Monthly Archives: May 2008

Charge It to the House

She Works Hard for the Money — Donna Summer

HELOC abuse is just as prevalent among women as it is among men. With all the free money floating around, it is to be expected that a woman who wanted to have the finer things in life would become accustomed to a lifestyle well beyond her means. Today’s featured property is owned by a woman (as the decor makes obvious,) and she managed to borrow and spend herself out of her home. There is a certain Shakespearian Tragedy element to stories like these. Today’s seller made a series of bad decisions which lead to her downfall. How are we supposed to feel when we see these situations? Part of me is sad that this woman is losing her home, and part of me is not sad because she brought this fate onto herself (and I suppose a little schadenfreude is mixed in as well.) The emotions we all feel when confronted with these stories serve to teach us all not to do what she did.

434 Monroe Kitchen

Asking Price: $357,642IrvineRenter

Income Requirement: $89,410

Downpayment Needed: $71,528

Monthly Equity Burn: $2,980

Purchase Price: $174,000

Purchase Date: 6/26/1998

Address: 434 Monroe, Irvine, CA 92620

Beds: 2
Baths: 3
Sq. Ft.: 1,142
$/Sq. Ft.: $313
Lot Size:
Property Type: Condominium
Style: Townhouse
Year Built: 1985
Stories: 2 Levels
Area: Northwood
County: Orange
MLS#: S534175
Source: SoCalMLS
Status: Active
On Redfin: 1 day

New Listing (24 hours)

Gourmet Kitchen Award BEST VALUE IN IRVINE AND MAYBE IN SOUTHERN CALIFORNIA!!!! PRICED FOR
QUICK SALE!! Fantastic value on this 2 bedroom, 2.5 bath, two story
townhome with 2 direct access car garage through private patio. Open
and airy floor plan. Fireplaced family area and kitchen with granite
counter tops, upgraded appliances, and plumbing fixtures makes for a
gourmets dream. Laminate and tile floors. Show and Sell Today!!!!!

The exclamation points are back. Hurray!!!!!!

Fireplaced family area? WTF?

gourmets dream? (needs an apostrophe) Does that mean I can use the gourmet kitchen graphic?

So how often did this woman go to the housing ATM? Let’s look at the bullet point recap:

  • The property was purchased for $174,000 on 6/26/1998 with an FHA loan of $165,900 and a $8,100 downpayment.
  • On 10/31/2001 the first sip of kool aid was a refinance for $180,000 pulling out her downpayment and an additional $6,000.
  • On 6/4/2002 she opened a stand-alone second for $28,000.
  • On 8/20/2003 she refinance for $189,000.
  • On 12/30/2003 she opened a HELOC for $101,000.
  • On 6/8/2004 she opened a stand-alone second for $8,000.
  • On 9/22/2004 she opened a stand-alone second for $40,000.
  • On 12/30/2004 she refinanced for $350,000.
  • On 2/1/2005 she opened a HELOC for $64,000.
  • On 12/9/2005 she opened a HELOC for $10,500.
  • On 9/26/2006 she refinanced with an Option ARM for $422,400.
  • On 9/26/2006 she opened a stand-alone second for $52,272.
  • On 7/12/2007 she opened a stand-alone second for $5,300.
  • Total debt on the property is $422,400 + $52,272 + $5,300 = $479,972.

That is quite a finance history. Her return-on-investment is excellent. She put in $8,100, got it back in 3 years, plus she took out and additional $305,972.

If this property sells for its asking price, her lenders, Washington Mutual and Apex Mortgage Services stand to lose $99,501 after a 6% commission on a property which would be selling at a profit of $183,642.

The lenders were pretty stupid, weren’t they?

Thus concludes another week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.

🙂

.

