Irvine Housing Blog

“What does that mean in terms of a bid at auction?”

We subtract all costs associated with the transaction to determine the maximum bid price. We may or may not be successful at auction.

Who, exactly is buying it at auction?

The hard money lender is buying the property and they are on title during the holding period. It is a trustee sale flip, but the hard-money lender gains the assurance of sale at a specified price.

Are you taking into account the condition of the property in the comp analysis? If so how?

If we cannot see the inside of the property, we assume it needs cosmetic renovation, and we allow for that in the maximum bid price.

I don’t know, 3% off for all the risks of an REO? Is there an inspection clause?

There is no inspection clause that allows the buyer to change their mind. We operate like a builder. Builders don’t like to build on speculation, and hard money lenders do not want market risk either.

We will obtain a third-party inspection after acquisition, and we will do whatever is required by the report. The risk is on the hard-money lender. If we have budgeted money for renovation—which is usually the case—then this money is withheld until the renovation is completed per specifications.

Some will consider a 3% discount sufficient, particularly since it will be cosmetically renovated prior to move in. What is their alternative? If people believe they can negotiate a better deal with another seller, that is their choice. Not many other sellers offer property under comps. We offer under comp price assurance, cosmetic renovation, and access to properties no one else delivers.

I would think that the way to make this worth your while - as the person wanting to actually buy the house - would be to share some of the profits if the house sells more cheaply at auction.  For instance, the first 10K under the maximum purchase price could go to the hard cash buyer, and after that, the parties could divide the profits equally.  That is, for every $500 less at auction, the purchase price is reduced by $250.  (I think a pure rebate might be problematic for the laws governing settlement).  That would provide me with a significant incentive.  It’s 3% under, with the possibility of more.

It’s a funny story but kind of ridiculous.  If these deadbeats don’t want to pay their HOA dues then slap them with a small claims lawsuit or charge them a bunch of penalties and sell the debt to a collection agency.  Garnish their wages.  There are ways of going after people to get them to pay up.  Blocking guests from coming and going just exposes them to liability if the cow of an owner stubs her toe on the gate because she was “being harassed” by her HOA.  Not worth risking it on these folks.

As much as I dislike HOAs, they do serve a purpose.  Having HOAs means less freedom.  They’ll dictate to me what color to paint my house and how to decorate my front yard.  Loss of freedom, I know. 
However, it’ll also prevent your neighbor from decorating his lawn with cars on cement blocks, or the neighbor from Lady Gaga school of design.

HOAs are double-edge swords.

I go back in forth on my reaction to these tactics. Barring non-payers from voting or using common facilities, absolutely reasonable. Turning off transponders, fine. Barring guests from the gate… I don’t know. It seems a little overly humiliating. But on the other hand, these owners chose this community knowing they were expected to pay their share of the security costs. There’s something ironic about people who wanted to live behind walls to keep out the riff-raff, yet ended up becoming the lower-income types that the community was designed to keep out.

Yeah for some reason this doesn’t pass the “smell test” with me at least. Banishing someone from the pool, park, BBQ, actual amenities, etc…makes sense. This seems akin to blocking off the street because someone didn’t pay their property taxes on time.

Locking someone out of Disneyland, shutting down someone’s AMEX, or heck even disabling someone’s car for nonpayment makes sense to me…this doesn’t.

I used to be prez of my HOA, but we weren’t gated and didn’t charge enough to employ guards.  The HOA fee is the first thing not to be paid, as it doesn’t affect one’s credit score. The usual recourse in case of fee defaulters is, as AZDavid says, fines, lawsuits, and in the event that these don’t make them cough up, eviction.  (It was a co-op, so we may have had more recourse than a condo association.)  We’d eventually get our money from escrow when the unit sold to the next buyer. But none of these has any teeth in the face of widespread unemployment, falling house prices and massive rises in inventory.  So maybe this association is on to something - it’s painful for Ms. Solis, but it’s also an object lesson to all other residents, and reminds them that they are in fact paying for services when they send in that monthly fee.

It makes for nice populism but it’s not going to last.  Just because some judge somewhere gave it his approval - another will come along and outlaw it.

It’d be no different if they changed the locks each month and only gave out keys to the non deadbeats.

They don’t have the authority to impede you from accessing “your” property.  All they can do is levy fines.  If the person stops paying then they should be using the courts to get them to pay up.

