Foreclosure 101: Mechanics of a Trustee Sale

Today we conclude the three-part series, Foreclosure 101, with a look at the details of a Trustee Sale and a high-end Irvine property defying financial gravity.

1 SHADOW Gln Irvine, CA 92620 kitchen

Irvine Home Address … 1 SHADOW Gln Irvine, CA 92620
Resale Home Price …… $1,389,900


I get up, and nothing gets me down.
You got it tough. I’ve seen the toughest around.
And I know, baby, just how you feel.
You’ve got to roll with the punches to get to what’s real

Oh can’t you see me standing here,
I’ve got my back against the record machine
I ain’t the worst that you’ve seen.
Oh can’t you see what I mean ?

Might as well jump. Jump !
Might as well jump.
Go ahead, jump. Jump !
Go ahead, jump.

Jump — Van Halen

The auction atmosphere of a Trustee Sale with its immediacy and permanence is not for the indecisive. Buyers need to be ready to jump when the deals are available, and these deals do exist prompting many to don wings and parachutes and take their chances.

This is the final installment of the Foreclosure 101 series which includes:

Foreclosure 101: Vesting Title

Foreclosure 101: Non-Judicial Foreclosure

Foreclosure 101: Mechanics of a Trustee Sale

Why Trustee Sales?

Most buy at Trustee Sales to make or save money. When compared to resale properties, Trustee Sales are generally discounted between 10% and 20% and sometimes the discounts are even greater. The first post in this series featured a property being flipped for a 25% gain, a significant profit for taking risks and trapping cash for a few months. However, flipping for profit is not the only reason to consider this market.

My disdain for flippers is apparent, but my ire is not spread evenly. Flippers who buy at auction provide necessary liquidity in a market isolated from lender financing, and flippers who renovate properties (even with pergraniteel) add tangible value; however, the flippers who annoy me are the ones who trade stucco boxes without making improvements or adding value as they merely drive up prices for families.

The problem is “how can families take advantage of this situation and save the flipper profit?” Families who have enough cash to purchase a property without financing at a Trustee Sale are missing a major opportunity to either (1) save money, or (2) buy from inventory unavailable to financed buyers. It isn’t always about the discount as simply having “first dibs” is big advantage, the fact that it is discounted to resale is a bonus.

So why don’t more buyers purchase at Trustee Sales?

Trustee Sale Risks and Limitations

The purchase of real estate at a Trustee Sale is inherently more
speculative, complicated, and risky than purchase by conventional
means. The above-average risk is due to such considerations as
potential title problems, the possibility of unknown liens, unpaid property taxes, delayed
holding periods, unknown property condition prior to purchase,
potential acts of vandalism, unforeseen governmental intervention, etc. Overcoming these obstacles requires a major investment of time and brainpower making Trustee
Sales suitable for buyers who can invest the time and effort and who will not be economically
devastated should they lose their entire investment. The major risks and limitations are as follows:

Cash Only: Trustee Sales allow cash bids only — Buyers will need to bring cashier’s checks for the full amount of the purchase to the sale.

Selection: A property fitting a Buyer’s property parameters and price range may not be scheduled for a Trustee Sale in a reasonable time.

No Inspection: Buyer will not be able to view the inside of the
property prior to the sale unless the property is actively listed in
the Multiple Listing Service, or in the unusual case where the current
owner allows access. The property is acquired “as is” which may include undetectable
physical damage.

No Insurance: Buyers can’t purchase title insurance at the sale and protect against unrecorded mechanic’s liens or judgment liens against the owner. This is rare, but it does happen, and the buyer is liable for these claims against the property.

No Remorse: The Sale is final – there is no recourse for buyers with remorse.

Unannounced Postponements and Late Cancellations: Most Trustee Sales are postponed at least once, and many are postponed numerous times, sometimes for a period of several weeks or months. If the Sale is postponed, the postponement may not be announced until buyer attends the scheduled sale, unused cashier’s checks in hand. Some owners are able to sell or refinance their properties at the last minute, cancelling the Trustee Sale altogether.

High Opening Bids: Most or all properties fitting Buyer’s criteria may
be over encumbered, and the published opening bids are often higher
than the property’s market value. The foreclosing lender has the option
of starting the bidding at less than market value, and they may not
decide whether or not to do so until the auctioneer begins to call the

Competition: There will often be competing bidders at the Sale, and some will bid above the property’s market value.