She works hard for the money
so hard for it honey
she works hard for the money
so you better treat her right

She works hard for the money
so hard for it honey
she works hard for the money
so you better treat her right

Onetta there in the corner stand
and wonders where she is and
it’s strange to her
some people seem to have everything

Nine a.m. on the hour hand
and she’s waiting for the bell
and she’s looking real pretty
just wait for her clientele

She works hard for the money
so hard for it honey
she works hard for the money
so you better treat her right

She works hard for the money
so hard for it honey
she works hard for the money
so you better treat her right

Twenty five years have
come and gone
and she’ seen a lot of tears
of the ones who come in
they really seem to need her there

It’s a sacrifice working day to day
for little money just tips for pay
But it’s worth it all
just to hear them say that they care

She works hard for the money
so hard for it honey
she works hard for the money
so you better treat her right

She already knows
she’s seen her bad times
she already knows
these are the good times

She’ll never sell out
she never will
not for a dollar bill
she works hard

She Works Hard for the Money — Donna Summer

A Downtrodden Apartment

Little House — The Fray

The distress at the low end of the market doesn’t bode well for the high end. In a normal, healthy real estate market, small condos generally sell for the highest prices on a per-square-foot basis. When single-family detached homes where going for upwards of $400/SF, small condos were selling for $450/SF and up. Small properties cost more on a per-square-foot basis because the inexpensive square footage in bedrooms and living areas are much smaller, but the expensive square footage in kitchens and bathrooms are still present. Right now, in our market, the smaller condos are selling for much less on a per-square-foot basis than the larger, single-family detached homes. This situation will not persist. Either small condo prices will increase, or larger home prices will fall. I think it will be the latter.

189 Pineview Outside

Asking Price: $349,876IrvineRenter

Income Requirement: $87,469

Downpayment Needed: $69,975

Monthly Equity Burn: $2,915

Purchase Price: $424,000

Purchase Date: 8/4/2005

Address: 189 Pineview, Irvine, CA 92620

Short Sale

Beds: 2
Baths: 1
Sq. Ft.: 1,202
$/Sq. Ft.: $291
Lot Size: 760

Sq. Ft.

Property Type: Condominium
Style: Cape Cod
Year Built: 1977
Stories: 2 Levels
Area: Northwood
County: Orange
MLS#: S533137
Source: SoCalMLS
Status: Active
On Redfin: 9 days

Fixer-upper

Resort Like Area! Open Floor Plan. Good size Kitchen with Bay
Window.Enjoy View of Streaming Water!! Kitchen overlooks Formal Dining
and Living Room. Living Room with High Ceiling and Cozy Fireplace.
Enjoy the soumd of Bubling Water while Relaxing in Patio.Watch the
Ducks swiming and walking around! Laundry Area in patio. Spacious
Master Bedroom with two closets; one mirrored ,one walking, Separate
Vanity with two Sinks in dressing area.Full bath with tub upstairs, and
Half a Bath in first floor. Second bedroom is large enough for 2 beds!!
One Carport and one assigned parking. Associations dues include water.
Enjoy the association facilities;Pools ,Tennis Courts,ClubHouse, BBQ.
Minutes from Freeway 5,Walk to Shopping Center, Elementry School and to
Award Winning Norhtwood High School. Property needs some TLC.

One Carport and one assigned parking. That’s desirable…

Guess what? This property was purchased with 100% financing by a flipper. The music stopped playing, and he couldn’t find a chair. First Franklin is the big loser today. If this property sells for its asking price, First Franklin stands to lose $95,116. This sales price would leave the first mortgage unharmed, but it will wipe out the second. Some knife catcher might buy it for that, but it is still grossly overpriced even for an owner-occupant.

It is interesting to watch this first wave of knife catchers. These people have no concept of what a property is really worth. They are just as kool-aid intoxicated as the fools who bought during the bubble. As this group also gets their heads handed to them, the market will be open to a another significant leg down. I would look for this in the fall after the “spring slide” (there was no rally just a brief flattening.) When this group of buyers is exhausted, there will be very little support below the market, and there will be a huge number of foreclosures to absorb. This fall and winter should be very interesting.

.

