Flower Dust ** Update 1 **

I received an email from a reader providing more information on this listing:

Here is the deal on this property: Mr. Windfall Profits purchased the property for $330,000 direct from Shea Homes in Jun-2003. Just 14 months later, Ms. Greater Fool purchased the property for $500,000 in Aug-2004. Ms. G.F. encumbered the property with $475,000 in debt at the time of acquisition. Ms. G.F. apparently needed some money (new Mercedes lease? tropical vacation?), so she refinanced in Aug-2006–a $480,000 first and a $128,000 second, for a total of $608,000 in debt.

When Ms. G.F. refinanced, her original loan would have been paid off, enriching her with a whopping $133,000 in cash.

Ms. Greater Fool sold the property in Jul-2007–but unfortunately for the lender this was not sold by a grant deed, it was sold by trustee’s deed! Deutsche Bank Trust Co America is the recorded owner at a price of $505,138. It’s on Redfin for $469,900. With a full price offer and 6% in sales commissions, the total lender loss from the Aug-2006 refi will be $166,294 or 27%!

It is Black Friday today…I wonder what Ms. Greater Fool is doing with all that cash?

I am wondering the same thing. If I had just walked away with that much of the banks money, I would be very thankful…

I close my eyes, only for a moment,
and the moment’s gone
All my dreams, pass before my eyes,
a curiosity
Dust in the wind,
all they are is dust in the wind.
Same old song,
just a drop of water in an endless sea
All we do, crumbles to the ground,
though we refuse to see

Dust in the wind,
all we are is dust in the wind

Kansas Dust in the Wind[Now] Don’t hang on,
nothing lasts forever but the earth and sky
It slips away,
and all your money won’t another minute buy.

Dust in the wind,
all we are is dust in the wind
Dust in the wind,
everything is dust in the wind.

Dust in the Wind — Kansas

Link to Studio Version Music Video

The recent fires have reminded me of the helplessness of man to confront forces larger than himself. Many homeowners are hoping the FED or somebody can save the housing market. The forces in play are much larger than anyone can control. We are all powerless to change our real estate market, including the FED. All we can do at this blog is keep people informed of its progress, and hopefully keep of few readers from watching their hard-earned money consumed by the market or dissipate into the ethers.

19 Flower Bud

IrvineRenterNew Asking Price: $469,900

Old Asking Price: $499,900

Income Requirement: $124,975

Downpayment Needed: $99,980

Purchase Price: $505,138

Purchase Date: 7/24/2007

Address: 19 Flowerbud, Irvine, CA 92618

Beds: 2
Baths: 2REO
Sq. Ft.: 1,200
$/Sq. Ft.: $417
Lot Size: –
Type: Condominium
Style: Townhouse
Year Built: 2003
Stories: Three or More Levels
Area: Quail Hill
County: OrangeRollback
MLS#: P606334
Status: Active
On Redfin: 1 day
New Listing (24 hours)



SUBMIT!!! Sounds like a line from a bad bondage video…



Check out the sales history:

Sales History
Date Price
07/24/2007 $505,138
08/26/2004 $500,000

This is actually a 2004 rollback and the second REO we have seen prices below $500,000 in Quail Hill. The first might be written off as an anomaly, the second is an ominous sign. At what point does this become identified as a trend?

Monthly Mortgage Resets

Just in case you forgot why we are seeing all these REOs.

60 thoughts on “Flower Dust ** Update 1 **

  1. IrvineRenter

    Typically a flipper would not put a property for sale a couple of months after buying it for a loss.

  2. Dr. Ruth

    “SUBMIT!!! Sounds like a line from a bad bondage video…”

    Anyone in OC would know that first hand.

  3. FamilyGuy

    On one hand I think you could just be trolling, yet on the other hand I think you might be genuine in your racist and inflamatory remarks.

    What’s your deal? If you don’t like the OC, go read about another community.

  4. Nic

    Are Option Adjustable Rates bad? What kind of loan is it? Will they default?

    It’s interesting to see so few mortageges reset past 2012. I guess it’s because everybody likes the 5-year term, eventhought the rate are low compared to historical perspective; therefore justifying a long-term loan. However, lender would not ,oan for 30 year fix to bad risk people…they would never make money that way I guess.

  5. mark

    Option ARMs aren’t “bad,” they’ve just been sold to the wrong people. Historically these loans have been used by the more sophisticated borrower whose income may fluctuate greatly (e.g. commission sales person, actor; i.e. any borrower who has a decent income, but not a regular paycheck). The Option ARM allows the borrower to chose the payment every month. They can make a payment less than the interest due, only interest due, or interest + principal. So when cash flow’s tight, the borrower could chose to pay less than interest for a few months, but then make much larger payments when cash flow improves.

