Are the high-end homes in Irvine plated with marble? The asking prices would make you think so. Today's featured property was purchased by a knife catcher at auction. No improvements have been done to the property -- no marble -- and now they want $260,000 for their efforts. Oh wait, they made no effort. They just want $260,000 just because. This is the kind of behavior that makes house prices unaffordable, and it is exactly the kind of behavior this market is going to crush out of existence.
The people who bought properties as flips in 2007 had to put their own money into the transaction. All of these people made a small fortune by starting out with a larger one.
One of the myths of the real estate bulls is the rich-foreigners-will-save-us fallacy. This myth has a hint of racism to it: foreigners must be culturally superior to have the money to come to the rescue of us poor Americans. Whenever I see this argument raised, I always link to a post done by Rich Toscano at Piggington.com called The Dumb Money. As stated in the article, "Far from being a positive fundamental, a sudden excess of foreign
participation in an asset market is indicative of ill-informed
speculative money at work. When the foreigners really start piling on,
it's always a good sign that the end of the bubble is nigh." As you might have surmised, today's featured property was a flip attempt by someone with a non-Westernized name (as was yesterday's.) The stupidity of this particular flip is breathtaking to me. It was purchased as REO for well over what the lender paid, and now it is being offered for much less. The entire loss is going to be the flipper's money.
If the property looks familiar, it is because we have featured it before: Brookside Comp Killer.
Check out Howlin' Wolf's description of the blues (it's at the beginning.)
It cannot be denied (rationally) that we are currently in a declining market. In a declining market, banks look at appraisals and comps differently than they do in a rising market. When prices are rising the lender will look at the highest comparable sales to determine total value upon which they will base their loan. When prices are declining like they are now, the lender will look at the lowest comparable sales or asking prices to establish the value upon which they will base their loan. This is a major headache for sellers. Remember the post I did on the big drop in Turtle Rock recently How to Lose $500,000 in a Year? Once that seller put that house on the market asking $800,000, he ruined the comps for every similar home within a mile of his location. Let's say you are the neighbor at 6022 Sierra Siena Road who is asking $950,000 for a similar property. If you find a buyer willing to pay $950,000 and put 20% down, the lender is going to look at the neighboring house asking $800,000 and say, "I can only loan your buyer 80% of $800,000." For the buyer of the Seirra Siena Road property to make a sale, the buyer will need to put down $310,000 -- almost 30% because of the low asking price on Silver Cres.
Also, in a declining market lenders will raise loan-to-value requirements. The lenders I have spoken to have told me that right now, there is no market outside of the conforming loans of the GSEs (Freddie Mac, Fannie Mae) or the FHA. The FHA will allow loans with 3% down, but the income requirements are so tight, that it is very difficult to qualify. The GSEs allow higher DTIs, but they are also requiring higher downpayments. Even now, very few loans are being approved without 20% down. Another interesting thing I was told is that nearly all of the buyers over the last several months were renting at the time of their purchase. It is a classic case of those renters who felt "priced out forever" jumping at the chance to own -- more kool aid. There is almost no move-up market right now, probably due to the deep price drops at the low end of the market. People getting out of entry-level housing do not have any equity, and those who still have equity, are not able to sell their homes.
Today's property is a classic flip. The owners bought it in March, and they are asking $119,000 more than they paid for it. In the bubble rally, they might have pulled it off because the bank would have ignored their low purchase price and financed anyone with 100% financing at almost any price they wanted to ask. However,in today's market, they set their own comp, and the lender is not going to ignore it. For them to get their WTF asking price, someone is going to have to put down a large amount of cash. In short, it is not going to happen.
