Today we have a flipper in Northwood II trying to make a quick $125K. Will he get it?
Irvine Home Address … 27 Secret Gdn Irvine, CA 92620
Resale Home Price …… $949,000
{book1}
I leave you with photographs
Pictures of trickery
Stains on the carpet and
Stains on the scenery
Songs about happiness murmured in dreams
When we both us knew
How the ending would be…
Disintegration — The Cure
Isn’t there a certain inevitability to the disintegration of the market? Isn’t foreclosure really the cure? The previous owners that had this house overborrowed and overpaid. The property is being recycled, and the new owners will borrow much less and will borrow with much more stable terms. It isn’t that the process is painless; it is the ending we know is coming, and it must simply be endured.
In the meantime… we have flippers trying to make a quick buck. Today’s featured property was purchased for $764,150 at auction. The flippers are trying to make about $125,000 after commissions for providing the liquidity that is required at auction. They can turn around and sell it in the financed resale market for 10% to 20% more, so they do.
I am sick of flippers.
I would rather see a family get a property like this at auction prices, but it is difficult to learn the process and research the properties to find deals — difficult, time-consuming and intimidating, particularly for novices, and the penalty for a mistake is tens of thousands of dollars.
Wouldn’t it be great if families with cash had a seasoned trustee sale buyer to help them? I am working on that one…
Irvine Home Address … 27 Secret Gdn Irvine, CA 92620
Resale Home Price … $949,000
Income Requirement ……. $174,666
Downpayment Needed … $189,800
Home Purchase Price … $764,150
Home Purchase Date …. 9/24/2009
Net Gain (Loss) ………. $127,910
Percent Change ………. 24.2%
Annual Appreciation … astronomical%
Monthly Mortgage Payment … $4,076
Monthly Cash Outlays ………… $5,430
Monthly Cost of Ownership … $4,090
Redfin Property Details for 27 Secret Gdn Irvine, CA 92620
Beds 4
Baths 2 full 1 part baths
Size 3,069 sq ft
($309 / sq ft)
Lot Size 4,820 sq ft
Year Built 2005
Days on Market 2
Listing Updated 10/15/2009
MLS Number S592736
Property Type Single Family, Residential
Community Northwood
Tract Came
EQUITY SELLER, Not a short sale or REO. Corporate owned, free and clear. Bring your pre-approved buyers and close FAST! Gorgeous, like new home located in the gated community of Northwood. Shows like a model home. Fabulous kitchen with granite countertops and brand new Viking appliances including a new refrigerator. Huge Master Suite with large walk-in closet. Large studio over garage with separate entry. Travertine tile, hardwood flooring and upgraded carpet. Built-in stainless steel BBQ island in backyard.
Of course it is an equity seller; it is a flipper!
I would be ready to close fast too if I stood to make $127,910.
BTW, “flippers” may become the buzzword of 2010, and it isn’t house flippers….
I thought this house was interesting with the studio over garage. If it includes a small kitchen, this would be something I’d like to have for the grandparents on extended stays. Anyone know how many of these there are in Irvine? Seemed to me that TIC would refuse to build granny flats because of the perception it degrades neighborhood value. Or maybe you can negotiate getting one with the builder?
I don’t think that an upstairs bedroom/studio is really well-suited for grandparents (arthritis, bad hips, etc.).
Best would be a first floor bedroom
–Cheers
i have no problem with flippers making money on this if they can get stupid people to buy it at their listed price. With the amount of info out there. if an ignorant buyer seeing a house was sold for 120k less in one month buys at this price the next month.. they deserve to lose the 120k.
They do provide a service of sorts. Say you have 20% down, or maybe even just the FHA 3.5%. You can’t buy a property at a foreclosure auction with that little down; you need 100% cash to do that. So, you have to pay a bit extra to a cash buyer-who does take on significant risk in doing this. Flipping is highly dangerous if you screw up-you can lose quite a bit of money.
