Originally posted April 26, 2007
Address: 260 Dewdrop, Irvine, CA 92603 (Quail Hill)
Plan: 830 sq ft – 1/1
MLS: U7000571 DOM: 84
Sale History: 11/21/2005: $445,000
10/23/2003: $251,000
Price Reduced: 03/22/07 — $445,000 to $434,900
Current Price: $434,900
Many thanks to the reader who tipped us off to this property! Here we’ve got a Plan 1 in the Jasmine tract in Quail Hill. It was most recently purchased for $445,000 with 100% down (both loans from Greenpoint) on 11/21/2005. $445k for a 1bd? Yikes!
Fast forward about 14 months and the property is back on the market. Originally listed at $445k (hey, it should be worth at least what I bought it for right?), it was reduced a little after 1.5 months. Although this property does not qualify for a Knife Catcher award, the owner (or will it be the lender in this case?) is definitely bleeding money every month as the property is listed as VACANT.
The property taxes for the 2005 Roll Year were delinquent. Now, the website is showing them as paid on 3/26/2007. Also, the first installment for the 2006 Roll Year is also Delinquent. About $7k in property taxes (1st and 2nd installments) are due by 7/2/2007. It looks like they are trying but they probably got in over their heads.
{adsense}
The original owner (the buyer in 2003) made quite a nice profit in 2 years. From what I can see on title, it looks like they may have put up to $80k down on that purchase. So the original owner bought a $250k property, may have put $80k of their own money down, owned the property for about 2 years, got lucky with the timing and price of the sale, and made around $170k. Contrast that with the current owner who bought a $445k property, put $0 down, owned the property for 1.5 years, got unlucky with the timing and price, and will lose at least $36k (assuming 6% in selling costs)!
UPDATE #1 – June 8, 2007
Here’s a quick update. The price was reduced again a few days after the initial post.
MLS: U7000571
Price Reduced: 04/30/07 — $434,900 to $428,900
The loss will be about $42k if we assume 6% in selling costs. This one has gotta be going back to the bank.
Welcome to the the Quail Hill Graveyard!!
—–
“Lucky” and “unlucky” in your last two sentences there . . . it makes you think. What a tragedy that insanity in markets brings out the worst in people (fraud, greed, etc.) and offends a capitalistic system that should reward merit, but instead rewards “lucky” timing.
And who is it that is really unlucky here? The buyer didn’t have any money in the condo….all that they are losing is points off of their fico score. The lender is the real loser.
Although I guess the buyer does have to report the loss as ‘income’, so they will have a tax hit.
Rather amazing that you could make that kind of profit in 2 years by “investing” in housing; who’d a thunk the housing market would get so fixed to allow it to run up so quickly (volatility)? That’s nuts, giving better odds than Vegas. Good for the 11/2005 seller who pocketed $170k, but there’s going to be lots of sleepless nights for the bag-holder buyer.
Is anyone else NOT surprised that alot of this excess liquidity seems to be running to the Stock Market, now that the real estate asset bubble is deflating?
And who is it that is really unlucky here? The buyer didn’t have any money in the condo….all that they are losing is points off of their fico score. The lender is the real loser.
Once again NO one, not the BUYER, not the BROKER, and not even the LENDER (since the loan has long since been sold off to Wall St. as a CDO, no doubt) had any significant “skin” in the game, so there was little to lose here for everyone. That lack of accountability was the problem fueling the housing balloon in the first place: brokers were handling OPM, not their companies.
That swelling home equity wasn’t “real”, until the lender issued the $180k payment to the seller.
Hmmm, wonder if those changes in capital gains tax rules MIGHT’VE played more than a small role in GAMING the housing market here? Ya’ think? No?
Although I guess the buyer does have to report the loss as ‘income’, so they will have a tax hit.
I guess we’re assuming it’ll go to F/C.
On the bright side, the Fed Gov’t will get ALOT of $$$ from all those 1099’s being issued, IF the FB can actually afford to pay taxes! The FB really needs to decide if it’ll be better to drastically drop their asking price to stimulate a sell (and show up to the closing table with their personal checkbook to make up the difference) OR just let it go back to the bank as an F/C and deal with the tax implications of a F/C later. Now knowing the American consumer (who are quite good at delayed gratification; uh, sarcasm), which route do you think they’ll take?
Depends on the seller’s circumstance.
If it is a relocation and they could afford their payment all along, they will go ahead and write the check to preserve their credit and allow themselves to buy a house sometime in the future. That is assuming: a) they can afford to write the check, b) the loss isn’t too big.