Asking Price: $659,000
Income Requirement: $164,750
Downpayment Needed: $227,000 based on their purchase price as a comp
You don't need a realtor to sell a house. A title company can take care of most paperwork, and an attorney can draft the rest for a minimal fee. Realtors are supposed to be experts at sales and marketing, but if you possess these skills, there is no need to pay someone 6% to draft a poorly written property description and sit in your house on the weekends. You can do it yourself and save a great deal of money. There are advantages of to selling on your own. You don't have to base your asking price on comparable properties. You can make up a number and put the property for sale for whatever price you want. There is no neutral market observer to tell you your price might be too high. Who needs to pay attention to comps? Also, you don't have to worry about the time and money your realtor is going to spend marketing your home because you will pay all those expenses yourself.
Today's featured property has been featured on IHB before. The previous owner was unable to sell it using a realtor, and it went back to the bank in foreclosure. The current owners bought it from the bank. Surely, they will find the buyer who appreciates the unique qualities of this home and obtain their asking price. It is just a matter of good sales and marketing and a healthy dose of optimism (real estate optimism tastes best when mixed with kool aid.)
In the era of 100% financing, speculation was widespread. Why not, speculators had nothing to lose other than their credit score, and if prices had gone up, they would have reaped a huge windfall. We have documented case after case of this behavior right here on this blog. Are we flagellating the equine after it has already perished? Perhaps, but until this behavior is seen for what it was, lenders will not learn their lessons, and they will do it all over again. Realistically, the only thing that could save housing prices would be a return of 100% financing and the elimination of lending standards like we saw during the bubble. There is only one problem with that: people cannot afford the payments -- They have proven that much. The continued use of 100% financing through 2007 was the only thing delaying the crash. Now that the FED is lowering interest rates, they are hoping this will translate into lower borrowing costs and help knife-catchers finance the huge sums necessary to afford today's pricing and slow the decent of prices. There is only one problem with that: as the FED lowers interest rates it increases inflation expectations, and mortgage interest rates go up. Hmmm... It is really quite a quandary.
The low interest rates we are experiencing now may prompt a few sales in 2008, but the FED will not be able to keep interest rates low for long or inflation will get out of control (anyone remember the 1970s?) If the FED starts raising interest rates later this year to curb inflation, mortgage interest rates will again rise -- not because of inflation expectations but because base rates will have increased. Mortgage interest rates hit the floor in 2004. The Federal Funds rate was 1%, inflation was low, and risk premiums were artificially low because investors in mortgage backed securities did not recognize the risks. 5.8% is as low as interest rates on a 30-year fixed-rate mortgage can get. Higher inflation and more rational risk premiums will prevent interest rates from getting that low again. It seems very unlikely mortgage interest rates can get any lower than 5.8%. We will not see 4% mortgage rates to prop up prices.
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Have you noticed when the real estate market bulls are proven wrong, there is always some unforeseen outside factor to blame? David Lereah had the nerve to claim nobody saw the subprime crisis coming despite the fact warnings about subprime lending were widely known and reported. Remember that you read this here: Mortgage interest rates are going to rise. You will probably not see mortgage interest rates on 30 year fixed rate mortgage below 6% again in your lifetime. Sometime in late 2008 or early 2009, the federal reserve will start raising interest rates, and mortgage rates will rise with them. This will be blamed for the big drop in prices and it will be held up as the reason for the faulty forecasts of bullish realtors. If it wasn't for the FED, trees really would grow to the sky, right?
One of the primary functions of the FED is to provide a stable financial system. Once the Federal Reserve begins to see economic growth and liquidity in the debt markets, interest rates may rise as quickly as they fell in order to stop hyperinflation from occurring. The FED does not want to see its member banks receive worthless currency in return for the loans it made; although I suppose this is better than receiving even less currency in a default.