When you think about it, the reason for the price discount is due to the combined effect of the factors listed above; prices need to be under resale to compensate buyers for the risks and unknowns. The more risks and unknowns, the greater the discount. In the post High End Auction Properties Abound I profiled the only property currently on the MLS scheduled for auction over the next several weeks. Assuming the property sells at the Trustee Sale, it will probably not be discounted as much from resale value as another property full of unknowns.

Trustee Sale Research

Most buyers when considering a Trustee Sale immediately run into a deficit of information. These properties are most often not on the MLS, and without MLS access to find basic information, to pull comps to estimate value or to locate old pictures, buyers have no way to conduct basic property research. This information barrier dissuades all but the most determined.

At a minimum, buyers need to determine the following:

  • Detailed description of Property
  • Property tax information (tax rate, Mello Roos status, etc.)
  • Basic Home Owners Association information, if any
  • Recent market comparable sales
  • Recent comparable foreclosure sales, if any
  • Updated Trustee Sale Status (confirmation of current Sale date, published bid, etc.)

In addition to the basics, most buyers will also want to know:

  • Title -all persons currently vested on title, or previously vested at any time as of or since the acquisition of the Property.
  • Liens – all Trust Deeds and all other liens currently encumbering Property, and an analysis of their effect or standing, if any, at or following the Sale
  • Property Tax Status – total property taxes owed against the property, if any, including current taxes, delinquent taxes, and penalties
  • Final Analysis – an estimate of the total amount that will still be owed on the Property, if any, following purchase at the Sale.

Since it is not possible to get Title Insurance at closing, a buyer is advised to obtain a title report on the property and the owner because judgment liens survive foreclosure. This does not protect the buyer from unrecorded mechanics liens.

The research list is long, and it may take several days, many phone calls, and out-of-pocket costs for title reports and other data. Given the difficulties of doing proper research and ignorance to what research is required, many buyers either take unnecessary risks by failing to do the proper research, or they give up on the idea and go back to shopping in the easier resale market.

Preparing for Trustee Sale

To prepare for a Trustee Sale, a buyer has three important tasks: (1) determine vesting, (2) establish a maximum bid amount, and (3) obtain Cashier’s checks in the amount of the maximum bid. We covered vesting in Foreclosure 101: Vesting Title. The buyer must give this information to the Trustee if a sale is successful.

Trustees like Cashier’s Checks, mostly because the buyer cannot stop payment after the sale. A buyer could attend the sale with a single Cashier’s check and wait for the Trustee to refund the difference. However, with a little effort, it is relatively easy to obtain a number of checks in various increments to cover bid amounts less than the maximum.

The best method for obtaining checks is to decide on your minimum increment and obtain checks starting with the initial increment and doubling in value with each successive check. For instance, a buyer would get Cashier’s checks for $1,000, $2,000, $4,000, $8,000, and so on until the negotiating range is covered, and then one remainder check brings the balance up to the total. The bidder on a $600,000 property who wanted to start bidding at $500,000 would obtain checks for $1,000, $2,000, $4,000, $8,000, $16,000, $32,000, $64,000, and $473,000. Some combination of those checks will cover every $1,000 increment between $473,000 and $600,000 allowing the bidder to leave the Trustee with only the amount of the winning bid.

The Cashier’s checks should be made out to the buyer, not the Trustee. If there is a sale, the buyer merely endorses the checks and gives them to the Trustee. If there is no sale, the buyer can either hold the checks for the next auction or redeposit them. There is no way for the money to be lost or stolen as the buyer is the only one who can cash the checks.

What happens at auction?

At the appointed time and place, a Trustee will call a public auction. The Trustee announces the property and asks the assembled if any wish to bid on the property. One at a time, the Trustee will meet privately with each bidder who must show the Trustee their Cashier’s checks to verify the amount held. The Trustee will not permit any bidder from exceeding the total of the Cashier’s checks on their person — nobody is “good for it.”

Once each bidder has shown the Trustee their money, the Trustee will call out the opening bid from the first mortgage holder. This is a pregnant moment because the advertised opening bids often do not match the actual opening bids, and even after all the preparation, a lender may come in and vastly overpay for the property because their loss mitigation procedures demand it. Lenders who underestimated the amount owed sometimes increase their advertised opening bid, but often, lenders drop their opening bid to avoid obtaining more REO.

Most buyers give up after attending a few postponed auctions. It takes half a day or more away from work or other responsibilities to attend a sale, and most busy people do not have the time. It is possible to go to only one auction and get a dream property at a 25% discount, but the more common scenario is for people to go to half a dozen auctions and obtain nothing.