    However, in the last few years Option ARMs have been used to qualify all types of borrowers for loans they couldn’t traditionally afford based upon the lowest payment option. It works out for the lender and borrower as long as prices keep going up.

  6. IrvineRenter

    They certainly have been given to the wrong people. I read yesterday that Countrywide’s option ARM portfolio has 80% of the people making the minimum payment every month. It is likely that all of these people will default when the reset comes because they cannot afford (or will chose not to pay) more than the minimum payment.

  7. snicker

    “1200 sq ft for 1/2 a mill?
    Why no inside pics?

    Whaa??? Since it was built with crapy materials (like 95% of most “new” homes in OC), I say $150k TOPS. Reason? You’ll be REPLACING 80% of the house in 8 years anyway….


  8. Dr. Ruth

    “racist”?? You’ve got one twisted sense of reality. Maybe YOU should “go read about another community”!

  9. lendingmaestro

    Haha. Good point.

    I wonder why people don’t look at the replacement cost on their insurance policies and then look at the “appraised value” amd go…”huh?”

    “My 625k condo which I owe 535k on has a replacement cost of only 278k?”

  10. OptimusPrime

    Love the IMF chart. So much for the bottom callers in 2008/09.

    Also..that condo is worth $300k tops 🙂

  11. buster

    You make a great point! As the fires grew, I checked the policy on my rental in Greentree. Insured for $258,000. Bought in 1991 and the insurance company kept adding 2% per year to the insured value. I’m making that call TODAY to my insurance company! Again, thanks for reminding everyone that you need to read those policies rather than just write a check every year.

  12. Jay Davis

    Jesus…I think your bondage joke may have been misinterpreted as something about slavery(?) It’s a stretch to say the least.

  13. Kit

    1200 SF on three stories!!

    I hope the next buyer likes stairs.

    500 K for 2 bedrooms?

    Seriously, the only people interseted in 2br are single people. You are either on the way up or down. Since this GEM is on 3 levels I cannot see anyone over 35 buying this place. (not that 35 is old, but a 35 with half a brain might think, “gee this stair thing sucks now, but is really going to suck in 20 years)

    Why do people insist on putting granite and fireplaces in 2 br houses. The money would be MUCH better spent on a 3rd bedroom.

  14. houseonlegs

    04 buyer put 25k down and got a 5.5% fix, looks like even borrowers with good credit and fixed rates are walking away from their homes. Bank did buy it back in 7/07.

  15. lendingmaestro

    Alt-A stands for “Alternate to Agency paper” Agency referring to either Freddie Mac or Fannie Mae. These two are both called GSE’s which stands for Gov’t sponsored entities.

    These two entities have underwriting guidlines, one of which is maximum loan amount of 417,000. The term “conforming” means it conforms to their guidelines.

    Agency paper is seen as “golden” but that really may not be the case. Both entities purchase stated income loans. Full doc loans, can be approved WITHOUT asset verification. The borrower only needs to verify income. They also have a documentation called “fast forward.” which waives verification of income, assets, AND, employment. This essentially is a no-doc loan masquerading as full-doc.

    How many of those are in their portfolio? Anyone’s guess.

  16. NanoWest

    The granite in the place so that when the “owner” dies, they can make a grave marker out of stone………

  17. Capocorso

    Judging from the graph, is it to simplistic to think that the the time to start making low ball offers to banks will be the end of 2008 (about a year from now) when the last of the subprime resets hit? Or maybe 9 months later when all the foreclosures have run their course?

  18. Major Schadenfreude

    If Countrywide really wanted to be suave, they would send a self addressed (with postage) shipping box largest enough to hold house keys along with that first re-set mortgage payment bill!

  19. CapitalismWorks

    I can’t resist chiming in on the option arms. These are a stupidest loans ever written. Using an option are is like “buying” a home on a credit card. The ARM resets are bad, the option arm resets are poison. Just think of the utter lack of fiscal discipline demonstrated by the average american. If we can hang ourselves with debt we will. Then combine that with a vehicle that is geared toward automatically increasing the outstanding debt monthly. 80% of option arms on CWs books are paying the minimum? I am surprised its not 100%! I wonder how many dupes bought into option arms with absolutely no understanding of negative amortization…

    I hate to admit it, but I have a friend who financed a home with one of these things (yes, I tried to talk him out of it). The loan officer/mortgage broker explained that option arms were just like Interest Onlys (used as an example of the safe form of financing) if the borrower paid the minimum payment 11 times a year, then paid a fully-amortizing payment once a year. I didn’t run the numbers, it may be true though it sounds like BS. Regardless, fact is most people prepare budgets with very little cushion. What do you think happened when the month came around for that fully amortizing payment?

