)
As seen on VT bumper sticker: Welcome to Vermont…now go home.
hehe. I live in Lake Arrowhead, well, not actually in the lake but in the town, up in the mountains at 5600 feet, above San Bernardino about 25 minutes to a freeway on beautiful roads. We get 4 seasons, snow and the record low here was 8 degrees F which occurred this year by the way thanks to global cooling.
If we want warm we just get in the car and go “down the hill” to normal Southern California beautiful, but boring, weather where it never goes below freezing. In the summer when it’s 110-120 in the LA basin, it’s 90 up here. Woo hoo!
Anyone want to buy my house here so I can move to upstate New York?
Well no one said you have to leave LA to go to PHX or NV….those are worse…not better.
All this talk about what place is better. The place that is best for me is where I make the most money. I’m a high tech nomad. There is no large city I do not like. People like to boast about whereever they are located because they want to be perceived as right. Bout time we all grow up.
No one is boasting here. It’s personal preference and NOT everything is about money for me. Perhaps it is for you? Yes, of course I want to make a good living BUT I also value living in a city that offers me a good quality of life in more ways than just pay.
Living in 120F summers and dry desert isn’t what I’m looking for and I wouldn’t move there any amount of pay. I can’t stand the desert areas and I hate heat…so not all cities are equal sorry.
It doesn’t mean I want to stay in LA either BUT making the move from LA to PHX or NV isn’t worth it TO ME. It has to be a worthwhile move.
I think you should heed your comment about growing up so you don’t take the knock at PHX so personally.
Those people do not live in Fairyland (Southern California) they live in the rest of the country. Believe me I would never ever move to Southern California - you could not pay me to live there!
Is there any actual future dated benefit to dragging this out rather than just a sudden crash? What I mean by that is say the mortgage and housing market just crashed tomorrow. Within a one year period everyone that was in danger of defaults and bankruptcy would enter this process. Fast-forward 7 - 12 years from now a large portion on these same knuckleheads are now having these issue dropped from their credit records and thus “may” be back into a somewhat positive credit rating area and decide, “woohoo, time to buy again I don’t want to be late to the party like I was last time” or worse they’ll jump in again at the tail end of the next great housing bubble. Dragging it out has the potential of staggering these folks’ reentry into the big-ticket purchase arena and limits their impact down the road?
Of course all of these people might learn their lesson and use the 7 - 10 years to change their spending habits/priorities, save as much as they can, and position themselves to actually be able to afford it so a quick crash might be painful for the near future and much better in the long run.
Who knows, maybe it just doesn’t matter either way.
Don’t forget lending standards will be much stricter and forget subprime, its gone. Thus those who got foreclosed 10 years ago may not be able to “qualify” for financing and very well may be stuck as lifelong renters. Those are the kind of people who don’t deserve a house, sorry to say.
Trust me those same knuckleheads still won’t have any downpayment or closing cost money.
Then no mortgage for them. You will be needing 20% down
I’m living in an REO. The landlord was foreclosed on. I was the tenant. The house is now owned by Wells Fargo via Option One. WF bought house back at auction for $741,000 and change. House Zestimates at $904,000 after a drop of $18,000 from last month. We would like to purchase the house (for around $750,000) but the realtor/broker said that policy dictates the house must be vacant before a listing price can be determined through appraisal. The bank will then list/market the house in an effort to obtain full market value. If we would like to make an offer then(after moving out), we are welcome to. Of course that is ludicrous and we are trying to negotiate while being stonewalled. When I say we, I mean finacee and me. We both have FICO scores above 700 and have amassed close to $35,000 for a downpayment. Any tips, ideas or suggestions would be appreciated. BTW, We’re in L.A.
That’s BS I have sold quite a few REO’s to tenants. Some with far less FICO scores than yours. If I were you and if you have the nads to go it alone. I would submit an offer directly to the bank. Call WF locate the R.E.O. department locate the person in charge of that property and fax him an offer. The agent may not even have a listing at this point if he doesn’t have a sales price to quote. He may have just sent in a BPO and wishing he gets the listing. If you can find some comps to assist your case all the better.