In today’s market, dropped bids are the opportunities that bring third-parties to auctions. Assuming the first lien holder’s opening bid is less than the maximum price a third-party buyer is willing to pay, the auction begins. In an open outcry system, bidders verbally announce their bids and the Trustee acknowledges the highest bidder. There is no minimum increment to increase a bid, which leads to the rather tedious process of two bidders outbidding one another with small increments until one of them reaches their walkaway point. In fact, one of the major frustrations for many Trustee Buyers is the fact that they often get outbid by a single dollar, such is the nature of auctions.

If a buyer is the highest bidder, the Trustee takes the buyer’s vesting information and Cashier’s checks. In return, the Trustee gives the buyer a receipt at the sale. The buyer does not obtain the Trustee’s Deed at the auction.

Getting the Trustee’s Deed

The Trustee usually mails the Trustee’s Deed to the buyer within days of the sale; however, there is no legal timeframe the Trustee must adhere to. In contrast, the owner has 15 days to record the Trustee’s Deed in order to be considered the owner as of 8:00 AM the day of the Trustee Sale, otherwise ownership begins the day of recordation. The day of legal ownership is important because if a lien appears after the Trustee Sale but before recordation, the buyer can be liable, or at a minimum, have to deal with getting an invalid lien off the title of his new property. It is a rare occurrence, but the problem is best avoided by timely recordation.

Taking Equitable Title (possession)

Taking possession of a vacant house only requires the buyer to show up with a locksmith. If the house is not vacant, taking possession is more complex. The simplest solution is for the buyer to approach the occupants and offer them money to leave: cash for keys. Many holdover tenants, including the previous owners, are happy to get some money to cover the costs of moving out. Obviously, getting occupants to leave voluntarily is better for all concerned.

In situations where the holdover tenants are not cooperative, the new owner will need to employ the services of an eviction attorney to remove the occupants, and there are situations where renters do not have to leave due to local ordinances that protect renters. The rental contract itself is extinguished at the foreclosure sale, so renters cannot stay for the duration of their lease, and the new owner is not required to repay any security deposits. The exception to this is where the lease pre-dates the foreclosing lien – in this case the buyer takes title subject to the terms of the lease.

Is it worth it?

Buying at Trustee Sale is time consuming with (1) property research, (2) attending auctions and (3) following up to take possession, and the sale is fraught with risk, but for those who make the effort, saving what can amount to a year’s salary or more is very tempting, particularly when the resale market is likely to show further weakness. Buying at auction today puts an owner in a property well below rental parity, and likely below the resale bottom.

Ideal Home Brokers Trustee Sale Service

If you are interested in learning how you can become active in the Trustee Sale market, review Ideal Home Brokers Trustee Sale Service or contact us at

1 SHADOW Gln Irvine, CA 92620 kitchen

Irvine Home Address … 1 SHADOW Gln Irvine, CA 92620

Resale Home Price … $1,389,900

Income Requirement ……. $293,719
Downpayment Needed … $277,980
20% Down Conventional

Gourmet Kitchen Award

Home Purchase Price … $1,470,000
Home Purchase Date …. 9/26/2006

Net Gain (Loss) ………. $(163,494)
Percent Change ………. -5.4%
Annual Appreciation … -1.6%

Mortgage Interest Rate ………. 5.18%
Monthly Mortgage Payment … $6,092
Monthly Cash Outlays ………… $7,790
Monthly Cost of Ownership … $5,570

Property Details for 1 SHADOW Gln Irvine, CA 92620

Beds 4
Baths 2 full 2 part baths
Home Size 3,800 sq ft
($366 / sq ft)
Lot Size 8,282 sq ft
Year Built 1998
Days on Market 1
Listing Updated 1/13/2010
MLS Number S601505
Property Type Single Family, Residential
Community Northwood
Tract Cris

Absolutely gorgeous inside and outside. Oversized lot on a cul-de-sac. Dramatic open floorplan with high ceilings and spiral staircase. Formal living room and separate dining room with vaulted ceilings and custom fireplace. Gourmet oversized kitchen open to family room and breakfast nook. Spacious family room with fireplace and custom built-ins. Den downstairs used as media room. Open loft perfect for home office or play area. Large master suite with large master bath and walk in closet. Tastefully upgraded with stone floors, custom paint, shutters, neutral carpeting and more. Oversized lot with new built-in pool and spa. Minutes from parks, schools, tennis courts shopping and freeways. Walk to Canyon View Elementary and Northwood High.