Mortgage Interest Rates 1972-2006
When a country knowingly devalues its currency, it causes a severe recession as the prices of imported goods and raw materials increases dramatically. Perhaps a severe recession and price inflation is preferable to an economic depression like the one of the 1930s in America, but it is certainly not desirable. There will be some benefits to a devalued currency. A less valuable currency is a boon to exporters. The United States has run a chronic trade deficit for many years, and much of the recent deficit has come from inexpensive goods imported from China. The trade imbalance may correct itself with currency devaluation. Of course, this rebalancing of trade will come at the cost of more expensive imported foreign goods and a commensurate decline in spending power from US consumers. Also, prior to currency devaluation, wages in the United States were so high that jobs were being outsourced to foreign countries where people can be paid much less. Wages could not rise significantly from where they were without devaluing the dollar to prevent wage arbitrage from moving jobs overseas. The devalued currency provided some room for wage increases, and these wage increases could theoretically provide additional support for housing prices. If the FED does chose hyperinflation, there needs to be wage inflation to go along with it or the economy will experience a very deep recession due to the steep drop in consumer spending (It may anyway.) If wages rise, houses become affordable again. I wouldn't mind paying today's prices if my salary doubles.
Put today's problems in perspective: the Federal Reserve is being forced to chose between stagflation and depression, house prices are crashing, and homeowners are being foreclosed on in record numbers. This situation is the result of declining home prices; the declining home prices are a direct result of the unsustainable price levels created during the bubble rally; the unsustainable price levels were created by widespread use of 100% financing and the elimination of lending standards, so this is important stuff worthy of daily exposure on blogs like this one. In today's 24 hour news cycle, it is easy to focus on the sensational and forget about the root causes of our problems. The roots are here in properties like this one and in borrowers like this one who used 100% financing to speculate in the real estate market at the expense of our banking system.
6 bedrooms total - 4 bedrooms upstairs, 2 bedrooms, 2 dens downstairs, with 2.75 baths. Wood flooring downstairs. Remodeled kitchen with double ovens, flat top cooking surface, large pantry & newer cabinets. Leaded glass front doors, plantation shutters, newer central A/C, newer tile roof, 8 ceiling fans and recently painted in & out. Large backyard. Close to park and community pool.
$241 / SF is real progress.
The price will have to be reduced for the cost or repainting. The pink and green colors are truly ugly.
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This property was purchased less than one year ago, and if the short sale is approved, and if the seller gets their asking price, the lender (NBGI Inc.) stands to lose $207,400 after a 6% commission. There have been some comments on my equity burn calculation where I take 10% of the purchase price and divide it by 12 to get a monthly equity loss on the property. How much was this lender's equity burn? $17,283 per month. If this flipper had any of his money in the deal, that would have been his loss, but since it was the lender...
Anyone looking to buy in today's market really should pay attention to the equity burn number. In today's market, borrowers have to put money down. It is their money evaporating into the ethers. The phenomenon is real, and it will continue for the foreseeable future.
It is a good time to be a renter.
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Tonights the night well make history, honey, you and i
And Ill take any risk to tie back the hands of time
And stay with you here tonight
I know you feel these are the worst of times
I do believe its true
When people lock their doors and hide inside
Rumor has it its the end of paradise
But I know, if the world just passed us by
Baby I know, you wouldnt have to cry
The best of times are when Im alone with you
Some rain some shine, well make this a world for two
Our memories of yesterday will last a lifetime
Well take the best, forget the rest
And someday well find these are the best of times
These are the best of times
Oh We're Not Gonna Take It
no, We Ain't Gonna Take It
oh We're Not Gonna Take It Anymore
we've Got The Right To Choose And
there Ain't No Way We'll Lose It
this Is Our Life, This Is Our Song
we'll Fight The Powers That Be Just
don't Pick Our Destiny 'cause
you Don't Know Us, You Don't Belong
oh We're Not Gonna Take It
no, We Ain't Gonna Take It
oh We're Not Gonna Take It Anymore
oh You're So Condescending
your Gall Is Never Ending
we Don't Want Nothin', Not A Thing From You
your Life Is Trite And Jaded
boring And Confiscated
if That's Your Best, Your Best Won't Do
I think these clueless WTF sellers have finally pushed me over the edge. I want to shame them; shame them all. I'm mad as hell, and I am not going to take it anymore. How much longer are we going to watch these people put ridiculous prices on properties before we all decide "We're Not Gonna Take It Anymore?" When do sellers start worrying about insulting the intelligence of buyers? How can you list a property for $240,000 more than an arguably superior property 4 doors down, particularly when the comparable property isn't selling?
