Asking Price: $925,000
Purchase Price: $940,000
Purchase Date: 11/07/2005
Address: 4 Ticonderoga, Irvine, CA 92620
Beds: 5 
Baths: 3
Sq. Ft.*: 3,029
Lot Sq. Ft.*: 5,300
Year Built: 1980
Stories: 2
Type: Single Family Residence
Neighborhood: Northwood
$/Sq. Ft.*: $305
MLS: P561270
Status: Active on market
On Redfin: 52 days
We have written a great deal about the coming foreclosure tsunami which will drive prices lower. This is just the beginning. This house is going to sell for less than its 2005 purchase price because the owner has to sell. Must-sell inventory lowers the comps in the entire neighborhood. Right now, these sales are more the exception than the rule, but the stress of mortgage resets has not hit the market yet, so more of these sales are coming.
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{adsense}
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From Redfin: “SHORT SALE, PRE-FORECLOSURE, UNDERMARKET OPPORTUNITY. A bright home in desirable Northwood Village of Irvine. Walking distance to elementary & middle schools and community park. One bedroom and bath in main floor. Low maintenance backyard with fruit trees. Large 5th room may be used as library, gameroom or office. No association and No Mello Roos fees. House is sold AS-IS w/ no Warranties of any kind implied or not.”
Assuming a 6% commission, and assuming this wasn’t a negative amortization loan, this lender will lose $70,500 on this FB. What is worse is the impact on the neighborhood. If Zillow is any indication, this sale will reduce the property values in the entire neighborhood about 10%. So it begins…
The lender isn’t going to lose squat. First, they won’t approve a short sale giving up 6% commissions. The lenders are still in denial about the market in SoCal too. Second, I doubt the seller and agent proclaiming opportunity have actually got the lender on board with a short sale.
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this house is ugly…..
“Low maintenance backyard” means – backyard covered in concrete.
Selling a $900k+ home with “no warranties”, “as-is”. Are you freaking kidding me. Drop the price another $400k and maybe…maybe I’d stop by for a quick look. We’ve got a long way to fall.
If they got an offer at 925, the lender would likely jump at it. Much better than what they’ll get at foreclosure, and they know it.
They also likely have taken out insurance for the loan.
Sure, they’ll play hardball as long as they can, and see if the borrower has any assets, but if they don’t, they’ll exercise their insurance and be made whole.
Chuck
This is not directly related to that $900k+ home you show, but do you know what I would love to see? A sign with http://www.IrvineHousingBlog.com hanging from a few of the major over passes on the 5 and 405 freeways (Jamboree, Sand Canyon, Culver, etc.). Your site traffic would undoubtedly increase, and more Sheeple would get the true scoop about their neighborhoods (hopefully convincing more would be buyers to WAIT).
The Decada in Portola Springs,
Phase 1 released on July 29, 2006
Phase 2 released on Feb 3, 2007
see the price chang
plan 1: $691,490——$580,000, 1437sf
plan 2: $723,420——$602,000, 1545sf
plan 3: $779,080——$648,000, 1750sf
Other builders are almost same. I believe drop more in the future 2 years. Just wait.
in west irvine, the worse is coming next year.
Donut said, “The lender isn’t going to lose squat. First, they won’t approve a short sale giving up 6% commissions. The lenders are still in denial about the market in SoCal too. Second, I doubt the seller and agent proclaiming opportunity have actually got the lender on board with a short sale.”
I concur with some of your comments, but I dissagree with your first statement. The lender is in for loosing more than $70,000. First of all, if the lender has not approved the short sale, which seems to be the case, the agent has nothing and most probably things would take their course and the property will be foreclosed, consecuently exposing the lender to an even bigger lost. Maybe if the agent knew how to handle a short sale and ask for a actual approval from the lender from the get go, things would move forward, but at the same time the price would have to be enticying enough for anybody to even consider looking at this property. I am seeing a whole bunch of agents who list properties on a short sale bases without the lender’s approval and hopping against hope that a sucker born just a minute ago will buy the dump. This is a waist of time and it only diverts the seller’s attention from actually looking for more feasable solutions to their problem.
Furthermore, I review the listing and the listing agent is offering only 2% commission. This agent just created another factor to against the potential sale of this property. No selling agent will even bother showing this place with such commission on the line. What is the point if everybody else is offering 3%?
We should wager to see if the short sale actually takes place before the property is foreclosed. I bet $100 that it will be foreclosed.
Actually, I went to see this. It’s a huge short sale. Bought on 11/07/2005 with 100% financing with a $752,000 first and a $188,000 second. Forclosure date is April 11 (tomorrow). Already contacted lender – they will take $752,000 for the property right now and will cut a nice financing deal.
The buyer rented it out – it’s a disaster. To bring it up to par will take $100k plus. Termites, roof leaks, etc. Backyard is 100% patched-in concrete. Told the bank I would pass – it’s worth $475,000 – $500,000 tops. With basic renovations, you’re into it at $600,000 – $675,000 depending on how far you want to go. Add three new bathrooms and a new kitchen and you’re well over $700,000.