FHA financing is not allowed for any property purchased if the sales contract is dated within 90 days of the prior close of escrow. It’s referred to as the FHA 90 day rule. Hey, on the bright side this keeps some FHA loan form being originated because guess who’s going to walk as prices sink due to having no skin in the game.
I realize its a small percentage, but 3.5% of 900,000 dollars is still 30k + the extra PMI you have to pay on an FHA loan… probably means someone went into it with 50k. To some people thats an awful lot of skin. Maybe not to people who qualify for a 900,000 dollar mortgage but …. considering the low savings rate of past years that could be someones entire savings account easily.
That doesn’t stop flipping at all. The flipper merely holds on to the property for 91 days before relisting it for sale.
How much is “a bit extra” for that service? $1k?
$120k extra seems like quite an expensive service to me, unless the same appreciation rate continues for a few months after you buy it. đ
Well, they also absorb the risk of the property being in poor condition, title problems, back taxes, that sort of thing. Frequently they make repairs as well.
But, yeah, it is a large fee for said service. I’m kind of surprised that somebody (a bank or more likely a non-bank entity of some sort) hasn’t started making loans (with high interest rates) to allow people to buy foreclosure auction properties directly without the full cash amount already available, to short circuit this type of flip.
“tea-party”
That says all I need to know about the link in this post. Non partisan, not about republicans? PUHLEASE!!!!!!
Its sponsored Faux News as is most of the tea party crap this country has had to quitness. Have you SEEN the kind of trash that follows the “tea party” circuit? Racist, bigoted, moronic fools who vote against their best economic interests because they feel a bond to an over paid, fake crying, rich dork on Faux News.
Don’t hold bac now. Tell us how you really feel?
If you want to pay more taxes you can send the IRS as much money as you want.
Hey if you say Faux enough people might overlook how absurdly in the tank the Communist News Network is…Oh, wait, no they won’t.
Fact checking SNL. Jiminy Christmas!
Gindy51, its nice to hear from obama-bots on this post every once in while. Glad to see CVS was open to fill your latest round of prescription drugs that I have noticed most neo-libs are on.
all hail obama the magnificent!
LOL!
I was thinking the same thing when I saw this site. People shouldn’t accuse the IHB of being partisan. If I find right-wing causes funny, interesting or exciting, I will feature them.
One thing I find amusing about this “flip this house” ad campaign is how it harkens back to the good ol’ days of 2004-2006 when the Republicans ruled the world and the housing bubble was driving our economy. Is this a message that will resonate today? Are people still in denial to the point they want to bring back the world as it was during a Ponzi Scheme?
Nation’s Morons March On Washington State
it is ok for the government to Faux you while bailing out the ones who created this mess in the first place…i get to choose if want to see faux news or ignore their drivel, the govt just faux’s me doing the right thing, not even a ‘may I faux you’ or a ‘thank you’ in return..peace đ
Waiting for the Next McMansion to Drop
By JAMES R. HAGERTY
WSJ
Despite some tentative signs of recovery, the U.S. housing market remains vulnerable to further price dropsâespecially in areas where large numbers of mortgages are headed toward foreclosure over the next few years.
The Wall Street Journal’s quarterly survey of housing-market data in 28 major metro areas shows sharp drops in the number of homes listed for sale across the country. But the potential supply of homes is far larger because banks are likely to acquire significant numbers of foreclosed homes in some areas, notably Las Vegas, Atlanta, Detroit, Phoenix, Miami and other parts of Florida, and Sacramento, Calif., over the next few years.
Sales of those homes may depress prices further. By contrast, metro areas with relatively low foreclosure and mortgage-delinquency rates include Boston, Denver, Minneapolis, San Francisco, Seattle, Raleigh, N.C., and Portland, Ore., making them less vulnerable.
