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Latest REOs
- $199,900 :: 3125 Watermarke Pl, Irvine CA, 92612
- $349,900 :: 10 Greenleaf 16, Irvine CA, 92604
- $439,900 :: 61 Olivehurst, Irvine CA, 92602
- $889,900 :: 14 Upland, Irvine CA, 92602
- $429,900 :: 56 Great Lawn, Irvine CA, 92620
- $465,000 :: 212 Garden Gate Ln, Irvine CA, 92620
- $329,000 :: 1006 Terra Bella, Irvine CA, 92602
- $579,900 :: 8 Star Thistle, Irvine CA, 92604
- $398,900 :: 191 Lockford, Irvine CA, 92602
- $750,000 :: 69 Lakeview 6, Irvine CA, 92604
I wonder where the down payment for this property came from. Making $228k/yr, saving 10%/yr would take 10 years, 20%/yr would take 5. Imagine 10 years of solid 401k contributions gone. The danger of leverage that had worked so well for so many as long as prices were going up.
Comp sales analysis is really a garbage way of appraising properties. However, if you were to look at rents for my neighborhood, there are 2 active rentals, both under contract. It would be hard to extrapolate from those two data points, especially to homes roughly 2x as expensive.
I would say go with a cost-to-build appraisal, but when land is such a large component of the value of a home, it becomes much more difficult to assess that cost.
What was interesting about comp-sales is the most recent sale of a given home was never used. If a home sold for $450k last year, shouldn’t that be a decent comp? But a couple of neighboring homes cranked at 20%/yr appreciation, so now the home is worth $540k?
For lower down payments I’d like to see higher interest rates and shorter terms. Just using a 15 vs. 30yr changes your equity position, with 0 down from 8.2% - barely enough to cover the realtor - to over 25% - enough to get a check at closing. You also end up with higher payments which doesn’t allow people to stretch as far.
IR,
The standard boilerplate I’ve read on 98% of the bubble related appraisals I’ve reviewed is something like “single family rental property is not prevelent in the subject area, therefore income approach is not utilized”.
This with the fact that two different valuation models have to be used leaving only the “cost” approach to accompany the sales comparison method. I can’t even tell you the BS boilerplate I read in that section. This is why the bank via Andrew Cuomo has some “appraiser” (likely who thinks there is a z in the the word appraisal) drive from Hesperia to do an appraisal in Oceanside for $170 but charges the borrower $500. What kind of due diligence do you think was done on that report? Geographic competency? It is a complete joke. If the banks wanted to know the value of the collateral they would have retained staff and review appraisers that protected them instead of painting them as “deal killers”. Schadenfreude in full effect for every one of these used house salesmen, loan shysters and home debtors that deserve it!
Using this approach makes too much sense. SoCalappraiser is right; our appraisal system is a mess. We complete IHB reports all over Orange County and I have yet to run into an issue finding rental comps to establish what a property will lease for, or an IHB fundamental value based upon comparable leases. If this approach were used during the bubble or even today for that matter and it was explained to buyers that even though they want/wanted to pay $700,000 for a property that will lease for $2100, the bank will not give them a loan for more than $300,000 because it does not make sense it would have saved a lot of buyers. Moreover, this will allow the market to get more involved which is what they want anyways as a result of the issues that Fannie and Freddie have. The market will likely eventually provide an option that will allow consumers to pay a higher interest rate and take loans for properties that are above rental parity, however, it will force them to question why they are paying 7% rather than 4.5% for a home that makes sense.
What’s sad is that no group will stand up for this because they are all too near-sighted. It would be great to see agent organizations or other groups support common sense policy like this. If a buyer wants to bring more down or find a portfolio lender they can and it should prevent our government from backing loans that don’t make sense and will help to protect consumers at the same time.
If a bank wants to loan someone 600,000 dollars for a 700,000 dollar house that rents at 2,100 dollars, then they should be able to do that. The problem happened when the government bailed out the banks that took on these risky loans. The bank with the risky loans should have failed.
That would be the market solution to this problem instead of making more complicated rules so we can confuse the subject even more.
Thankyou!!!!!!!!!!!!!!!1
Government involvement is what makes this problem systemic. Christ why cant people see this? Being overly focused on the regulation aspect is staring at the trees and missing the forest.
The only solution is the free market solution.
What happens when half the banks in the nation fail all at once? It’s entirely possible given a financial meltdown like the aftermath of a bubble. We’re looking at some pretty big externalities. Looking at history, these kinds of event were causing severe recessions in the US (for example the Panic of 1893) long before we had anything like the regulation we have now. If you get rid of govt regulation it’s hard to see why events like this wouldn’t continue.
I agree we should let stupid banks fail, but unless you have govt regulating their activities and/or limiting their size, their failure is going to cause a lot of pain to the rest of us when it happens.
The majority do not want a free market as roughly 64% of the country are houseowners or housedebtors who depend on the Government presence in the market to keep their equity above water. That’s the entire problem. No arithetic or logic is going to change their mind if the solution results in lower house prices.