Please, somebody help me understand the thought process here.
OK, my neighbor, who has a similar house, has been trying to sell it for almost six months. My neighbor paid almost $400,000 more for their house, so it is probably a nicer property, but mine is better because it is mine. It isn't a short sale, so there is nothing stopping my neighbor from selling (other than there are no buyers.) My neighbor has reduced his asking price $400,000 over the last 6 months trying to get out. I know this because I am a neighbor, and my realtor must know about this property and has also told me. I have been hearing stories about price declines, but my neighborhood is different, and my property is special, so I am going to ask...
$240,000 more than my neighbor and $235,000 more than I paid in March of 2006 (almost the peak.)
Yes, that makes sense. The market has bottomed, and the spring rush is coming. I am sure some buyer will see the unique qualities of my property and pay me the profit to which I am entitled.
Is there some other way to see this listing price? Please help me. I can see no other line of reasoning or pattern of thought that can produce this asking price. How out-of-touch with reality are sellers today?
You know, perhaps we should stop calling them sellers because there is no way the property is going to sell for this price. Perhaps we should call them "listers" or "askers" or "clueless-WTF-nutcases?" What do you think?
Just move in. Highly desirable Juliet's Balcony model with larger lot. Porte cochere and French doors leading to nice courtyard on side of home. Walk in and see living rm and library. Large gourmet kitchen with all the extras like Viking 6 burner with griddle, stained maple cabinets, stainless steel appliances, granite counters, pendant lights. Craftsroom downstairs with built-in cabniets and computer niche. Wine cellar. Built-ins for TV area in family room and master. 20' diagonal tile flooring with granite inserts downstairs. 4 bedrooms upstairs each with own bathrooms. Master and one other bedroom have retreat areas. Master bath has spacious tub and glass enclosed shower. Balcony upstairs. Backyard has been professionally hardscaped with built-in BBQ, and plants will be completed. Enjoy all the amenities of a contemporary home. Location is great near 2 parks. Association offers a 9 acre recreation center and 3 pool areas.
pergraniteel -- "stained maple cabinets, stainless steel appliances, granite counters,"
Update 4 — The saga continues… This house was relisted again for $1,359,000. The total loss stands at $473,540. After putting $525,400 down, I imagine this seller did not think they would be risking a short sale. Their equity is all but gone…
Beds: 4
Baths: 4.5
Sq. Ft.: 3,750
$/Sq. Ft.: $453
Lot Size: 6,348 sq. ft.
Year Built: 2005
Stories: 2
Type: Single Family Residence
View: Park or Green Belt
County: Orange
Neighborhood: Woodbury
MLS#: S472319
Status: Active
On Redfin: 215 days
Unsold in 90+ days
From Redfin, “The Jewel of Woodbury! Ready to deal. Rich woods on floor, ceilings, p aneling etc. Gorgeous paint schemes, tile designs. All Viking Kitchen, open bright floor plan typical of Juliet’s Balcony homes. Surround sound, huge master bath, all bedrooms are suites. Designer window treatments. Across from a private park. Walk to parks and 6 pools, elementary school, shopping center. Woodbury’s amenities are incredible and the lifestyle resort like.”
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IMO, the property being offered for $240,000 less is a superior property. I think the front landscaping is certainly more attractive. Anyway, as a public service, let's help this hapless lister pick a better asking price.
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That 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.
Well I was drinkin last night with a biker
And I showed him a picture of you
I said, pal get to know her, youll like her
Seemed like the least I could do.
Cause when hes chargin his chopper
Up and down your carpeted halls
You will think I am dressed up quite proper
Never mind how I stumble and fall.
