Address: 15361 Seine Cir., Irvine, CA 92604 (El Camino Real)
Plan: 2982 sq ft – 5/3.25
MLS: S457284 DOM: 41
Sale History: 7/5/2006: $897,000
Price Reduced: 10/06/06 — $1,100,000 to $999,000
Current Price: $999,000
This home in The Ranch tract in El Camino Real was sold by a real estate agent/homeowner and sold to a real estate agent/flipper. The real estate agent/flipper put the home back on the market exactly 2 months after they bought it AND they expected to find a GF (as in Greater Fool) to pick it up so they could make the $203,000 profit they worked so hard for. A month went by with absolutely no interest and they lowered the price by 100k, deciding that they would be okay with a measely $102,000 profit.
If they do find a GF to pay the $1 million asking price for this home, they’ll actually make considerably less than $102,000. The seller is offering a 4% commission for someone to bring a GF so I’ll assume a total of 6% in selling costs (4% plus a little in closing costs plus a little to their broker). That reduces the potential profit to $42,000. The home is also listed as vacant and is also available for rent for $3600/month. Being the nice guy that I am, I’ll assume carrying costs of only $4000/month (10% down, 6% IO on the other 90%). It’ll be at least 5 months of carrying costs by the time this home is sold. That reduces the potential profit to $22,000. In all likelihood, the home will sell for less than $1 million and the flipper agent may be in the hole.
It’s pretty surprising for me to see someone leg into a flip right now. When the summer started, things had obviously slowed down. How could anyone, especially someone in the business, decide they were going to buy a home this summer with the intention of flipping it?!?
Tough luck fella. Double wammy!! He will (most likely) end up losing money on this flip. As the RE market comes to a crawl, the RE Agent will not make much money on commission and possibly lose his job if the RE decline continues.
The biggest question is how will this flipper/RE Agent handle this situation. Since many 2000 SQFT homes were priced near $1 million dollars, this wise guy thought that he will buy low ($900K for a 3000 SQFT house). He didnt realize how bad (starting to normalize) the market has gotten. $1 million for a 3000SQFT house is better than most houses for sale in Irvine but good luck on finding another sucker. Will this agent that blundered on buying a flip house make a second blunder and ride this market down. Stay tuned for this gripping episode on Flipper. Same bad neighborhood. Same bad price. (dating myself with this Batman TV show comment)
—–
I think this rookie ‘house traders’ fail to realize how hard it can be to exit something as illiquid as property.
From an appraiser’s viewpoint the market downturn apparently leaving a real estate agent holding the bag on the above house is sweet justice. In our end of the business, realtors and agents are known as used house salesmen. I can’t tell you how many agents have told me they would just get another appraiser if I couldn’t “hit their number”. So I would just nod, collect my $350 and then deliver the appraisal @ market value – not @ market plus 10 – 20% which is the low end of what they wanted.
Angry messages to my voice mail would follow. I would then purposely try to piss them off more by returning a phone call thanking them for the $350 payday for a report they could not use. Then a lot of them went and found appraisers to “hit the number”. Here’s where my next payday is coming in – all of the appraisers that “hit the number” are civilly liable for any negligence. It is very easy to do a past value appraisal with all the interenet data avialable. These scumbag appraisers are starting to get sued – by banks and by homeowners whose appraisals had grossly overstated value to make the loan go.
The whole thing was fueled by the exotic loan products removing a major barrier to entry – the down payment. Suddenly every McDonalds swing manager thought they deserved a 5 BR house in Corona and every scummy used house salesmen thought they were Donald Trump and had several investment properties. In the past these people rented, saved, took a second job, etc. to save to put together a down payment. Now with the way the market prices have been irrationally driven by the above factors, there is no amount of saving or moonlighting that can get average middle class into average OC homes. This whole thing is headed down the other side and if it takes a bunch of REIC people with it – all the better!
Can you guys check out something in Tustin, just over the “fence” from Irvine: On Zip Realty, look at Ballesteros Lane, Tustin 92782: house numbers 2911, 2913, 2918, and 2858 are all listed at various prices in the $600+ range? What’s going on down there? Are there any flippers among them? Thanks!
This is a perfect case of paying too much. If even one were to follow the Robert Kiyosaki method of buying real estate, this person failed. Kiyosaki emphasize two main things, positive cash flow and buying at a good price.
But beyond the real estate guru realm, this is an overpriced home in Irvine. Even the overly optimistic Zillow has this property priced at $943,000. If anything, this person will be lucky to break even. Yet this is the slowest time of the season from October to March for selling a home. Somehow I think we will be seeing many of these cases especially in Orange County.
Crucial-Taunt, these properties are all in the Venturanza Del Verde tract in Tustin Ranch. I looked into them and only one seems like a flip: 2911 Ballesteros Lane.
2911 Ballesteros was bought by a RE agent on 12/12/2005 with 100% financing for $660k. He listed it on 9/25/2006 for $795k. Good luck with that considering there there are some BRAND NEW 2100-2700 sq ft condos in Villages of Columbus from the low 700s.