So you are willing to take on a 700K mortgage? You guys must have some major income. You’re talking 4500 for just P&I. Probably another 600-700 of tax and insurance.
T and I probably more like 900 to 1000
… or 2000 if the property is in Florida.
It’s not very wise to sink yourself in that kind of debt with only 5% down and a falling market. You don’t want to end up being the greater fool.
Am I reading this right? You guys amassed $35K for a down payment on a $750K house? If this is true, I’m speechless. I’m still giving you the benefit of the doubt i.e. typo. You meant to say $350K.
Cinch
Whatever your downpayment, why volunteer to be an FB. Sit tight, enjoy renting, and don’t think about buying again until the price is under 600k. Then sit tight, enjoy renting and don’t think about buying again…until at least the 2008 resets start. Or, you could just take your 35k and start a bonfire in the front yard.
If the bank wants you out, then leave and find some other landlord to rent from. Do NOT pay $750k for this house or you will be next in line to get foreclosed. I hope you learned from your landlord’s mistake. $35k is NOT enough of a downpayment that isnt even 5% and besides house prices are going down fast! I bet that house will be under $500k in a year or two at most.
If you choose to ignore our advice and buy the house, you will meet the same fate as your landlord.
You have 35K down payment for a 750K?? Are you on drugs? try more like 20%.
“Any tips, ideas or suggestions would be appreciated”
ok..
Someone who’s ready and able .. and can fathom the real and potential impact of borrowing anything near 3/4 of a million bucks would not have used the word “amassed” in conjunction with something less than $35,000.
Not to mention (fiance’). Serious enough decision all else considered. Rent\Save\Get married (if you must), then buy.
Dude. Yeah, I’m with pretty much everyone else replying here. If it took some work for you and your wife to accumulate 35k, (1) you got no bidniz getting into a 750k mortgage and (2) closing costs will leave you at zero equity…if you’re on this site, are you really counting on value appreciation to float your equity boat? Take a look at the recent posts regarding FL and Sac, they’re ahead of the pack and still gaining steam. How will you feel when LA is where they’re at now, you’re 200k underwater on that place and the market is still falling? I’d keep amassing if I were you, soon your 35k will be more than closing costs and if you keep amassing you’ll start out with some equity and a place that isn’t so over-priced…
I agree with everybody above that thinks you are out of your mind for 1) trusting Zilllo, 2) thinking 35K is “amassing”, 3) trying to deal with a realtor - who’s prime interest is to get the most amount for the house possible (see NAR’s rules) 4) Believes that they can pay PITI for the same as renting or even marginally close 5) having been on this blog and aware of the national news that you believe the collapse is almost over. We are in the first inning of a nine inning game. My advice rent, let somebody else be a bagholder.
I recommend this. You know those movies where, in the basement of the house there is a portal to hell or something like that. yeah. Get out. Get out NOW.
That dump you’re living in was selling for 300,000 7 years ago and will return to near that value.
I tried to warn a friend of mine not to buy last year, but he did. Now he got a new job and has to move and will have to bring 30k to the closing.
You’ve been warned. Don’t whine about how you didn’t know when you find out you’ve committed financial suicide. Oh and it was a he and his fiancee deal too (they subsequently got married). Now she’s blaming him when all along it was her nagging to buy that made him do it. I wonder how long this marriage is going to last when she realizes how much they lost and how it was all his fault and all.
One last forgot to mention. Bank wants us out yesterday. Already served Unlawful Detainer notice this week. We respond on Monday.
If you have an attorney helping you file an answer, also have him construct an offer to send to the R.E.O. Manager. I’m not a lawyer but I would also see if he can incorporate the fact you want to buy it in the answer. That’s just a suggestion I don’t know if it will work our not. But if you want the house it’s worth it to float by him and see what he says.