You imagine me sipping champagne from your boot
For taste of your elegant pride
I may be going to hell in a bucket, babe
But at least Im enjoying the ride, at least Ill enjoy the ride.
I have to wonder if today's flipper decided to buy after a night of drinking. He certainly had more kool aid than common sense. Today's property was purchased for peak pricing a year after the peak in May 2007. This property was purchased despite the news of the subprime blow up 3 months earlier. Perhaps this flipper really believed the "subprime containment" meme? It is easy to ridicule a bad investment after the fact, but we at the IHB would have ridiculed it before the fact, and we would have been right. Enjoy the schadenfreude at this flipper's expense, with the damage to his credit this fiasco will entail, he won't be doing it again any time soon.
Rarely on the market, Largest floorplan in The Legacy Tract. Spacious West Irvine Home features a Gourmet Cook's Kitchen with Granite Counter tops. Large Family Room With Fireplace. Beautiful tile floors throughout family room. Extra large Loft. Guest Bedroom on First Floor with full Bath. Three car garage with large driveway. Top Award winning schools: MYFORD Elementary, PIONEER Jr High and BECKMAN HIGH. Wonderful neighborhood with no association dues. Views of the Park and trees.
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This large, single-family detached property is selling in Irvine for $231 / SF. This is not a bad property in a bad neighborhood, it is a beautifully updated property with a large yard backing onto a park. It is selling at such a low price for a couple of reasons. First, the market is declining precipitously, and there are few buyers around. Second, this seller used 100% financing (I guess you could still get that in May 2007,) so he doesn't have any reason to keep up payments. This was purchased as a speculative flip, and the lender was taking all the risk. It didn't work out, so the flipper gets bad credit, and the lender gets a huge loss. If this property sells for asking price, the lender (JP Morgan) stands to lose $251,005 after a 6% commission. That is a sizable loss considering this loan was made about 9 months ago. I wonder if the flipper has even made any payments? This could be fraud, but the owner is a real person and not some fictitious business entity, so I think this was a real flip attempt -- a very foolish one.
That concludes another week at the Irvine Housing Blog. I hope you have enjoyed the Grateful Dead. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
The first casualty reported by us in the Collage tract was 714 Timberwood. And yes, these are the actual pictures advertising this property. Kinda crappy huh? You really need to evaluate the smaller no-name real estate brokers/agents before you entrust them with your $500k+ sale.
On to the details:
Address: 1602 Timberwood, Irvine, CA 92620 (Northwood) Plan: 1267 sq ft - 2/2.5 MLS: S467201 DOM: 43 Sale History: 02/21/2006: $560,000 10/31/2003: $300,000 4/18/2001: $240,000 Current Price: $560,000
So what happened here? Well our flippers got in over their heads. They purchased in February 2006 for $560,000 using 100% financing. How common is this?!?!
What I find interesting here is that in the 2.5 years from the original sale in 2001 to the 2003, the price went up $60,000 (25%). And then in the next 2.5 years from 2003 to 2006, the price went up $260,000 (87%).
The buyer in 2003 put down about 27%. The flipper in 2006 put down 0%.
In a rapidly appreciating market (from 2003-2005), flippers used other people's money and made out like bandits. They were looked up to as 'real estate gurus'. My guess is the current seller wanted to get in on the game and not be left behind. Too bad for them. At the current asking price, they are facing a loss of about $33,000 (assuming 6% in selling costs). Oh wait! They didn't put anything down.. I suppose the lender (Fremont Investment & Loan) will be the biggest loser given that the private remarks state: "ALL offers need short sale approval from mortgage holder."
UPDATE #1 - February 5, 2008
Yes, it has been over a year since this property was featured. It looks like the property went back to the bank (La Salle Bank) on 5/25/2007 at a price of $484,358.
It was then listed as a REO on 6/5/2007 for $532,500. The price kept dropping over a few months and it finally sold on 12/27/2007 for $447,000 (~20% off the 2006 price).