If this is someone who is selling because they can’t make the payment, then the lender (bondholder) will take it on the chin.
I’m seeing a lot of homes in Irvine that are now priced less than they were purchased for in 2005. It also seems like a lot of homes are for sale that were purchased in 2004 & 2005. I wonder if these are newly unemployed New Century mortgage brokers. As prices continue to decline, here come the short sales and foreclosures.
By George, I think this giant ponzi scheme is rolling over. LoL
The seller has a lot to lose.
1.) The monthly payments on that place were much more than what rent rates are. Even after the tax deduction the current owner is still paying more.
2.) We live in a highly leveraged society, like it or not. Unless you have stacks of cash lying around, which our homeowner doesn’t, low FICO’s can cause significant harm.
3.) California homeowners have the right to walk away from a home without recourse from the lender. However they can’t escape the IRS. Here’s what I mean:
If this ends up as a short sale or REO, the homeowner doesn’t have t pay the difference.
ie) mortgage debt 450k and sales price 400k.
The IRS will see that 50k difference as a “forgiveness of debt” the homeowner will have to pay taxes on that 50k.
If ever a place belongs back at its 2003 price, this would be it!
Actually, the more I look at it….this should be a 150k starter condo.
what a difference one year wait can make:
29 Valley Ter, Irvine, CA 92603
Sale History
03/21/2007: $1,700,000
06/19/2006: $2,025,000
16% decline in value and
Loss = 325K + 100K(fee) = 425
but is’s just beginning of decline in real estate value, fun to watch greedy people burn
though 29 Valley Ter owner suffered 425K loss in less than a year, this one is indeed one year:
108 Mosaic, Irvine, CA 92603
Sale History
04/26/2007: $1,500,000
04/24/2006: $1,725,000
I may be mistaken, but as I understand California lending law:
1. a purchase money loan (i.e. the initial loan used to buy the property) is a non-resourse loan meaning that all the lender has as collateral is the house,
2. while a refinanced mortgage is a recourse loan that says all of the borrower’s assets are collateralizing the new mortgage.
I think this will be the next “gotcha” aspect of these loans that will hit when foreclosures are happening.
I’m no lawyer, but my understanding is if the bank decides to allow the owner to attempt a ‘short sale’, it means the seller has signed a statement that the troubled borrower has NO other resources (i.e. savings, other properties, etc.) left to make up the difference in price.
If the owner has other assets AND they have a buyer who’s willing to buy for less than the outstanding mortgage, the bank expects the seller to come to the closing table with a check book in hand to make up the difference. Banks don’t just take ANY short sale, accepting less than what is owed, UNLESS they know there’s going to be no other recourse but the home going “back to the bank” via foreclosure.
However, even if the bank allows a short sale (and in essence is forgiving the difference in amount between what the owner owes and what the new buyer will pay), they also issue a 1099 to the seller in the amount of the difference, as that money in essence is income to the owner. Then the SELLER has to pony up with the IRS for taxes on the income; and there’s no capital gains exemptions on 1099’s for debt foregiveness! It ain’t scot-free, and then the seller will have to deal with the IRS on next year’s tax returns (and the IRS tracks 1099’s easily, as the process is automated: easy to see any discrepancies between what the taxpayer vs bank reports for 1099’s).
On the implication of re-fi and bankruptcy laws, my understanding is that Dave is correct: re-financing removes many of the ‘homestead’ protections afforded in the initial mortgage. So all those people who re-fi are putting their homes on the line, losing the protections afforded by declaring bankruptcy in the event of a F/C.
ARGH, on the market six months and the idiot reduced their price 3%.
Foreclosure or BK will be a good education for that tool.
I think this is a Quail Hill – Jasmine HOA – Molles Home (Plan 1). When they were first released the selling price was around 250k’ish? 1 bed, 1 bath, 822 sq ft, single car garage. Everything on one level (bottom) which is preferable to tri-level homes where you worry about tripping and rolling down the stairway.
I guess they got a little scared when their neighbor over at 212 gave his home back to the bank for $477k on the 31st. I don’t think they told the seller of 213 of his new neighbor Mr. Bank.
Interesting – just talked to the manager of the Quail Hill Albertsons. Apparently the recyling has gone from almost nothing to about $100/day. There are a lot more coupons being used, and people are tending to buy more for sale items than just whatever they usually bought. And sales are up – I guess more people are eating in instead of out.
The ARM resets must be starting …