  20. No_Such_Reality

    The problem with the chart is the option ARMs start reseting in 2009.

    That’s based on the paper reset date. Which may or may not be the actual reset date based on when and how people used the option. At first, I think the option ARMs were all 5 year ARMs. Then later, last year, maybe the year before, the 2/28s came around. I don’t know if they primarily saddled the 2/28s as subprime or not.

    Anyway, shortening the long story, the bomb on the option ARM is when the reset triggers early because the buyer has been using the option. I don’t know if the rate is still fixed or not, but instead of a nice low minimum payment for five years, the buyer suddenly has to make the fully amortizing payment starting about 2.5 years in. That’s what does them in.

    The chart shows when the ARM rate starts to flucuate, it does not show you when 80% of the borrowers run out of fuse on their bombs.

    My guess is that the Option ARM hump needs to get pushed forward about 2 years to reflect reality of when the borrowers will run out of flexibility.

  21. mark

    Most Alt-A loans in the last couple years have been to borrowers with decent or better credit, with stated-income, and used to purchase a non-owner-occupied residence.

    There were lenders who specialized in this area, but they are all gone, along with these types of loans.

  22. mark

    This early reset occurs as a result of the LTV (“loan-to-value”) exceeding the terms. Negatively amortizing loans contractually reset at 110, 115, or 120 LTV. So even if the value remains constant for two years, the loan can reset prior to the scheduled five year reset.

  23. lawyerliz

    Enuf already with the old people not being able to go up and down stairs bit.

    My 84 year old mom goes up and down 3 flights, altho now it is becoming a trial. My 61 1/2 year old self goes up and down stairs in my 2 story space coast house many, many times a day. You young’ens need to reevaluate what “old” is. Going up and down stairs is good exercise (as in stairmaster exercise machines), and may even help to keep you

    If I apply for Social Security in half a year, it will be because my real estate business imploded, not because I have lost my brains and my body has fallen apart. And (evil chuckle here) I’ll get at least some
    money out of it before IT implodes.

  24. Genius

    About 9-16 months after the mass resets hit is my guess. It takes a little time for these to hit the market.

  25. buster

    Or maybe these people were smart. I don’t know if anyone has run the numbers, but is it cheaper to (1) rent or (2) do a 100% financing ARM w/ minimum (negative amortization)payments? Given any certain set of reasonable assumptions, it may be better to go in w/ nothing down (versus a security deposit for renting) and walk when the reset comes (versus when the lease is up). Sombody with better financial accumen than I should be able to run the numbers, and maybe the results will show that these people are smarter then the renters. And if their credit was for crap anyway, what more damage can they do? As they say, you can’t hurt yourself jumping out of a basement window.

  26. Law_Student

    What most renters cannot understand is that it is almost always better to buy. The fact that renters could not afford to buy a house 5 or 10 years ago and still cannot afford one does not make them smart.

    The only possibly “smart” renters are those who sold near the top of the market and rented in anticipation of buying when the price dropped. This is a highly risky move, however, because of the loss you will take due to broker commissions and lost time in dealing with the sales and purchase. Even in today’s market, this would not yet prove to have been the smart financial move.

    Those who took a risk by buying at the top of the market and lost have learned some things about buying and owning a home that many renters will never learn. The buyers who lost money, were foreclosed upon, and even went bankrupt will more than likely be in a stronger position than most renters within a few years when they buy another home.

    As for the “dummies” that bought a house with 100% financing on a neg-am mortgage (people that renters often insult on this board), they lost nothing but points on their credit score for a few years. The risk they took was a good risk in a rising market. These dummies are a lot better off than the “hard working renters” praised so often on this board who spent 10 years of their life saving up a 20% down payment and will now lose their life savings if they cannot make the payments for whatever reason.

    In the long run, the risk of buying versus renting has been proven to be a good one.

    As for me, I bought my last home in 1999, have a 30 year fixed mortgage, and have very low tolerance for risk because I have a family to take care of. I also have enough money to not work and go to law school because I sold my second home in 2004.

    I know plenty of people who made a lot of money in the real estate market. I firmly believe buying real estate is the best investment that exists. I hope to buy another home after I graduate in 2010, which I believe will be the time to buy.

    While I love this site and appreciate anyone trying to drive the price down so that they can buy, I don’t believe that renting is better than buying. Best of luck to you all.