Homeowners and potential buyers have been whipsawed by conflicting signals about the state of the market in recent months. Ulani and Mike Thiessen found the market surprisingly hot when they went shopping for their first home in Las Vegas during the summer. With the help of Kim Kelly-Reed, an agent from One Source Realty & Management, the Thiessens finally bought a foreclosed house in September for about $136,000âbut only after being outbid on three other houses.
“It’s a crazy market out there,” says Ms. Thiessen, who works for an electrical contractor.
Despite a continuing surge in defaults, there is a shortage of well-preserved foreclosed homes on the market in Las Vegas, Sacramento and some other metro areas where first-time home buyers have been competing with investors for newly affordable properties. “Anything under $300,000 that is decent within hours has dozens of offers,” says Michael Lyon, CEO of Lyon Real Estate in Sacramento.
The supply of foreclosed homes listed for sale has dwindled largely because of government-mandated efforts to save as many borrowers as possible from losing their homes. That campaign has gummed up the foreclosure process, slowing the flow of houses into bank ownershipâbut only temporarily.
Over the next few years, housing analysts believe, millions of other homes are heading for bank ownership, but no one can say how long that will take or when a sudden torrent of bank-owned properties may swamp certain local markets.
Nearly 27% of first-lien home mortgages are at least 30 days overdue or in foreclosure in the Miami-Fort Lauderdale area, according to research firm LPS Applied Analytics in Denver. The rate is 23% in Las Vegas, but about 8% in Denver and Seattle. The national average is 12.4%, up from 5.2% at the end of 2006.
Among the millions of homeowners whose fate remains undecided are Jill and Robert Loy, who live in Scottsdale, Ariz. They bought their home in 2004 for $630,000 but figure it is now worth only about $350,000, well below the $470,000 owed on their mortgage.
Falling Behind
The couple fell behind on their loan payments last spring when Ms. Loy was temporarily jobless, and they have been trying to work out a modification of their loan terms with the company that collects payments on their mortgage, Colonial Savings FA of Fort Worth, Texas. A Colonial spokeswoman says the bank is trying to help the Loys.
The housing market is heading into the winter doldrumsâwhen fewer people shop for real estateâafter a summer marked by strong demand for low-end to midrange homes, spurred by a temporary federal tax credit for first-time buyers. How the market fares in the spring will depend largely on the state of the economy and the pace of foreclosures.
“The number of people receiving paychecks will drive the demand for houses and apartments,” Jay Brinkmann, chief economist for the Mortgage Bankers Association, said Tuesday in testimony to the Senate Banking Committee, “and the recovery will begin when unemployment stops rising.”
For now, the market seems to be stabilizing, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. But if the job market gets much worse and mortgage rates rise sharply, “that could be the tipping point” for another drop in prices.
Mark Zandi, chief economist at Moody’s Economy.com, predicts that average national home prices will bottom out in next year’s third quarter, assuming that employment begins growing again in mid-2010. But prices in some metro areas still have a long way to fall, he believes. Prices in the second quarter of 2010 will be down about 30% from a year earlier in Miami, 27% in Orlando, Fla., 24% in Las Vegas and 23% in Phoenix, Moody’s Economy.com forecasts.
Foreclosures and short sales (in which a home is offered for less than the mortgage balance) dominate the markets in some metro areas. Satish M. Mansukhani, a market strategist in New York, estimates that such “distressed” homes account for 79% of home listings in the Detroit area and 75% in Las Vegas, but just 16% in Houston and 7% in Boston.
One big question is how much more the federal government will do to prop up housing. Congress is debating whether to extend the tax credit for home buyers beyond Nov. 30. Meanwhile, the Federal Reserve is phasing out its massive purchases of mortgage-backed securities and plans to conclude the program by the end of March. Those purchases have helped keep interest rates on 30-year fixed-rate mortgages around 5%. Mr. Zandi says mortgage rates are likely to rise as much as one percentage point after the Fed ends that support. Analysts at Barclays Capital in New York forecast mortgage rates will be slightly over 6% by the end of March.