Irvine Housing Blog No Kool Aid

I hope you have enjoyed this week, and thank you for reading the Irvine Housing Blog: astutely observing
the Irvine home market and combating California Kool-Aid since

Have a great weekend,

Irvine Renter

62 thoughts on “Foreclosure 101: Mechanics of a Trustee Sale

  1. AZDavidPhx

    From the “What is going on here!” Department:

    The Supreme Court removes important limits on campaign finance

    Friday, January 22, 2010
    FOR MORE THAN a century, Congress has recognized the danger of letting corporations use their wealth to wield undue influence in political campaigns. The Supreme Court had upheld these efforts. But Thursday, making a mockery of some justices’ pretensions to judicial restraint, the Supreme Court unnecessarily and wrongly ruled 5 to 4 that the constitutional guarantee of free speech means that corporations can spend unlimited sums to help elect favored candidates or defeat those they oppose. This, as the dissenting justices wrote, “threatens to undermine the integrity of elected institutions across the nation.”

    1. AZDavidPhx

      Of course “free speech” has absolutely nothing to do with campaign contributions and they all know it.

        1. AZDavidPhx

          Then don’t allow them to run TV ads – force the sheeple to get out and do their own independent research on the differing platforms and give independent candidates a fair chance.

          They have been electing presidents longer than TV has been around.

        2. norcal

          I think that more importantly, corporations are accorded the same rights as “persons” under the law. So any incorporated body can “say” whatever it wants, because it has free speech rights.

          Same status gives corporations rights against real people in court cases, tax law, etc.

    2. AZDavidPhx

      Has the National Association of REALTORS(R) issued a press release yet praising the high court’s decision?

  2. Lee in Irvine

    Well, Well, Well … look at this, bipartisanship at its best.

    Senate Dems Not Sure They Can Get Enough Votes to Reconfirm Bernanke

    January 21, 2010 9:50 PM

    Amidst the voter anger at Wall Street and Washington, D.C., ABC News has learned that the Senate Democratic leadership isn’t sure there are enough votes to re-confirm Ben Bernanke for another term as chairman of the Federal Reserve.

    Bernanke’s term expires on Jan. 31.

    The White House did not respond to many requests for comment.

    “The American people are disgusted with the greed and recklessness of Wall Street,” Sen. Bernie Sanders, I-Vt., said in an interview with The Associated Press last month. “People are asking, ‘Why didn’t the Fed intervene at the appropriate time to stop the casino-type activities of large financial companies?'”

    Sanders, Sen. Jim Bunning, R-Ky., Sen. Jim DeMint, R-S.C., and Sen. David Vitter, R-La., have all put holds on Bernanke’s nomination, requiring 60 votes to proceed to a vote.

    Voter anger is of heightened concern to members of Congress given the surprise victory of Sen.-elect Scott Brown, R-Mass., who rode a tide of voter discontent and economic anxiety to an upset victory in a special election earlier this week.

    1. AZDavidPhx

      One would think that something has to eventually give. Of course even if they do get rid of him, they will likely appoint someone else from the same club who will keep the autopilot switch in the “ON” position.

      Obama is looking like more of a failure each day. His party; sacked from Massachusetts and he runs out promising to create jobs for everybody.


      I have just about had it up to here with all this nonsense from a politician behaving as though his role is to create job opportunities for us peasants to go and wank ourselves with.

      Obama has failed to curtail government spending which has gone completely out of control.

      Obama has let all of his Wall Street brethren off the hook for destroying the economy. Nobody is going to jail except for Madoff who was only busted because he stole from other rich people. Goldman Sachs gets a free pass for selling subprime MBS to its customers while secretly placing bets on its own behalf that those securities would fail.

      Obama continues to conduct war in the middle east; getting us tactically situated for a nice defensive invasion of Iran in the next decade or two while simultaneously conditioning the people to believe in the old “Weapons Of Mass Destruction” canard.

      You notice how you are hearing less and less Bush hatred these days and more and more “Obama Disappointment”.

      Obama will need to do a little more than promise jobs. I suggest he help restore some confidence to the market and string up a Wall Street executive or two.

      1. Lee in Irvine

        When you become so cynical you give up … I’ve been there before. With that said, I’ve got 2 kids, I’m mad as hell, and I want real change now.

        I’m gonna pen both my senators a letter today at lunch, imploring them to vote no on Bernanke. I suspect I’m not only one to do so. The heat is turning up.

      2. zubs

        although Bernanke will just be replaced by another Bernanke clone, it still sends a message to Wall Street. Thus, stocks are starting to tank now.