This is why we rent from an apartment complex, rather than risking getting mixed up in a foreclosure mess. If you are already at the point of being served with an unlawful retainer, your credit is screwed, and I doubt you have a 700+ fico any more. You could wage war with the bank, but you were most likey given a 30 to 60 day notice to vacate, so you will be on weak turf. Sorry to hear you ended up in this mess, it is all part of the collateral damage done by this massive bubble.
“…If you are already at the point of being served with an unlawful retainer, your credit is screwed,..”
Simply not true, This doesn’t affect your credit score until the bank actually gets a judgement. I don’t know all the circumstances of his particular case. But he’s still somewhat in the drivers seat. If he answers the unlawful detainer he has a lot of room and time for negotiating with the bank without any dings to the credit.
I vote that we change the acronym REO to BORE( bank owned real estate).
Yeah what does R.E.O mean anyway? REO speedwagon was a 1970/80’s rock band.
Serious question - If a property does not get bids and or sold by the county it goes back to the bank. Is this the only time that the county will try to auction it? Also if the banks sit on these houses for even a few months are they not going to get vandalized? If this is true how will they ever get the mortgage amount for these houses? It sounds like a lot of banks are gonna have a lot of losses to write off.
waman–first, it’s not the county (except in the case of tax sales). It’s the note holder (bank, fund, private individual that carried back paper) that ends up taking it back. Yup, damned straight that they gt vandalized, have overgrown/unkept yards, turn into crack houses. But to my understanding, at the initial Trustee sale the note holder can’t take less than the amt due+fees. Afterward, they can take whatever pounding they can handle.
In the case of a mortgage that has been split into bonds, who ends up holding the bag on a foreclosure? Who actually owns it?
In 1953-54 when I was in the US Army we had REO trucks that we drove.
Ransom Eli Olds .. from whence the group REO Speedwagon took it’s name.
wiki.
Great advice. Thanks for the help.
PLEASE don’t do it. Even if you can easily afford it, the price will drop like a rock within two years and you’ll be upside down for a decade.
RE= Banks REO - I have friends at two different banks - the word seems to be out - “get these houses off our books by Dec. 31″. . .I think this September-December will see a huge write-off of houses by banks - they can’t keep 300 repos on the books forever.
300??? Try three hundred THOUSAND or more. Nationwide lenders have REO in every state of the union, and oftentimes more than 1,000 listings per state (on average) per lender, therefore it may be upwards of 300,000. I haven’t counted (who has?) but there are a whole lot of REOs being held.
There are several levels of bonus to this problem. Level 1: Keeping the houses in REO means the bank has that much less liquidity to make new loans, therefore the credit market tightens considerably. Level 2: As the market drops, these “assets” do too, which means they will be worth considerably less when they finally are dumped and swamp what’s left of the market - credit will tighten again as the bank gets less than it thought it would. Level 3: between tight credit and thousands of new listings, prices will plunge further. Level 4: the farther prices plunge, the less the CDOs and derivatives are “worth” therefore the more margin calls, repayment demands, and slashed credit lines will happen at the highest levels. This causes credit to become tighter than… tighter than… well, really, really tight. Level 5 - if what is being said above is true, and it may be true - banks may face regulations or requirements limiting the amount of time they can keep a property in REO before it becomes something else like a nonperforming asset and must be listed as such - then there will be a concerted push to get rid of them before Christmas, which may be simply impossible. What would a banker do if confronted by a choice between having an REO deemed “nonperforming asset” and realizing a 50% loss on the asset? We’ll see!
Please keep your hands and feet inside the vehicle until it comes to a complete stop!
By the way, REO = Real Estate Owned
KIA - You have spelled this whole problem out so well. Everyone knows that the best time of the year to sell a house is now past. In every year real estate sales get even slower in the fall and early winter. I cannot how the banks are going to avoid losing so much cash. When more and more learn this it will cause the stock market to crash and then the party is over if not already.
300??? Try three hundred THOUSAND or more. Nationwide lenders have REO in every state of the union, and oftentimes more than 1,000 listings per state (on average) per lender, therefore it may be upwards of 300,000. I haven’t counted (who has?) but there are a whole lot of REOs being held.