To make a long story short – there was lots of traffic over the past three weeks. As of today, NOT A SINGLE PERSON is willing to offer even the $752,000 it will take to make the first TD holder whole. What’s that say about his market? Carve $188,000 off of the price the buyer paid 18 months ago and not a single offer. If you want it, be on the courthouse steps tomorrow at 10:00am. Nobody else wanted it….
I bet $100 that it will be foreclosed.
I wouldn’t take that bet.
Your observations are very similar to mine as I was homes that are listed ‘bring all overs’ ‘short sale’ languish on the market six months or more.
And I agree, the lender is going to eat a whole lot more than $70,000. It just isn’t going to be on a short sale and I doubt if it’ll be soon. First they’ll foreclose, then they’ll sit on it, then finally move to liquidate. I figure twelve months plus before the lender realizes the loss on this critter.
IrvineRenter,
According to the following article, since most ARMs are owned by MBS investors, the REOs for these ARMs will likely end up as rentals instead of showing up on the MLS.
Rentals also generate incomes, but I don’t think they generate as much as mortgage payments. I wonder whether the incomes from renting meet the requirements of the MBS holders.
Any thought ?
http://www.californiahousingforecast.com/commentary/2007/4/10/reos-in-the-last-downturn-inteview-with-30-year-re-veteran.html
IrvineRenter,
I read the article and I think it is a very good alternative for the lenders, I am only concern they will lack the common sense to consider this option. If the try to sell a property at a discount, it is money lost, but if they keep the property and rent it then it becomes a performing assest. On the other hand, that is the problem with common sense, it is not that common. If it was, these investors would not have put their money into these risking loans in the first place.
Another alternative for the lenders is a workout with the borrower, provided that borrower is not a wanabe investor/flipper. If the borrower actually purchased the property with the intend of being there for the long run, they can contact the lender and try renotianting the terms of the loan. At this point lenders are more willing to do that than even given the fact that the alternative is foreclosure.
But we will see, I hope lenders have the common sense to realize that they should not look forward for profits, but at the ways they can minimize their loses.
I am sorry, I was directing my last comment to gn not to Irvine Renter.
According the MLS record, the home was purchase on 11/07/2005 with sale price of $940K. The owner borrowed $940K, or 100%, from Indymac Bank. The home is vacant now; but was occupied by tenant just before vacant. From previous listing that expired in 2007, it stated that owner bought another home!
Owner bought another home! Does anyone see anthing wrong with this picture?
“Owner bought another home! Does anyone see anthing wrong with this picture?”
NIR,
My guess is that they were lying? It seems fairly unrealistic that they would walk away from one house and be approved for another loan. I can only imagine that the realtor embellished the situation.
Gn,
I would think the scenario described in the article are entirely possible, although I’m not sure how tolerant investors would be if they were expecting a certain return on investment from their REITs, MBS, etc., only to realize a much lower return. I’m not a fixed income expert but let me see if I can make sense of this…
First of all, MBS are debt obligations with coupon rates attached to them. Investors are not at risk since they receive interests as debt holders (unless the bond defaults in which case the lender bank has a lot more to worry about, such as keeping their business alive). Home default risk is with the lender, not the bond holders.
With REITs, the investor is at risk since they will simply receive less dividends than they anticipated if houses in their portfolios default. But isn’t there some sort of expected dividend payout ratio? I can’t imagine sub-prime housing – or any residential housing for that matter – would yield high enough expected dividends to be able to form successful REITs. My understanding is that most REITs are commercial properties.
Any securities experts out there that can elaborate?
Just FYI, IndyMac is willing to eat the wrap second for $188,000. They WILL accept $752,000 on this per their rep. This has been an open house three weekends running and we saw this one along with quite a bit of other traffic. Interestingly, this goes to the courthouse steps TOMORROW – April 11th. We spoke with IndyMac and they said they would take $752,000 for it to make their 1st TD whole.
Most intersting — of all the people who previewed this property, not a SINGLE ONE has been willing to offer even the $752,000 it will take to make the 1st TD whole. So even a $188,000 reduction from the price paid in Nov. 2005 to now isn’t enough to get this property moving. Not a good sign for sure……
Sorry for the double post, but if anyone is interested in the foreclosure sale the Owner is Adam Luwaga, the mortgage holder is IndyMac and the mortgage document number is 2005000892187. Oh, and the 2005 Supplemental and all 2006 taxes are in default, so bring a little extra cash.
Great, so all the must sell homes now become must rent homes. Rents will get depressed even further and the gap between renting and owning will swing even further to renting.
[i]If the try to sell a property at a discount, it is money lost, but if they keep the property and rent it then it becomes a performing assest. [/i]
Mexifornia,
A property is not a performing asset when it is cashflow negative. In this case, the rent to cover the lenders monthly nut on this place would be about HALF of what the monthly loan amount is for. Therefore, the lender will still lose money whether they sell it for a loss or rents it for a loss. At least when they sell it, they get the immediate writeoff.