  27. lendingmaestro

    No offense, but those are some of the scariest words of advice that I’ve heard. Do you have financial examples to back up your claims? Sorry, Real Estate is not the best investment that exists. Over the long term it doesn’t even yield a rate of return greater than the safest investment out there–the US treasury.

    Many people that have gone through years of financial education and none of them will tell you to diversify your portfolio by purchasing Real Estate. Very few people prior to this bubble made money through real estate development. The advent of 100% financing skewed the reality of an traditionally capital-intensive industry.

    You used to need a little skin in the game. Most brokerages will let you buy investments with a maximum margin of around 50% yet you could buy a home with 100% financing? Sillyness.

    An investment is defined as something that produces a dividend, or grows in value due to reinvestment. Bonds pay a yield. Stocks either pay a dividend to you from net earnings or reinvest into the company, at which case the price should increase.

    A home does none of these. A home does not pay you a quarterly yield or dividend. A home does not produce daily, monthly, or yearly earnings. A home does not improve itself. On the contrary, a home is an obligation which requires maintenance and tax payments, regardless if it is paid off or not. The reason why prices gradually increase is due to inflation.

  28. skek

    The renter vs. owner class warfare that sometimes crops up in the comments is unseemly.

    Let’s not lose track of the fact that for most people, real estate should be a home — a place to live. Some rent, some buy. Part of the reason we are in this trouble is because people began to mix their home with their investments. How many people knew someone who’d move every 2 years in order to qualify for the “primary residence” exemption to the capital gains tax? Even when they were making money, I would ask them who wants to live that way? Other people viewed their residence as an ATM, or more accurately, a credit card and cashed out beyond their ability to repay the debt.

    The fact is, not everyone is cut out for home ownership, but not everyone wants it either. I respect people who rent by choice — most could easily handle home ownership but have made a reasonable financial decision not to buy. I respect people who own responsibly. I don’t respect people who are personally or financially irresponsible, whether they are bad tenants or ignorant home owners. I say foreclose on the bad owners and let lawyerliz evict the bad tenants.

  29. ipoplaya

    I agree with you Maestro that real estate is not the best possible investment out there, but disagree with regards to your interpretation of investment… I think ole Law Student has Bubble Blinders on and hasn’t considered the historical performance of various investments opportunities. RE has been the best investment for a few years and I’m sure many were able to reap large rewards from it.

    Generally speaking, investments are the use of money to make more money. Many good investments don’t necessarily pays yields or grow through reinvestment. Those ounces of gold purchased a few years ago sure would seem to be a good investment, although they would not appear to qualify under your narrow definition.

    Houses need not appreciate by any more than inflation to be a good investment. You have to consider the after-tax consequences of investments to make them relative. Home purchases may produce a return by simply lowering the net capital outlays required by a person for shelter all other things being equal. Less dollars spent on housing is analagous to a dividend or other yield. Either way, it means more capital in your pocket available for other things… The cashlow consequences of the mortgage interest and property tax deductions can be considerable. Saving $500-1000 per month in net monthly spend while living in a purchased home vs. renting is a wise investment.

    My personal situation is a good example. My net out of pocket after mortgage, prop tax, hoa, insurance, etc. is around $1200 per month as a result of those lovely tax deductions. I put down around $50K when I bought… To rent the same property, it is around $2600-2800 per month. At the time I bought, rents of places of that size were probably around $2K. Ignoring all appreciation in the value of my home, my “investment” has improved my capital position by somewhere between $1000-1500 per month over a six year period. That return dwarfs most alternate investment options for my $50K down and does not even consider the appreciation of the home/investment over that time.

  30. No_Such_Reality

    Options ARMs are like a bottle of wine.

    If you have wine rack full of nice wine and it a give you pleasure good. If one day you take a bottle and share it with friends and have glass it is good. The next day, you walk past your wine rack and don’t think about it. Later that month, you find a nice bottle of wine and replace it. Then some time later, you open another bottle of wine. Maybe you drink it all at home yourself, maybe you share it with someone special. You enjoy it, you walk past the wine rack the next day and eventually replace that bottle too. This is all good.

    Now, if you grab a bottle, open it and guzzle it yourself every day, the wine rack is not good.

    How you use it is the key.