Of course they real winners are the banks; it just goes to show you how the masses can be conditioned if you throw them some scraps off the dinner table.
I agree to a point. First, the banks are still taking on similar risky loans daily that are being funneled to the government in the form of FHA and loans that are underwritten to meet and be sold to Fannie and Freddie. This is the point. If a bank wants to keep appraising the way they are now, they should not be allowed to resell the loan to Fannie or Freddie or be insured through FHA. Grant it, underwriting standards have improved; however, many risky loans are originated daily.
Second, the problem is that the banks were packaging them and reselling them while at the same time they were betting against them. Moreover, the incentive system made many people wealthy for doing this at the expense of hard working honest people; these bankers have not and will probably never face the consequences of their actions. They got rich on the backs of the average American and left many American’s holding the bag with no consequences.
Moreover, currently a majority of loans are being sold to Fannie and Freddie. I agree that a free market solution is better, however, if a free market solution is not eased into there will be consequences that will likely hurt a large majority; therefore, it’s not likely going to happen. The income approach is a common sense solution, if buyers don’t like the limitations that the income approach for appraisals creates it will force and create opportunity a free market alternative.
“The standard boilerplate I’ve read on 98% of the bubble related appraisals I’ve reviewed is something like “single family rental property is not prevalent in the subject area ...”
In that case nearby average condo rents should be used in the comp formula for mortgages rather than punt on rental value.
Occupying an SFR is not a right, and families can always substitute when necessary if they can’t pay 100% cash.
“...‘Nobody wants to buy an asset they think will go down in value,’ Neil Dutta, an economist at Bank of America Merrill Lynch in New York, said before the report…”
Really? Then why does everyone buy “assets” that go down in value? Choose your words better Neil Dutta…
Ah, guess that’s why people never buy new cars or diamond rings then.
I have one lingering question about this idea that banks become landlords, at least until it makes sense financially to sell: What about the added cost of property management, HOAs (so prevalent out here—$500 a month on todays’s 2 bdrm property!!), etc.?
In my field, people are expensive and usually the biggest part of our budget. But the banks would have to hire someone (or a service - and someone to be in charge of handling that service) to go out there, clean out the property, advertise, find renters, etc. That manpower costs.
Plus being responsible for all the fees and maintenance that goes with owning a property is going to cost them too.
So from my naive perspective, each property the banks were considering foreclosing would have to go through a careful analysis of costs renting versus owning. Sure, it’s possible. But what is the likelihood that these big organizations have the policies and types of people around able to do this? It strikes me as yet another way for the banks to lose money.
Rahrahgirl, you bring up a good point, however, imagine you can borrow money at 1% or less as the banks do from customers and the government. The cap rates, even in Irvine are still over 2%, even after expeneses. Although I don’t think banks should be allowed to hold and lease out their properties, it could be a good choice in some areas.
If I could borrow money from the government for under 1% I would hold properties all day at 3%+ cap rates, or better yet in Vegas where cap rates are 8%+.
Banks could set up Special Investment Vehicles - they already do to hide all sorts of toxic assets. Sell the REO to the SIV & have the SIV manage as a rental.
So banks can hold the income stream from a mishmash of mishmash of tranches of subprime mortgages (CDO-squared), but they can’t hold some residential property?
The biggest expense for banks has been asset write-downs. Merrill paid out tens of billions in bonuses & other comp, but it was the many tens of billions in write-downs that forced the sale to BoA.
There is another organization with the manpower & solid financial footing combined with large REO inventory to take this undertaking on, but I don’t think they have the stomach to try…
Its called a depreciating asset class. And for the last few years it now includes Real Estate.
When you buy a car you can usually project its depreciation over its life expectency. Now a Diamond Ring is a whole diffent asset class. If you know what your doing and dont pay retail. That diamond is a actually a fair investment.
Its not going to wear out and will hold its value faily well over the long term.
But from what I see with Real Estate here in Irvine. Rents are pretty flat. And prices are still slowly slipping lower. The only thing keeping it going in Irvine is the influx of Asian Money.
Somebody should start a list of the Percentage of closed deals that have Asian Surnames. My guess would be above 65% of all Irvine sales are Asian FCB`s.
My aunt owns 3 houses in Turtle Rock which she rents out at the moment. Bought in the 1990s. Although she bought a long time ago, she is an FCB. She earned the money to buy those houses in a foreign country, and not USA..and she is still looking for more properties today.
Larry Roberts just got PWNED
http://irvinehomes.ocregister.com/2011/06/06/realtors-complain-about-blogger-who-says-they-lie/18073/
LOL! You go IR!!! :-D
Good to see that you got their attention!!!
This incident also shows the wisdom in Larry’s choice NOT to join the NAR/CAR/OCAR, because now he doesn’t give them to opportunity, no matter how symbolic, of throwing him out of their club of thieves and liars.