High-Priced Home Glut
While supplies of moderately priced homes have shrunk, there is still a glut of high-priced houses in many areas, suggesting that prices on those properties may fall sharply as more owners default. In Sacramento, there are enough homes on the market at $600,000 and above to last more than 15 months at the recent rate of sales, compared with just 1.5 months for homes priced at $300,000 and below, according to Lyon Real Estate.
Home sellers will also face tougher competition from landlords, who generally have been cutting rents in the past year. The national apartment-vacancy rate in the third quarter was 7.8%, the highest in 23 years, according to Reis Inc., a New York research firm. It predicts “a few more quarters of distress, lower rents and higher vacancies.”
Apartment rents may face further downward pressure as investors buy foreclosed single-family homes and turn them into rental units, says Ryan Severino, an economist at Reis, who notes that there is little data on the number of houses being converted into rental properties.
I am not sick of flippers. I am sick of leveraged amateur flippers, and only because their mistakes are costing all of us, not just themselves and the lenders. Truth be told, even the fact that the taxpayers are paying for some of this mess is the taxpayers fault. But, I digress.
I admire the professional flippers. They pay cash at auction and take all the risk on themselves. The flippers who can smell a bargain will do well. Those who make too many mistakes will find another career. If the professional flipper makes a profit, all the power to him/her. If they lose money, so be it.
Risk has its rewards and its punishments. Why do folks resent flippers? Do they think the flipper has made the property more expensive? IMO, the expense added to the price of the home by the flipper is the normally unseen cost of financing. No one wants to talk about it, but home prices would be much, much, much, much less if folks were not able to finance 90%, or 80%, or 95%, or 100%, or 50% of a home’s cost. Why blame the flipper? The extra cost is truly the fault of people’s desire to have their home now and pay for it for the next thirty years.
One more thing. I have noticed that professional flippers are very realistic about market price. Their asking price is usually very close to what the home sells for and if they do not get offers quickly, they lower the price quickly until they get an offer. The pros have no ego or hope involved.
I applaud the flippers.
I gotta agree with Awgee on this one. They are taking the risk. Its a free market, have at it.
Though, I wish I had more cash to purchase at auction prices. We are talking a huge liquidity premium that is painful to consider.
Actually, I agree with awgee’s points as well.
Logically, flippers should be seen as people in business risking capital to make gains.
Emotionally, these are parasites who step in and bid up prices so families pay more.
The professional flippers and rehabilitation experts provide a valuable service, and they should make be able to make a good living. They add value.
The fool who buys a stucco box and keeps it empty for six months while he tries to sell it for a quick profit does not add value, and if there were fewer of those flippers in the market, prices would be less volatile, and families would pay a lower price.
One of the signs we are at the bottom is when flipper activity is nil because prices are not moving and they have been stagnant for a very long time.
Thereâs absolutely nothing to applaud.
What risk?
Most of the âflippersâ operating in Irvine and Tustin are using investor funds and very little of their own personal capital.
Theyâre pooling investor money to buy at auction and hoping to make a quick buck on some unsuspecting buyer.
Thatâs not adding value in my book, but being greedy.
Iâd rather see this home sold at a lower price point to a family.
If there is not risk, are you doing it?
Itâs not something Iâm really interested in nor is it my area of expertise.
If it was, then sure Iâd line up investors and pool their money together and get after it.
Like I said from what Iâve seen and heard most of these flippers are comprised of investor pools, and not one guy showing up at the courthouse steps with a $1M cashiers check of his own money.
Not your area of expertise, yet you know enough to know there is no risk? And you know that the flippers organizing the investors pools are using very little of their own capital? You sure sound like an expert.
As an investor, I get pitched deals all day long.
Not sure if that makes me an expert.
Either way, there are a number of flippers buying at auction using OPM.
I guess we will just have to take your non-expert investor word for it.