She doesn’t look, she doesn’t see
Opens up for nobody
Figures out, she figures out
Narrow line, she can’t decide
Everything short of suicide
Never hurts, nearly works

Something is scratching
Its way out
Something you want
To forget about

A part of you that’ll never show
You’re the only one that’ll ever know
Take it back when it all began
Take your time, would you understand
What it’s all about?
What it’s all about?

Something is scratching
Its way out
Something you want
To forget about

No one expects
You to get up
All on your own with
No one around

Little House — The Fray

Another Flopper

Crumbling Down — John Mellencamp

Today we continue with our daily grind of speculators giving up. The featured property was purchased in 2005, then as much money as possible was taken out of the property, and the lender is left holding the bag.

73 Reunion Kitchen

Asking Price: $474,000IrvineRenter

Income Requirement: $118,500

Downpayment Needed: $94,800

Monthly Equity Burn: $3,950

Purchase Price: $545,000

Purchase Date: 12/15/2005

Address: 73 Reunion, Irvine, CA 92603

Short Sale

Beds: 2
Baths: 2
Sq. Ft.: 1,099
$/Sq. Ft.: $432
Lot Size:
Property Type: Condominium
Style: Mediterranean
Year Built: 2003
Stories: Split-Level
View: Mountain
Area: Quail Hill
County: Orange
MLS#: S534044
Source: SoCalMLS
Status: Active
On Redfin: 1 day

New Listing (24 hours)

Highly upgraded Quail Hill condominium. Warm, charming and very well
kept. Granite kitchen countertops, stainless appliances, California
Closets, fireplace, dual master bathroom sinks, and so much more. End
unit with no one above or below. Largest two car garage of the tract.

Do you get to the point when you read a property is “highly upgraded” you think it is complete BS? Oh wait, I guess this guy put in pergraniteel.

This flopper bought the property in late 2005. He borrowed $408,750 with an Option ARM, a HELOC for $81,750 and put $54,500 down. Of course he quickly opened another HELOC 2 months later for $110,000 and 2 days after than, another was recorded for $61,250. Assuming he paid off the first HELOC, the total debt on the property was $580,000. Basically, this guy made $35,000 in his first two months of ownership. Perhaps he spent this on pergraniteel, who knows. In any case, he has none of his own money in the deal.

Even with the short sale, this asking price at $432 / SF is ridiculous. When this sells it will be under $400/SF, and probably well under it. If this sells for asking price, the HELOC lender (Wells Fargo) is going to lose $134,440. The borrower will only lose if the lender comes after him — maybe later…

.

Some people ain’t no damn good
You can’t trust ’em, you can’t love em
No good deed goes unpunished
And I don’t mind being their whipping boy
I’ve had that pleasure for years and years
No, no I never was a sinner-tell me what else can I do
Second best is what you get-till you learn to bend this rules
Time respects no person-what you lift up must fall
They’re waiting outside-to claim my crumblin’ walls

Saw my picture in the paper
Read the news around my face
And now some peopkle
Don’t want to treat me the same

When the walls come tumblin’ down
When the walls come crumblin’ crumblin’
When the walls come tumblin’ tumblin’ down

Some people say I’m obnoxious and lazy
That I’m uneducated and my opinipn means nothin’
But I know I’m a real good dancer
Don’t need to look over my shoulder to see what I’m after
Everybody’s got their problems-ain’t no new news here
I’m the same old trouble you’ve been having for years
Don’t confuse the problem with the issue, girl,
‘Cause it’s perfectly clear

Just a human desire to have you come near
Want to put my arms around you
Feel your breath in my ear
You can bend me You can break me
But you better stand clear

When the walls come tumblin’ down
When the walls come crumblin’ crumblin’
When the walls come tumblin’ tumblin’ down