        1. Major Schadenfreude

          I rather cynically believe that Wall St. can control the market and the recent market declines is Wall Street’s way of saying to the peasant masses who have recently been stirring,”Now, now, we are ALL in this together! See? When you pester us we will pester your 401K’s, so you must be nice!”

          Hopefully, we have the gull to say, “Have at it! Your going to jail!”

    2. Lee in Irvine

      They just announced on CNBC that Bernanke’s nomination did not have the votes in the senate. Donald Kohn is looking like he may become the next Fed Chairman.

      Oh My, One month you’re Time “Person of the Year”, the next month your ass is thrown out!

      Up Next, Timothy Geithner. Get out now!

      1. mike in irvine

        The fed is supposed to be aploitical, in reality it really doesnt matter who fed is..the administration will make the major decisions for them. The treasury will still support HAMP (it should have been called hump, because that is what it does to the home owners, banks and buyers waiting for prices to get to reasonable levels), MBS purchase and the rest of the crap.

        It really boils my blood when i read that former officials (e.g. the bald ex goldman sachs guy who started TARP during bush’s reign) are running billion dollar hedge funds have have made record profits mostly due to tarp and the bailout…atleast now i know who benefitted from their decisions.

      2. Paulson

        I recall the WS bailouts started with Paulson. Bernanke inherited and had to deal with Greenspan’s creation. However, I guess many voters are in the mood of “throw them all out”.

        1. Lee in Irvine

          Ben Bernanke should be held accountable for the simple fact that I (and many other RE bears) knew this Ponzi scheme would hurt America deeply, and he denied a bubble existed up until the grill of the train was in his face. He is a bubble machine … he has caused great harm to tax payers … he has enriched Wall Street.

          1. Paulson

            I’m really no fan of his but I was impressed with his bag of tricks, nonetheless. I did want home prices to drop to the historical normal levels but he did help keep them high with his ZIRP. I do also agree with someone else’s comments here that “Making Home Affordable” is realy “make homes cost more”. However, it’s hard to know what Bernanke really believed; but for him to admit publicly that there was a bubble, it would have caused many people to blame him for starting the housing crash. The fact is that it all started and peaked under Greenspan. This is not to ignore W.S.’s “pass the buck” role in creating the housing bubble and all this mess.

          2. IrvineRenter


            You are a clear thinker. I look forward to more of your astute observations. Welcome to the IHB.

    3. norcal

      As AZDavid says, who can they get to replace him who won’t have the same problems? And moreover, who WON’T be an expert in Depression economics? Can you imagine where we’d be if we’d continued to have Greenspan for the last 4 years?

      I think Bernanke’s getting the can for his inaction under GWB more than for his actions under BO. But public anger is not easily analyzed.

    1. Making Homes Cost More Programs

      “The Treasury has resisted calls to push lenders to write off loan balances, concerned that such a course would either threaten the health of banks by forcing them to swallow billions of dollars in write-offs or cost taxpayers additional money.”

      We all know this is all about the banking system, and we all know who is going to pay for it.

      1. AZDavidPhx

        Anyone who is pushing for balance write-offs is just engaging in cheap Populism; trying to score some easy political points.

        They obviously know that banks cannot just start reducing principals because it will do nothing but induce every debtor in the country to quit his job and stop paying the mortgage.

        You know those irritating television ads that they all start bombarding us with at election time? Be ready for “Candidate Dick didn’t help homeowners by reducing principals like I wanted him to! Vote for me!”

        That’s what all this principal reduction MUMBO JUMBO is all about.

        1. Making Homes Cost More Programs

          It has nothing to do with the debtors and everything to do with the banks. It’s simply a bonus that politicians can say they are helping people out while they push the banks into solvency.

          If they have to they will manipulate the markets into a double dip to scare the masses for the desired government subsidies to make the banks solvent.

          1. Making Homes Cost More Programs

            When I say “they” I am talking about the global banking cartel run by the central banks.

          2. Solon in CA

            I doubt there is much need to manipulate the market, more like allow them to function without intervention. That should be more than enough to inspire that second dip.

        2. alles_klar

          I really hope there will be no tax payer-funded principal write-offs. But I suspect the Treasury will modify HAMP in a way that will discourage people from purposefully leaving their jobs to get a principal reduction. For example, the Treasury could include a provision that only people who experienced an income reduction event during a specific time period (e.g., 2007 to mid-2009) will qualify for the principal reduction; whereas people who lost income after the cut-off won’t be eligable for the principal write down. This way, the Treasury will hope people will not purposefully leave their jobs to get the modification.