The risk includes:
1. Not being able to sell the property for a profit.
2. Unexpected problems with the property requiring repairs.
3. Unexpected title issues with the propetry.
4. Unexpected back taxes, HOA fees, liens, etc.
There’s no escrow or inspections at an auction. It’s cash only, no warranty. You probably can’t even see the inside of the property before purchasing it. Very risky if you don’t know what you are doing.
Geotpf,
I knew about back taxes, but I though past-due HOA fees and 2nd’s were wiped out.
I’m I mistaken about HOA and 2nd’s?
Are mechanics liens wiped out?
Do the original owner have a grace period to reclaim the property for a trustee sale?
I think they might from a tax sale.
I have thought more than a few times of taking some cash and Graphrix down to the courthouse and picking up a property that I “know” is a good bargain. But, I haven’t. Because no matter how much I think I “know”, putting out cash is a HUGE risk, and it is a HUGE risk I do not have the stomach for.
Sounds like you understand the service TDS flippers provide. One unrecorded lien on a property you just thought you stole on the auction block can be very educational.
Million $$ house….$20 pictures. What is the deal here. Those are some of the worst pictures I have seen (except for the self portrait with flash in the mirror ones). I mean come on….a couple shots of the corner of a room, the center of the bathroom. The problem I have with Flippers is that they often consider themselves contractors, interior designers, architects and now, apparently, photographers. They have sucked the character out of most California Ranch and Mid-Century homes and created cookie cutter Home Depot specials that appeal to the masses and do nothing for neighborhood individuality. This is just a simple arbitrage flip so the house was probably never touched (except for the new refrigerator!!!). If you are able to make over $100K in the course of 2-3 months, HIRE A PHOTOGRAPHER!!!!!
Off topic, I know, but I have been checking out the Foreclosure posting in the OC Register (http://www.mypublicnotices.com/orangecounty/PublicNotice.asp)
and they have jumped dramatically in the last 6 weeks. During the summer months they were running in the 40’s and 50’s. Last month started creeping up in the 70’s and today there are 94 foreclosure (auction, or at least threatened auction) announcements. Anecdotal, maybe, but that is a big jump. If most of these would actually be auctioned off we would get somewhere.
Hopefully the banks let these properties go, the first time credit dies, and the fed exits the MBS markets as they have promised. Then finally I can look at buying a property or 2 or 3.
An auction flipper uses all cash and risks their own money (100% down). They may buy a trashed house, defective house, house with squatters, ….The auction buyer has little to no recourse. They buy to get a good bargain and want to sell quickly.
A tax-subsidied flipper borrows money, buys at nearly any price (since it not his money with nearly nothing down), tried to sell at xx% over the purchase price. If the sales fails, rent it until you can walk away. With nothing down, the bank or taxpayer will be left holding the bag.
I’m glad to see negative and 0% down gone. Only wish FHA’s 3.5% prime and 10% subprime would also go way. The govt is trying to reinflate the housing bubble and change the bank’s toxic assets to the taxpayers’ toxic assets.
IrvineRenter,
On the FC owner, they purchased for $1.2 million on Redfind. What was their down and final loan amount? In other words, how much did the taxpayer lose on the loans?
Will you be giving a blog on buying at auction?
I didn’t look into it until you asked. The previous owners borrowed $895,650 and put almost $298,850 down. Ouch! That would really suck.
I am working to find an experienced trustee buyer to hook up with potential owner-occupants with cash. I know there are all-cash buyers active in the resale market, and they are competing against financing buyers. Most will not try to bid at auction due to all the uncertainties and unknowns. If I can bridge that gap for people — put a skilled trustee sale buyer with a family bidding all-cash — I can put real families into homes for less than resale market price. I think that would be cool.
How much could an all cash buyer save over a buyer who needs financing? 2%? 5%? more?
Try 20-30%+
I think that is about right.
Wow…. I’m shocked. I had no idea cash would be that much of a motivator to the seller. I definitely don’t understand this concept well… I must research it.
