Well, I can see no reason,
You’re living on your nerves.
When someone drops a cup and I submerge.
I’m swimming in a circle.
I feel I’m going down.
There has to be a fool to play my part.
Show Me the Way — Peter Frampton
Today I want to show you how to chase the market down. Sometimes I feel sorry for all the FBs. Their nerves must be frayed as they drop deeper and deeper underwater. If only they could find a greater fool to bail them out…
Today’s property was first featured and updated New Century Condo – 2005 Flip ** Update 1 **. It appears the new year has given new resolve to the seller who relisted with a significant reduction in price.
Income Requirement: $112,250
Downpayment Needed: $89,800
Purchase Price: $565,000
Purchase Date: 5/26/2005
Address: 1 Montgomery #46, Irvine, CA 92604
Second Mortgage $113,000
|On Redfin:||12 days|
GREAT VALUE IN IRVINE. TWO STORY TOWNHOUSE WITH 3 BEDROOMS AND 2.5 BATHS, 2 GARAGE IN DESIRABLE HERITAGE PARK. OPEN FLOOR PLAN WITH LARGE ROOMS. BLUE RIBBON SCHOOLS. CLOSE TO SCHOOLS SHOPPING AND FREEWAYS. NICE ASSOCTAION WITH ASSOCIATION POOL, SPA, PARKS, AND WALKS. LOW HOA DUES $175.00 AND NO MELLO-ROOS.
DESIRABLE HERITAGE PARK? I suppose it is also I-5 proximate.
LOW HOA DUES $175.00. Low compared to what?
New Century issued these loans, so who is going to lose the money? Despite its bankruptcy, the business plan for New Century was basically a good one: build an unsustainable business, take out as much in fees and stock sales as you can, and disappear letting others hold the bag. Since the loan issuer is no longer in business, the investor has nobody to sue to repurchase the bad loan. These shell companies make a great way to compartmentalize losses. Anyway, some CDO or SIV somewhere is going to lose $142,940 after a 6% commission. That is an amazingly large loss on a such a small unit. The asking price is 20% under the most recent sale which was a full year before the peak. Are you getting a sense of how bad this is becoming for lenders and investors?
So how does one chase the market down? Do what this seller did. First, you list a property for $610,000 which would cover your commissions and make you a few bucks. You keep this listing price far beyond 90 days when the market is telling you, “it is priced too high.” Then you reduce the price to something approximating the market at the time, and keep it there for another several months while the market deteriorates. When it finally dawns on you that you have missed the market, you lower your price in a panic and hope to find a knife catcher. At this point a market chaser would wait 3 to 6 months before lowering the price again. A real seller would lower the price every 30 days by a significant amount until they got out. What do you think this seller will do?