Agreed. Still seeking national chart. I’m guessing but the town I rent in North of Boston has maybe 10,000 homes and realtytrac shows 400+ bank owned and as many more in the pipeline.
Mark — that’s what I was thinking — that the banks will be increasingly motivated as their fiscal year-end approaches.
If those fools are bidding houses at overpriced retail values then what good are auctions? Foreclosed properties often are fixer uppers. I could just lowball 20 sellers and im sure at least a couple will reluctantly take me up on the offer and ill get a perfect condition house at a bargain price. But that time wont be till 2009 or 2010, that is when everyone will be desperate to sell before prices go down further. Complete opposite of buyers desperate to buy before they are “priced out”(LOL suckers)
I think this saga will unfold later this year or sometime in 2008 then there will be a rush to sell and every sell will lower comps and buyers will know they can wait for a better price or lowball the sellers “my offer is $xxxx, if you don’t take it, you will never see this offer again. House prices are crashing so decide wisely” and im sure many sellers will accept lowball offers which in turn lower the comps. Some are saying the bottom may undershoot itself before rebounding or staying sticky for years. Hopefully we never see a bubble again and we won’t as long as lending standards are strict.
If those fools are bidding houses at overpriced retail values then what good are auctions?
Oh, they’re plenty good. For the bank.
I’d just let it go at:
“my offer is $xxxx,”
and delete the “if you don’t take it, you will never see this offer again. House prices are crashing so decide wisely…”
If you have to tell it or explain it to them, you’re wasting your time.
When I sold real estate I discouraged all my buyers from buying REO or any foreclosed real estate. Tax sales included. Half the time the buyer really gets screwed, because the banks and sheriffs sales all say “as is” and they do NOT disclose any defects, even if they know there some. They didn’t live in the houses, so they don’t need to by law. House up the street from me had a bad septic, the whole neighborhood knew, but the buyers never knew until they moved in. If we’d known who the buyers were, we would have told them. They’re looking at $10-20K to put in a new one.
I posted a HUD repo in the Florida thread. HUD seems to do a pretty good property condition report, at least here in Florida. They don’t sugarcoat anything and the photos were pretty revealing.
Every day people ask me about REOs. I tell them that my bank does not have any, and then I explain that we did only prime loans, no 100% financing, and no negative amortization loans. I them give them our recorded phone line that they can call and find out (we actually have had a couple of REOs in the last year, but they are listed with local agents.)
I explain the foreclosure process and why they should not bid at the Trustee’s sale (no property inspection, competing against the pros.) The property then becomes an REO, and is listed for sale, close to market price. I do not believe that there are any screaming deals yet on these. We have to be closer to large inventories and desperation (when no one wants to even think about buying RE, like 1995 here in SoCalif.
Then they ask about short sales, thinking there are great deals on them. I explain that the short sale has to be approved by the lender/owner of the loan. This owner wants to get as much as possible from the sale, and if the sale price is too low, they will foreclose instead.
I know that we are nowhere near a bottom in this market, because people still think they can buy a bargain and make a killing “flipping/investing”. Many of these people are wanna-be investors/speculators. The pain in this market has not reached a point where it slaps these ideas out of their heads, like what we saw in the middle 90s.
On the sad side of things, many potential first time buyers want to buy but still cannot afford. Many of them think that there is some magic way to get a great price through short-sales, REOs, or Trustee Sales. I hate to burst their bubbles and see the disappointed looks on their faces. But most truly cannot afford to buy now, and really do need a significant drop in prices. I tell them to wait and watch.
Very informative post! A+++++
Some foreclosure websites tout great deals 50-80% off and houses as cheap as $10,000 is this a gimmic? As a FB, should I just try lowballing like 20 sellers(once we reach the bottom) and hope one takes that offer or will foreclosures be selling for next to nothing a few years from now as no one wants to buy?