Living easy
Loving free
Season ticket on a one way ride
Asking nothing
Leave me be
Taking everything in my stride
Don't need reason
Don't need rhyme
Ain't nothin' I would rather do
Going down
Party time
My friends are gonna be there too, eh
I'm on a highway to hell
On the highway to hell
Highway to hell
I'm on the highway to hell
Highway to Hell -- AC/DC
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"The Road to Hell is Paved with Good Intentions." -- Samuel Johnson. Most people who took out a "liar loan" did so to provide shelter for their families and hopefully make a few dollars speculating in real estate. Most people did not intend to defraud anyone when they took out the loan, but they ended up doing so by walking away from their payment obligations. This Highway to Hell is paved with good intentions, and it is very well traveled.
State Income Loans
One unique phenomenon of The Great Housing Bubble was the utilization of state-income loans, also known as “liar loans” because most people were not truthful when stating their income. Loan documentation is usually a routine part of obtaining financing. Lenders ordinarily require a borrower to provide documentation proving income, assets and debt. However, during the final stages of the Great Housing Bubble, loan documentation was seen as an unnecessary barrier to completing more transactions, and loan programs which circumvented normal documentation procedures flourished. The fact that these programs existed at all is a remarkable proof of the risk lenders were taking through the relaxing or outright elimination of lending standards. According to a study by Credit Suisse, 81% of Alt-A purchase originations in 2006 were stated income, and 50% of subprime originations in 2005 and 2006 were stated income. Stated income loans increased from 18% of originations in 2001 to 49% in 2006 according to Loan Performance. In a related study by the Mortgage Asset Research Institute, 60% of stated-income borrowers had exaggerated their incomes by more than 50%. Obviously, lying about one’s income to obtain a loan is not a conservative method of financing a property purchase.
The stated-income loan, also known as liar loan due to the built-in incentive to exaggerate one’s income, was originally provided to borrowers such as the self-employed who most often do not have W-2s to verify income. When these loan programs were first started, they were not made available to borrowers with W-2s as the transparency of the lie would have been obvious to all parties. During the bubble rally, these loans were made available to anyone, and not just were the borrowers encouraged to lie, they were often assisted in fabricating paperwork by aggressive loan officers and mortgage brokers. Since the loan could be packaged and sold to investors who had no idea what they were buying, there was a complete lack of concern for whether or not the borrower actually made the money stated in the loan application and thereby could actually make the payments on the loan. Everyone involved was making large fees, the borrower was obtaining the real estate they desired, and for a time, the investor was receiving payments from the borrower. As long as prices were rising, everyone benefited from the arrangement. Of course, once prices started to fall, borrowers did not want to continue making payments they could not afford, and the whole system collapsed in a massive credit crunch.
Today's property is a WTF listing price in Northwood II. This neighborhood is getting destroyed, and most sellers are losing money on their 2004 and 2005 purchases; however, today's seller believes his property is different, and in fact, it has appreciated over 40% since he bought in 2004. I imagine he wishes liar loans were still available so someone could come up with the money to buy him out.
Absolutely Gorgeous , Luxurious Home in Gated community! Very Open , Roomy Floor Plan. Incredible Highly Upgraded top to Bottom. Professional Paradise Landscape! AttractiveCustomised paint all inside house, * * Crown Molding , Hardwood Floors, Customised Carpet, Wood shutters, Large Gourmet Kitchen w/ Granite Counter Top & Huge Island, Luxurious master suites w/ walk-in closet. Large walk-in Pantry, Extended Family Room , Charming water fountain in Backyard. Best Location in NW II.
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No greed here, this seller only wants to make $462,000 for a little over three years of ownership. It might have worked out if he had purchased in 2001 or 2002, but a late 2004 purchase makes him late to the party. He is not a real estate mogul, he is a bagholder.
That 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.
BTW, since AC/DC is one of my favorite groups, I want to share two more songs with you.