          1. Making Homes Cost More Porgrams

            We know the banking cartel will be saved from collapsing via a government program. The only question is how the money will be funneled to the banks from the tax payers to make up for the bad debt. The rule you proposed seems like a reasonable guess.

            The easiest way would be an accounting gimmick that allowed the banks to write down principle but still claim that value on their books for capital requirement and loss mitigation purposes.

          2. norcal

            Yes, that sounds ideal (in a sad way). But can you think of such a gimmick? Or will it have to be invented?

            I can’t imagine an even vaguely honest way for a bank to say to its creditors, “I lost all that money I owe you and can’t ever hope to pay you back, but I’m solvent.” But then maybe honesty is not the best policy here.

          3. Making Homes Cost More Programs

            How about a 100 year non recourse zero coupon bond for the principal reduction. That should do the trick. The key for the banks is being able to fake their solvency and income statements to continue to operate.

        3. QueenCityEddie

          I agree that it is time for public figures to stop talking about principal reductions. The surest manner to get more active consideration of principal reduction is to end HAMP entirely, announce to the world that Fannie/Freddie are shutdown and have the Fed immediately end their purchases of MBS. There would be an almost immediate reconsideration on the part of lenders of what to do with their loans if they were truly convinced that no more OPM was going to be available to do anything about the quality of their loan portfolios. This won’t happen because the need to “DO SOMETHING” is the default position of nearly any public official.

  3. Lee in Irvine

    IR …

    I hope you’re not getting mad because we’re posting all these news stories, but this week has been very eventful.

    Cheers … they may actually throw Bernanke out! Yeah!

    1. IrvineRenter

      Not at all. The purpose of the astute observations is to discuss pertinent news as well as post-specific items. As long as it relates to real estate, and these developments may have impact, I am fine with the direction of the discussion.

    2. Chris

      The keyword here is ‘may’. Don’t be too sure until it’s all said and done.

      But let’s say if Benny boy is not reconfirmed. Who is gonna take his place? Another GS gopher? Same old, same old?

      I ain’t gonna cheer until I see stalemate in congress (1/2 one party, 1/2 the other….both accusing each other and let the market be free….free from being propped up by govt intervention).

      1. Lee in Irvine

        Well it looks like Benny is toast. Just announced on CNBC, Barbara Boxer, will vote NO on Bernanke. Is it a coincidence that she’s up election?

        The liberals are teaming up with the conservatives in the senate, to kill Bernanke’s nomination. I suspect Benny will remove his name from consideration sometime this weekend … possibly today.

        1. zubs

          I’m voting her out of office in Nov anyway….just cause she’s been in office since 1992 and I want fresh blood.

        2. Chris

          Like I said: I ain’t cheering until they elect someone who will NOT intervene in this market.

          Let me provide an example:

          1. ZIRP? Gone…give me the minimum 3%.
          2. Mark-to-fantasy (well, this is FASB rule, not Fed)…get rid of it.

          BTW, Geithner (another GS gopher) is still in it….too bad so sad. Get rid of him.

  4. lowrydr310

    I’m Tired!

    “I’m tired of being told that I have to pay more taxes to “keep people in their homes.” Sure, if they lost their jobs or got sick, I’m willing to help. But if they bought McMansions at three times the price of our paid-off, $250,000 condo, on one-third of my salary, then let the leftwing Congresscritters who passed Fannie and Freddie and the Community Reinvestment Act that created the bubble help them—with their own money.”

    1. AZDavidPhx

      Another Dittohead mad at the wrong thing.

      I am all for being tired of money being spent to “keep people in their homes” but why, in his giant list of grievances, he makes not one mention of Government policy that induced it?

      He is painting it as some kind of liberal-America problem; especially when it comes to minorities.


      President George W. Bush announced, in his 2002 State of the Union address, that he would work with Congress this year to achieve “broader homeownership, especially among minorities.”

      How can this be? Is GWB some kind of stealth liberal?

      Like the typical “join a political groupthink herd” armchair critic – he looks at the problem from the perspective of “the other side must have caused this” and fails to objectively observe.

      If you read the entire manifesto it is basically just a laundry list of the usual “liberal” straw dogs you here kicked around on any episode of the Rush Limbaugh show.

        1. Woodbury Renter

          Dave, you just figured out that GWB is a (not so) stealthy liberal? National prescription coverage mandate, national public education rules, massive gov’t spending increases? He tried to cross over and look where it got him, reviled by both sides of the aisle.

          1. Geotpf

            Liberals don’t start wars for no reason. If you think Bush is a liberal, you need to lay off the medical MJ.