  31. Irvinexpat

    Who decided to ruin Irvine? The city? The developers? Irvine Co? Or was it the citizens who sat back and watched? The people of Irvine should have demanded some sort of gross living area to lot size ratio (1500 sq ft home: 6000 sq ft lot/ 5000 sq ft home: 20000 sq ft lot), a good mix of single story homes and two level homes, no detached condos, more square lots rather than rectangular lots, and buffer zones between developments. This would make it easier for wealthy people to pay the premium Irvine demands for its schools, safe community, proxmity to the beach, etc.
    All these new homes and condos will be worthless when the dust settles.
    Villa Park is a good example of what a city can be like if greed is cut out of the equation. I’m not from Villa Park, I just admire it every time I pass through.

  32. Lost Cause

    It is a city created by marketing and beancounters with computers. I find it unbeleivable that actual planniing went into such an unhuman place. From the expressway boulevards, to the unwalkable neighborhoods (is there really anyplace to go?), and the parking lot strip malls…it is built on a scale to maximize profits, and nothing more.

  33. Lost Cause

    Perhaps timing the market is a bad strategy, but this has got to be the worst time to buy a house. I would wait until they are not losing $10,000 a month in equity.

  34. awgee

    The bankers do not think they have acknowledged the full extent of their losses. They are stalling for time.

  35. No_Such_Reality

    I’ve never understood why when shopping complexes are built in SoCal that they pave a giant parking lot around it instead of building a parking structure.

  36. Formerbanker

    Awgee, you are right. Banks won’t know how much their losses on RE loans will increase until we’re close to the bottom of the market…and we we’re still pretty close to the top the hill, and still gathering speed, as we head downward in terms of price reductions being reflected in closed home sales. Banks are hoping the RE markets get better before more loans become severely delinquent…I couldn’t believe Countrywide came out today and said that despite the >1 Billion loss in the 3Q07, it will return to profitability next quarter. Ha!

  37. JimmyJoe

    Awgee, and Formerbanker,

    You guys BOTH NAILED it!!!!!!!!!!


    “I couldn’t believe Countrywide came out today and said that despite the >1 Billion loss in the 3Q07, it will return to profitability next quarter. Ha!”

    ROFL !!!! I couldnt believe what I just heard too!!!! Gives good excuse for the stock bounce, and allows those to RESHORT it, or buy puts at a discount for later on. 😉

    BTW, did you know that trading curbs are OUT of the markets now?
    I heard about it yesterday.
    The big players are are loaded with puts, and shorts, and they are ready for the markets to FALL BIG TIME, IMHO. No more shorting up tick rule either. Hum…..

  38. lawyerliz

    This house is still ‘way too expensive for the mid middle class family that I would expect would want to live in a house that looks like that.

    Even taking it down a hundred grand more would mean you’d have to make $100,000. Didn’t somebody post the average was $80,000. So the price should be $350-360, to reach the average person.

  39. nut_job

    Wow — not sure how you’d make that interpretation. You must live an awfully bothered life if “Sounds like a line from a bad bondage video” annoys you.

  40. crankpot

    I went to the models when these places were first built. Yech! Who would ever want to live in a place like that. It seemed like there were steep staircases everywhere, very crammed feeling inside, windows looking out into your neighbors’ windows, no yard or gardens. If you have to live in a condo, I’d pick Orangetree, at least the grounds are fully grown, well-kept and sometimes there’s even a tree to keep the neighbors from peering inside.

  41. tonye

    Is Quail Hill on MY Zip Code.

    No way… you take it. It’s on the wrong side of the hill: geographically, demographically and financially. 😛

  42. tonye

    Yes, I went to see the models too. I couldn’t believe how tight those homes are. If they were in a City… like a brownstones in Washington DC or NYC and they were built our of brick, then I’d understand.

    But as they are built, these are suburban mistakes.

  43. xsocallandmerchant

    Remember that the insurance amount is to rebuild the “sticks and Bricks”. You need to deduct the land value from the cost. You do not insure your home for market value.

    Under prop 13, Assesed Value, other than recently purchased properties, have no relationship to market value.


  44. Cecilia Sherrard

    Bondage, too funny. I love the caps and 50 million (!!!!!!!!!!) REALTORS use to make their point.

    It’s a sad time in America when the most important thing to consider and appreciate is status, a 7 series, and a Gucci bag.

    Who cares about tomorrow as long as today we’re “hawt”

    Americans need to tighten their belts and realize that there are billions of dollars being poured into wars and our education system and jobs are following the path to warmer ground…Irresponsible loans and purchases must become “uncool” if we want to survive as a wealthy, respectable, existing nation.

    Cleveland’s housing market is close to being the cheapest in the nation. Foreclosures are still rampant and regardless of the bottom line, from $80,000 to $800,000, we love to spend money…

    Oh, and what did Britney have for breakfast today??

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