That’s a fantastic idea. I’d love to buy my next home at auction but I’m still learning the ropes with trustee sales. PM me if you ever get this off the ground…
IrvineRenter,
For an auction purchase of the first, will the title be a clear title, i.e., other than tax liens are wiped out?
Is their an easy way to do the research on outstanding liens? In the mid-west, most are on the public database and one just goes in for the one that have not been scanned and codified.
There is a guy I know that has been buying foreclosed homes for the past 24 years. I had a brief chat with him two weeks ago. He seems like a very sincere man. I’m sure he will do all the dirty work for a fee if there are cash buyers willing to front the money.
Is new Irvine Co. home back to the future?
http://tinyurl.com/yzm4knx
O.C.’s priciest listing gets slashed by $8.5 million
http://tinyurl.com/yk87scc
Think I’ll rush out now to buy this.
Fed says foreclosures undermine Western recovery
http://tinyurl.com/yjnkvqw
So the Fed says foreclosures are still a problem, but an LAT article yesterday said they may never materialize.
Who’s right?
He is the same flipper who flip 29 Grape Arbor.
He sold 29 Grape Arbor $100,000 above comp price.
In the process of flipping, he drive up the costs of NWII from $300/SQF to $360/SQF.
If this flipper does not exist,
29 Grape Arbor and 27 Secret Gdn will become REOs
If we now have two REOs competing in open market, it would drive the price down.
I support to change law, that flipper can not sell house for 6 months after purchase.
Otherwise, goverment should levy flipper profits with 100% tax penalty.
Sorry, but flippers don’t set prices — buyers do.
Right. If nobody is willing to pay the inflated fee, the property will never sell.
Irvine rents down, vacancies up
http://tinyurl.com/yzx5pzl
Good luck finding someone to finance that property. FNMA/FHLMC do not have very strict anti-flip rules, but strong enough to require a gigantic down payment. Know many people who have big down cash lying around? Wait another 45 days and see what the price will be. W/O foreign investors who might pay all cash, this dead body might lie on the ground for a few months.
My .02c
Soylent Green Is People.
There’s just something about having your neighbor’s house 15 feet away that doesn’t quite jibe with the term “million dollar house”…. I guess that’s why I’m still on the sidelines….
And how is the income requirement only 175K? It used to be that you shouldn’t buy a house at more than 4x your income (in California — the rest of the country advises 3x max.) Personally, I wouldn’t want to buy something at over 2x, so I have some money left over and so I don’t force my spouse to work every day for the rest of her life. What if one person in a two-income family loses a job?
low rates dramatically alter the income requirements (cost of carry). Right now it is feasable to carry a loan ~5X income an still be within traditional affordability limits.
Exactly, in fact, I set up my posts in an excel spreadsheet now, and I have the income requirement to backward calculate assuming traditional financing and current interest rates. When I plug in 5% interest rates, the results are what you see.
I agree with Craig that it still doesn’t feel right to me, and I think this payment affordability is ephemeral, but it does make for an interesting phenomenon. As a market bottom indicator, price-to-income will likely be the least accurate this time around due to the government intervention.
Yup, I applaud flippers as well. Like the FEDERAL RESERVE, they should just buy….or better yet, finance people with mortgages that are 6x people wages, then when the defaults happen they can just sit on the houses until they manipulate the market back to bubble prices.
Oh yea, that’s already happened. Respect flippers? F them with a capital F. They deserve a few solid blows to the head.
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
Thomas Jefferson
I just . . . wow, I just don’t see where I’d get a million dollars’ worth of enjoyment out of this particular house. It’s ugly on the inside AND outside, burdened with a bland floorplan as well as a kitchen whose color scheme makes me think of a Wonka bar. And while I love chocolate, brown and gold in any room turns my stomach.
But somebody is going to shovel cash (or, at least, an oversized loan) into this place. I’ve never seen people more eager to lose their shirts on such bad bets before. Maybe the purveyor of the Kool-Aid this time around is more like Ken Kesey than Jim Jones.
so what is this property really worth on the free market?