          2. Woodbury Renter

            seriously? liberals have never gone to war? really? FDR? (and Truman). or liberals only drop A-bombs on civilians during the “right” wars?

            engaging in warfare has nothing to do with liberal/conservative.

          3. Reason

            What Geotpf said “….wars for no reason”. He did not say they would not start any war period.

  5. AZDavidPhx

    Breaking NEWS! The recession is over! Start the parade!

    The recovery continues Buy Now or Be Priced Out Forever

    State Unemployment Climbs; Four States Reach Records

    Unemployment rose in most states in December—even breaking records in a couple of states—a reversal from previous months when states showed improvement, according to government data released Friday.

    The December data is a reversal from the previous month, when 36 states reported lower unemployment.

    Earlier this month, the government reported that the national unemployment rate remained at 10 percent in December.

  6. thrifty

    Irvine Renter:
    Having looked into trustee sales and auctions in particular, I’m impressed by the number of genuine sales that never make it to auction. These generally show up as “flips” indicating that the flipper did get a screaming deal and immediately put it back on the market at a 15-20% markup. Unfortunately, people without connections – like those reading IHB – have no chance against these types of shenanigans.
    I’ve seen more than one such instance locally. And these are single, not bulk, sales.
    So – what’s the key to leveling the playing field and getting to bid on the properties which will never hit the courthouse steps?

    1. Geotpf

      There are four types of flips, IMHO:

      1. People who buy houses at auction and simply resell them.
      2. People who buy houses at auction, fix them up, and then resell them.
      3. People who buy houses on the open market and simply resell them.
      4. People who buy houses on the open market, fix them up, and then resell them.

      Only type #3 is really a problem-and it’s probably the hardest to pull off. In #1’s case, the flipper adds no real value to the house, but it’s unclear whether or not the price the flipper sells for would be higher or lower than what the bank would sell it for as a REO (auction prices are frequently lower than REO list prices)-and it’ll probably get on the market quicker. #2 and #4 add value to the house by making repairs-many people don’t want the hassle of hiring contractors and the like, plus it’s much harder to get a loan on a house in poor condition.

      1. thrifty

        Irvine Renter: Thanks for the itemization. My question wasn’t specific enough. The open market sales in your types #3 and #4 were at prices which I would have snapped up in a millisecond. These houses had for sale signs and I followed up obtaining the info available or was met with a recording telling me to leave a message and someone would get back to me. No one did.

        The houses never went to auction; they did sell.

        How can the playing field be leveled in this type of situation (assume the buyer has no intention of flipping)?

        1. IrvineRenter

          I know of no way to get a back-door short sale or special deal prior to auction. I don’t know that anyone does. I know how to get them at auction, but once they go there, the new owner is going to ask full resale value if they sell it and don’t keep it for themselves. The flips are certainly becoming more common, mostly because lenders are finally letting properties go at auction. The postponements are becoming rare lately.

      2. QueenCityEddie

        Why are any of these types of activities a problem? If a buyer/seller can pull off #3, then objecting just sounds like sour grapes. If they cannot pull it off successfully, how is that my concern?

        1. norcal

          The concern is over the limited availability of information and opportunity. The blowoffs in the complaint are kind of like trying to reach your elected representative in vain, when a lobbyist can waltz right in.

          The housing market looks really shady – if there’s enough perception of mass dishonesty among realtors and investors, individuals will be discouraged from buying.

          Would that really be a bad thing?

    2. awgee

      You have the same information available to you as the folks who buy before the house goes to auction or is listed for sale. They buy information such as a foreclosure radar and they buy lists of 60 day lates and 90 day lates. Also, they have cash to buy. The banks deal with them on a short sale basis because they have cash. My father’s friend buys short sales that are not listed or for sale. He pays a lot for information and he RISKS his cash. He has guts, not an unfair advantage. And he has smarts. He never does a deal where he does not have the next buyer right there at the escrow company ready to close five minutes after he buys. What most people do not realize is the foreclosures and short sales are just part of supply and they sell based on demand. There is not special discount for buying a foreclosure or short sale. The discount is for buying with cash and taking risk. Very, very few home buyers buy with cash and even fewer are willing to take the risk entailed with a foreclosure. Flippers are paid for the risk they take and the people who complain about them are a bunch of whiners who are not willing to take that risk and expect somebody else to pay their way.

  7. mike in irvine

    Bernake is an academic, he will probably go back to teaching, it is the others around him that need to go…


    The Bush White House: Where Are They Now?