This reminds me of when that lady sued Taco Bell a few months back, claiming that their taco meat couldn’t be advertised as “beef”. Taco Bell promptly took out a full-page ad in the WSJ with “Thank You for Suing Us” in bold letters across the top. They made the issue a centerpiece of their advertising campaign, and they were able to prove that their meat was over 80% pure beef (the rest is spices, flavorings, and fillers such as flour), not the 30% or less that the lawsuit was claiming. The lawsuit has since been dropped without any settlement payment from Taco Bell.
Larry should thank the OCAR for advertising for his blog!
-Darth
LOL
IrvineRenter, this is great publicity for the blog. Everyone knows that “r"ealtors are liars. Of course they have all these vague and ambiguous ethics platitudes that they have to make the definition of “lie” open to interpretation and basically give themselves plausible deniability. This is ultimately the source of their “grievance”. Don’t let the slick talking sleezebags get you down.
That article is good publicity for this site. It also means this blog is having an effect. Good job.
Unexpected news:
“Realtors go after blogger who says they lie”
http://irvinehomes.ocregister.com/2011/06/06/realtors-complain-about-blogger-who-says-they-lie/18073/
Is it real? What happened to our Freedom of Speech?
This is hilarious.
My question for the “r"ealtor scumbag who filed the “grievance”: Is it lying if you delist a property and then re-list it and claim to unsuspecting buyers that the property just entered the market? YES, that is lying. The property did not just come onto the market, you just pulled a fast one to rush the buyer into making an offer. LIAR.
“Realtors must not knowingly lie about competitors”
I don’t even know where to start with that.
Since a realtor’s first responsibility is to their client, how would that even matter?
Why word it as “not knowingly lie”? Is “not lie” too hard to parse? Does “not knowingly” indicate that research should not be done before slandering a fellow realtor?
It’s a fact that realtors game days on market. It’s a fact that realtor won’t guarantee permits.
It’s a fact that realtors won’t guarantee square footage.
It’s a fact that realtors often refuse to relay offers.
So ... when do realtors tell the truth? Only when it suits them financially.
IR,
Just saw the article in the reg.
are you going to comment on the attempted intimidation soon?
Homeowner Foreclosures [sic] on Bank of America (Yes, You Heard That Right)
http://news.yahoo.com/s/time/20110606/us_time/httpmoneylandtimecom20110606homeownerforeclosesonbankofamericayesyouheardthatrightxidrssfullnationyahoo
From the article: “Allen then reported to a local branch of the bank with sheriff’s deputies, who he instructed to remove cash from the tellers’ drawers, furniture, computers and other property. Approximately one hour later, the Naples News reports, the bank manager produced a check for $5,772.88 to satisfy Allen’s fees and additional costs.”
:-D
-Darth
Entertaining link.
Note that the owners were former police officers, so they had a bit of an advantage over the average.
“Don’t try to lie to a liar.”
Also, note that sheriff’s deputies are nearly always used in seizures and evictions, according to statute. That’s their job, so no surprise there.
(What’s fascinating is that in Chicago the head sheriff stopped evicting “surprised tenants” evictions due to bank foreclosure. He felt that not notifying the tenants was a violation of a legal posting requirement. The banks were outraged, crying about the failure of the rule of law.)
I hope tomorrows post is just be a reprint of the Registers article about OCAR and IHB, presented without comment, then watch the Cat-5 industrial strength mockery storm unfold!
My .02c
Soylent Green Is People.
I’m sure Patrick.net will pick up the original article tomorrow. Irvine Renter is about to become a hero.
Damn straight!
I wouldn’t be at all surprised if a national news outlet picks this up before the week’s out. If a kid’s battle to get un-banned from his prom makes national news, then this is surely deserving. You know that a personal interest story like this would strike a chord with all the people that have been swindled by [r]ealtors over the years, too.
-Darth
P.S. IR, you may need to upgrade the IHB’s servers soon. I think you’re about to get a lot more traffic in the coming days.
I saw your comment over at the OC Register and laughed out loud. Thanks for the support.
What article? What am I missing?
Ok, found it. But, I am confused. Does the grievance really say, “Realtors must not knowingly lie about competitors”? Didn’t they check to find out that you are not a realtor? They can not truly be that stupid.
Yes, it really says that, and they did not bother to find out before filing their grievance.
.
http://www.cotohousingblog.com/?p=16835
.
.
David,
Those are hilarious. Please post them again in the comments tomorrow.
Second-Mortgage Misery
Nearly 40% Who Borrowed Against Homes Are Underwater
http://online.wsj.com/article/SB10001424052702304906004576369844062260756.html?mod=WSJ_hp_LEFTTopStories
There’s one thing you have to ask yourself through all this: WWPRD?
What Would Planet Realty Do?
Why, he’d file a [r]ealtor ‘grievance’ against someone who isn’t a [r]ealtor, of course!! LOL, this whole incident has just had me in stitches all day! I can not wait to see how this plays out!
:-D
-Darth