New blood joins this earth
And quickly he's subdued
Through constant pained disgrace
The young boy learns their rules
With time the child draws in
This whipping boy done wrong
Deprived of all his thoughts
The young man strugggles on and on he's known
A vow unto his own
That never from this day
His will they'll take away-eay
What I've felt
What I've known
Never shined through in what I've shown
Never be
Never see
Won't see what might have been
What I've felt
What I've known
Never shined through in what I've shown
Never free
Never me
So I dub thee UNFORGIVEN
Forgiveness is never an easy thing. There are some things that seem so wrong you don't want to let people "off the hook" or you know you will see the behavior again. In the end, holding on to anger is far more destructive to the angry person than it is to the person to whom the anger is directed. Forgiveness is something one should do for their own sake.
The almost unbelievable irresponsibility with debt displayed by homeowners like today's is so amazing, so far beyond any form of excusable behavior, that you have to wonder if it is right to forgive it. If someone borrows hundreds of thousands of dollars against their home and ends up with a short sale requiring the forgiveness of this debt, how do you feel about it? Remember America’s Debtor Prisons or Are Short Sales Moral? These questions do not go away. Does a really extreme case change your opinion about the subject? Let's see...
Beautiful Woodbridge home has been expanded over 1000 sq ft to create an extra Large Kitchen, Great Room, Huge Master Bedroom complete with a Walk In Closet & a full size Customized Master Bath. Updated Kitchen includes Newer Appliances, Stainless Steel Refrigerator, Recessed Lights & Granite tile counters. This home is situated on a Private Lot with Gated Access to the Front Door. Walking distance to Parks, Pools and award winning Irvine Schools.
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So lets walk through the mortgage history of this property and see just how bad HELOC abuse can get...
7-20-2001 The house was purchased for $397,000 with a first mortgage of $317,600 and a downpayment of $79,400.
11-07-2001 HELOC for $48,000 taking out over half of downpayment.
8-26-2002 Refinance for $360,000.
11-26-2002 HELOC for $29,000
11-26-2002 HELOC for $71,000
6-18-2003 HELOC for $56,000
6-18-2003 HELOC for $100,000
6-1-2004 Refinance for 517,500 --probably paid off HELOCs at this point.
10-22-1004 HELOC for 89,900.
4-21-2005 Refinance first mortgage of $624,000
4-21-2005 Refinance second mortgage of $156,000. Total debt of $780,000 at this point.
9-12-2006 Refinance first mortgage of $948,750.
9-12-2006 Refinance second mortgage of $189,750. Total debt of $1,138,500. No HELOCs
So there you have it. This homeowner went to the housing ATM 8 times over a 5 year period and pulled out $820,900. Now they have a property priced at a WTF asking price hoping they can find some knife catcher to come pay off their bills. Even if you wanted to buy this house, would you do it knowing that you were about to pay for $820,900 worth of consumer spending (They may have spent $200,000 on the renovation, but please spare me the BS about investment or illness or any of that crap. Look at the pattern of withdrawals. They spent it, and you know it.) I suppose the lender can always hope these people stashed some of this money away somewhere to cover the shortfall at the closing table. Doesn't seem very likely, does it?
Consumed by greed, the homedebtors will be seeking forgiveness for their debts and sins. Our major religions believe forgiveness is a good idea, or should this behavior remain unforgiven?
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Our Father
which art in heaven,
Hallowed be thy name.
Thy kingdom come.
Thy will be done
in earth, as it is in heaven.
Give us this day our daily bread.
And forgive us our debts,
as we forgive
our debtors.
And lead us not into temptation,
but deliver us from evil:
[For thine is the kingdom, and the power,
and the glory, for ever. Amen.]
The Lord's Prayer -- Matthew 6:9-13
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I bet you didn't think I could get Metallica and the Lord's Prayer in the same post and have it make sense.
That 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.
New Listing (24 hours)
New Listing (24 hours)