I don’t see the banks keeping homes as rentals.
First, it is not their business. Banks make money by making loans, not managing real estate. They have consistently avoided holding real estate in the past, and I see no reason they would change their behavior now.
Second, rental income is only half of the mortgage payment they were getting. As a cashflow substitute, the rental is worth only half of their initial investment. Therefore, they actually come out ahead going through with a foreclosure and getting back 70% of their original capital rather than holding an asset that is worth only 50%. Plus, if they foreclose and take a loss, they have an insurance claim they will not have if they hold it.
Third, as donut pointed out, if the banks become the defacto cashflow investors in these properties, the large number of them will depress rents even further which reduces their cashflow value.
Fourth, if they do decide to hold these properties, rather than supporting a declining market, they will end up being the bagholders for the full decline. The banks will be far better served by finding some buyer to hold the asset as it declines further. Since these new buyers will need downpayments, they won’t get burned on the next sale.
When you put it all together, I really doubt banks will want to be long-term landlords for rental properties cashflowing half their initial investment. If they are waiting for the market to get back to peak 2005/2006 prices, they may be waiting 10-15 years or more. They simply will not want to do this.
At $752,000 , the property is $248 per sq ft! That is relatively amazing for Irvine. I am surprised that it isn’t getting snapped up for that price. Why wouldn’t the listing show the lower price? I am sure it would generate a lot more interest.
Is there a way to see what finally happens to this house after the auction? I keep hearing about houses going into auction and would like to know how cheap they sell for. Will it sell for less than $600k??
Personally, I would buy a house like that for $550 or so. I figure $50k in upgrades will make it look nice and new and though I beleive prices will fall below $550k, at least my wife can be happy knowing that we “own” a house.
Buster – was IndyMac at the open house offering up this info? How did you find out that they will drop the second loan and accept $752K for the house?
Thanks for the link to redfin! That’s a neat website/tool.
buster,
Did the owner even make any mortgage payments? I am just wondering if it is a mortgage fraud for profit.
RPK and NIR –
IndyMac was NOT at the open house. Just the agent. But we were interested and did quite a bit of research and found through a friend the right person at IndyMac. They told us they just want the 1st TD to be whole and, if we were to submit an offer that cleared the 1st TD, they would take it (pending, of course, our down payment and creditworthiness to re-write the loan.) Then it goes from non-performing to performing and his department is all happy. He didn’t really seem too concerned about what happened to the other department holding the wrap 2nd.
Note to RPK – $50k won’t do it. There are definitely a roof leaks (you can see warped and peeling interior paint near the ceiling), the roof is ORIGINAL, extensive termites, dead plugs and light switches, low water pressure, etc. Livable conditions is $75k. Irvine standard is $175k – $200k (I had a contractor walk it with me). Just look at the garage doors – original, heavy wood pull-em ups by the handle.
At $600k plus $200 for real upgrades, you’re into an $800,000 investment for a real nice property. BUT – will it be a $650,000 property when the neighbors all start defaulting? We looked at the comps – 15 in all within 0.8 miles. Of those, 12 are financed with subprime or Alt-A paper. New Century and Option One are even in there. So the guy at 24 Colonial, an exact same model two blocks to the west, defaults because he paid $980,000 early 2006 and what’s this place worth?
We are submitting an offer to IndyMac at $500,000 after they foreclose. By foreclosing, they clean up the title and clear out any title “debris” that might be floating around. We’ll keep you updated on what they say, but I give it less than 33%. I just don’t think they’re ready to take that kind of a beating. But our feeling is, if we’re going to buy in this kind of downward (ie, plunging) market, we better get out the big hammer and crush out a deal or we’re likely to be the one’s getting crushed in 18-24 months when everything is selling at 30% – 40% less than today.
Buster said the owner is Adam Luwaga. A reverse address search came up with:
Serungogi, Ali
4 Ticonderoga
Irvine, CA 92620-2558
(949) 596-0343
Any connection between these individuals? Does Ali own a bazillion homes, by any chance.
Tyrone – The title search shows him as the seller to Adam Luwaga. I don’t have the paperwork in front of me, but he owned it for quite a while. Whether or not they are related, and whether or not it was a staged sale to hose the lender, is pure speculation unless anyone knows of a relationship between the two.
Wow! What are the odds.
I performed a simple internet search for Luwaga and Serungogi. At the top of each search “Uganda” pops out. Perhaps this is reading too much into it. One individual sells to another individual in OC where they both may have an ethnic origin of Uganda. Sure; happens all the time.
Performing a people search on Adam Luwaga, it came up with hits for these cities:
Northridge, Granada Hills, Lancaster
Sherman Oaks, Anaheim, Stevenson Ranch, Irvine, Los Angeles
Ridin’ dirty!!!
Don’t mind me, just subscribing to the comment thread…
Buster,
In your earlier post, you mentioned that the house has “low water pressure”. How is this problem fixed ? How much does it cost ? Why do old houses tend to have low water pressure ?
Thanks.