There may be some good deals out there but is it where you want to live? Some of these ads are geared toward investors and are for bad houses in the worst areas of the worst cities.
As an individual buying a house to live in, you need to concentrate on the area you want, and can afford. Get to know the area. This means doing work, such as going to open houses, talking to agents, read the actual multiple listing pages. On the listing pages, it will mention short sale, bank owned, etc. And with a few mouse clicks, you can see what the person paid, and the balance of the loans on the house.
You will get a feel for the trends in prices, and can make an informed decision. Working with a good agent you can trust can help you in the process but you need to do your own research.
Bye FL:
Off-topic:
Considering all the McMansions, upgraded appliances, granite countertops, hardwood floors, etc., is the true market depreciation somewhat masked by the fact that the houses that are selling have much newer and more expensive features on average than those of ten years ago? There has been much talk about free upgrades given by builders but the same applies to previously owned homes.
Anybody here have a paid for membership at http://www.foreclosure.com ?
Bear Market’s Blues:
http://www.freerepublic.com/focus/f-news/1862655/posts
hmm.. 0.5 quadrillion
Unlike the story, I’d beware of the bank chosen REO real estate agent. The one I worked with buying a foreclosure a few years back attempted to royally screw me. She lied to me telling me she had already mailed me a signed contract when she actually had not and they were still out searching offers while I was getting inspections, etc. Luckily for me I had her on a recorded line telling me the contract was already signed when they came back wanting more money or a canceled deal.
Question:
What could account for Zillow showing the last sale for a particular house as occuring in 1987 when I know (?) for a fact it was sold last year. A friend put it up for sale.. supposedly it sold. He told me he sold it. He did move. There were all the trimmings of a home for sale.. signs and fliers..
forgot to add this guy is a flipper and is capable of anything.
It’s a free service, so how would Zillow profit by keeping sales info up-to-date? They’re probably doing the best they can to keep all info current.
oh..no.. i do trust Zillow.
it’s my friend I don’t trust. For all I know he didn’t actually own that house outright, but maybe had a piece of it.
I passed by once and the previous Sunday he had an open house .. 45 agents / buyers showed up. Not one offer.
anyway, i was wondering what sort of weird flipper-mentality convoluted possibilities there were for a house to be “sold” and yet not really sold… hmm.. maybe his partners bought him out when the house wouldn’t sell.
But perhaps Zillow just missed it.
I have seen a lot of houses that have sold but the sales didn’t show up on Zillow. Just about every time I went to the city web site and, sure enough, the sale is recorded there. I’ve even seen it happen for houses that sold 5 years ago, but Zillow insists the last sale was 10 years ago.
I think Zillow has some bugs to fix. Take any info from them with a grain of salt.
I concur, banks do not get it yet either. REO I looked at w/ a friend in late winter/early spring 07 was listed for 459k in a neighborhood where private sellers listed 500-520k. This pricing would make you think the bank gets it, but read on. REO agent was pretty straight forward, honest and did not seem to be hiding the ball (I was very suspicious until now). Agent said someone recently offered 450k, bank sat on it for 2 weeks. Bank told him when they listed it for 459k that 450k would be minimum acceptable bid, so he thought the sale was in the bag. Bank finally came back and told the agent to counter 475k. Buyer refused, deal fell through. Bank tells agent to list the place at 475k. I said well, based on that screw them. I’ve been getting e-mail update MLS listings from several agents. This one came up the other day, its still a REO and now lists for 469k. Its been almost 6 months!! They could have stopped the bleeding on this one way back then if they would have just taken the damn 450k & ran. Instead they’ve been on the hook for taxes, insurance, upkeep, HOA fees etc. So they just do not get it. Its a nice place in NOVA, but things just are not moving unless they price them like they were in early ‘04. Let them rot on the vine for a few more months. When its fall 07 and its looking like they’ll be stuck with the damn thing for over a year and into the winter months then they might realize 450k is reasonable, and maybe it will not be too late unless of course market conditions then dictate 400k!! HAHA!!