While I think it’s funny to watch the HOA harass these people - it’s obvious that they are overstepping their bounds.

You don’t have to pay taxes to vote.

And what should someone who’s unemployed, or taken a big income hit supposed to do when faced with utilities, or mortgage, or car payments, or groceries to pay, when it’s one of these item’s as opposed to the condo fee in their budget?

“Funny that non-payors get a vote.”

Representation without taxation? It does seem un-American.

The hard-money lender is only needed for the acquisition and the holding period while the buyer arranges traditional financing. One of our key functions is to pre-screen buyers to make sure they can really close the deal.

The beauty in this arrangement for hard-money lenders is the quick turn. If you flip for speculation, it is difficult to turn the property over in under 100 days; however, if the buyer is already in escrow, the turn is generally less than 50 days, and the money can be turned over many more times which dramatically increases annual returns, even if the profit per transaction is less.

Oh man, beef is going to deny pizza to delinquent HOA members.

Obviously this individual has gone above and beyond to get herself on the HOA’s radar leading them to dig their first parallel.

How many nastygrams does one have to ignore before it comes down to a blockade of one’s dwelling and siege style tactics?  They should surround the gate with cannons and some of those English guards marching to and fro.  Let these folks know that they mean business and that nobody shall screw with the HOA.

FHA is for us all!  If you are looking to go into debt well then our Government has just the program to HELP you out.  Right this way, my friend.

John,

You would need to speak with a lender about these issues for a definitive answer.

I am not aware of an income limitation, but their is a limit as to how large of an FHA loan they will underwrite: $729,750.

FHA loan will generally be comparable though somewhat less expensive than PMI.

FHA is not limited to 1st time buyers, but you can only obtain FHA loans so often, and you can only have one at a time.

I didn’t copy over the details properly. I have updated the post. Thank you for calling my attention to it.

Flippers like the move-in ready properties because they don’t lose time with renovations. Of course, they also tend to overpay for this luxury. It will be interesting to see if they hit their margins.

Lies all lies.

Please refer to the Used House Peddler Code of Conduct Article 2.

Such a treacherous act could only be the work of a damned rascal, subject to being stripped of his honors and privileges to peddle houses upon this land in god we trust in violation of realtor (little ‘r’) Code of Ethics Article 2 Statutes regarding exagerations and misrepresentations of pertinent facts regarding the property.

Let the speaker present his evidence.

An article on the yahoo front page today lists Orange County as one of the least stable housing environments in the country and the article noted people should not buy there due to overinflated prices.

But PlanetReality said the market hit bottom and low interest rates are here to stay!!!

This site has been monetized for a long time.  What’s the big deal?  You still get to write whatever you want in the comments.

I think the IHB approach is great.  They identified a market demand, and structured the company to take advantage of it. 

Most people don’t know how to buy at foreclosure auctions.  IHB is going to do it for these people and offer a 3% discount on comparable sales.  The people will get the house in a “move in” condition at 3% discount. 

“Move In” condition is subject to interpretation..hehe

“Now, it really feels as if the purpose of the blog is for you to make $$ rather than provide an real assessment of the market.  The house is ugly and I’m sure horrible on the inside; yet, you seem to be encouraging a purchase price of nearly half a million dollars.  Maybe I am wrong and misunderstand.  If that is the case, then please enlighten me.”

I present people with an opportunity they otherwise would not have, and I honestly advise them on the wisdom of taking or not taking the opportunity. In fact, in tomorrow’s post, I openly tell people not to do it because the property is a POS. Most properties going REO right now are not desirable properties.

I encourage nothing. If someone is willing to pay what is required to obtain a property knowing it may fall in value (probably will), am I supposed to deny them this opportunity they freely choose knowing the circumstances? I am not responsible for people’s decisions, but I will try to give them the best and most accurate information they can have.

We have already put many clients into homes, and each of them knew what they were getting into, and each of them felt they made the right choice for their families. None of them believe prices are going to rise any time soon. Each of them wanted a home for their families. We helped them get that.

I wish the market were at the bottom so I could stop telling people on the margins to wait. One customer who was eager to buy said he may need to move in three years, so we talked him into renting. If the market were at the bottom, I would not have to give that advice, and IHB would make more sales. I don’t do that because, as you noted, OC is one of the least stable housing environments in the country, and people should not buy here looking for appreciation, and they should have full knowledge of the downside risk. With what I write every day, how could I tell customers otherwise?