    John Snow

    As Treasury Secretary from 2003 to 2006, Snow had the good fortune of leaving the position before subprime defaults triggered an economic avalanche. He is now a director of Marathon Oil Corporation and chairman of Cerberus Capital Management, which invested billions in both Chrysler and GMAC just before the housing bubble stopped inflating. Snow also serves on Verizon’s Board of Directors.

    Hank Paulson

    Paulson went from ordinary Treasury Secretary to Wall Street superhero in September of 2008, when he rapidly organized a massive bailout of the entire financial industry and spent the next several months fighting to prevent bankruptcies that could have sent investors rushing for the exits. Upon leaving Washington, he joined John Hopkins University’s Paul Nitze School of Advanced International Studies as a distinguished visiting scholar. He’s also a fellow at the university’s Bernard Schwartz Forum on Constructive Capitalism. In July, Paulson invested in and joined the advisory board of Coda Automotive, a start-up that will be releasing a line of fully electric sedans later this year. Coda itself is based in California, but the sedans will be manufactured in China. Since leaving office, Paulson has had several reporters seek answers about the events of September 2008, and specifically how his ties to Goldman Sachs, where he was once Chairman and CEO, may have played into decisions he made during the height of the crisis. But Paulson dodged most media requests by saying he was too busy writing his memoir, “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.” The book will be available February 1.

  8. mrjumbomortgage

    Excellent Data Digging As Always! Between Calculated Risk and The Big Picture a guy can make some serious $ with your insights. Like avoid buying high end Irvine for two more years. Thanks.

    Charlie Rose which not enough people watch because he is on PBS did an excellent interview with Prince Alwaleed. I have known of the Prince for sometime because of his massive ownership stake in Citigroup. But most recently they purchased The Four Seasons Hotel brand along with Bill Gates. The interview is wide ranging from the Middle East, his investments, global change, China. Take a look. If you get bogged down with the Mid-East political talk Charlie draws him into, just skip ahead as there are some real insights here.

    Mr Jumbo Mortgage

  9. Chris

    Well, well, well, govt intervention got us into this bear bubble market, govt intervention is gonna get us back into what **SHOULD** have been a further drop in the market (stock, housing, whatever).

    Deflation, here we go 🙂

    1. Chris

      Try investigating this as well:

      Frankly, I made a small killing (few grands only) selling futures against UST knowing full well that the Fed is going to continue with this QE bullcrap. Got out at the end of last year because of the fear that the Fed will **raise** rates. But the blazon front-running the Fed has got to take the cake on cheating.

  10. newbie2008

    Rep. Barney Frank (D-Ma.), chairman of the House Financial Services Committee, said Friday that Fannie Mae and Freddie Mac should be eliminated as they stand now. from

    More of the same double talk.

    GS Investigation is will be another song and dance without teeth. Just a little embarrassment on knowing pushing toxic assets/CDO or prudent hedging.

    I see no claw-backs on the ill gotten gains/bonus or real restitution. Maybe the class action lawyers will have GS pay restitutions with $500 off coupons to open a GS account and on your next trade to every person with a 401k or on unemployment. Of course the lawyers will get $150 cash per coupon instead of worthless coupons.

  11. newbie2008

    Didn’t we come out of the recession and the possibility for a double dip or W-shaped recovery lessen since Nov. and Dec. was the time to reinvest in the stock market.

    “California lost 38,800 jobs, the most of any state. But its unemployment rate was unchanged at 12.4 percent, the fifth-highest in the nation. That’s because 107,000 people, or 0.6 percent of the state’s work force, gave up and stopped job-hunting.”

    But the market will go up as long as the bank bailout continue. Any hint of reducing the bailout will cause the market to go down, so better increase the bank bailouts and free money for the carry trade.

  12. tonye

    Ok.. back to REAL ESTATE.

    I knew we had a bubble when houses like this one were popping up in Irvine’s Moreno Valley.

    Those areas in the inland foothills should have been built up with affordable family homes… Perhaps on the high side since Irvine has _always_ been on the high side, but those McMansions far East of the Santa Ana Fwy make absolutely no sense.

    Those areas should have been built with 3 and 4 bedroom homes with 1800 to 2500 sq foot sized homes. Instead the builders saw the opportunity to make money (I can’t blame them btw) and started to build preposterous McMansions for people who could NOT afford them.

    Just think, when the boss, who’s a conservative fiscal type, lives in an older, nice home in Turtle Rock or Corona del Mar, the employess all live in far larger, very ostentatious McMansions in Irvine’s Moreno Valley.

    That, folks, is a bubble.

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