Crumbling Down — John Mellencamp

Apartment for Sale

The Apartment Story — The National

This crash is going to take a long time. Even with the record number of foreclosures and speculators giving up en masse, there are still more speculators giving up every day. It seems there is a never-ending supply of 100% financing deals gone bad. This isn’t that surprising when you think about it. Every speculator has a unique financial situation and a unique stubbornness when it comes to admitting a mistake. The combination of these factors means that some will hold on longer than others, so we will continue to see these people give up one-by-one for some time to come. They will all give up, and when they do, they add more fuel to the fire burning down our housing market. Even if some of them manage to avoid foreclosure, they will sell when they get back to breakeven to get out of the bad investment. There is no way prices will consistently rise again until all these people have been flushed out of the market. With each passing month, we get new foreclosure records, so the process is in full swing.

so worry not, all things are well, we’ll be alright, we have our looks and perfume…

205 Tarocco Inside

Asking Price: $295,000IrvineRenter

Income Requirement: $73,750

Downpayment Needed: $59,000

Monthly Equity Burn: $2,458

Purchase Price: $399,000

Purchase Date: 10/12/2006

Address: 205 Tarocco, Irvine, CA 92618

Short Sale

Beds: 2
Baths: 1.75
Sq. Ft.: 951
$/Sq. Ft.: $310
Lot Size:
Property Type Attached, Condominium
Property Style: Contemporary
Year Built: 1983
Stories: 1 Level
View: Park Or Green Belt, Trees/Woods
County: Orange
MLS#: S08056061
Source: MRMLS
Status: Active
On Redfin: 39 days

Short Sale Price Reduced by $24,000. Lender has agreed to an Affordable
$295,000 for this beautiful Light and Bright upper level condo unit
with 2 Beds & 1.75 Baths looking down on peaceful views of
greenbelt and trees, in a great cul de sac location in Irvine, close to
UC Irvine, Irvine Valley College, Irvine Spectrum, golf & shopping.
Spacious living room, cozy kitchen with dining area. Two balconies: One
off the entrance and the other off the master bedroom; Mirrored
wardrobes, dressing area in master bedroom, with enclosed storage area
downstairs. New roof on unit & carport & recently paved
driveway. Excellent layout for family or roommates. Complex is well
maintained and has community pool and spa.

Like I care how much you reduced the price? Ohhhh, the lender has agreed… how nice of them.

.

.

This is an apartment. I don’t care how they classify its ownership, it is an apartment — and not a very desirable one. The only reason you own an upstairs 2/2 with a carport is as an investment. If you are an investor who understands real estate (that excludes stupid speculators betting on appreciation,) then you will demand a positive cashflow. This probably rents for about $1,700 a month, and the dues are a very high $370, so it is probably worth $140,000 to $175,000. Some knife-catcher will pay more, and they will get burned. What does all this say about the guy who paid $399,000? Not much really: he used 100% financing and passed all the risk on to the lender, People’s Choice Home Loan, Inc. If this property sells for $295,000 and a 6% commission is paid, this lender is going to lose $121,700 plus carrying costs on a tiny 2/2 after only 18 months. What does this say about the lender?

.

Be still for a second while I try and try to pin your flowers on la la la la
Can you carry my drink I have everything else
I can tie my tie all by myself
I’m getting tied, I’m forgetting why

Oh we’re so disarming darling, everything we did believe
is diving diving diving diving off the balcony
Tired and wired we ruin too easy
sleep in our clothes and wait for winter to leave

Hold ourselves together with our arms around the stereo for hours, la la la la
While it sings to itself or whatever it does
when it sings to itself of its long lost loves
I’m getting tied, I’m forgetting why

Tired and wired we ruin too easy
sleep in our clothes and wait for winter to leave
but I’ll be with you behind the couch when they come
on a different day just like this one

We’ll stay inside til somebody finds us
do whatever the TV tells us
stay inside our rosy-minded fuzz for days
We’ll stay inside til somebody finds us
do whatever the TV tells us
stay inside our rosy-minded fuzz

so worry not
all things are well
we’ll be alright
we have our looks and perfume

stay inside til somebody finds us
do whatever the TV tells us
stay inside our rosy-minded fuzz

so worry not
all things are well
we’ll be alright
we have our looks and perfume on

The Apartment Story — The National