Professional Investment Funds Take Over the Foreclosure Flipping Market

Hedge funds are forming to buy auction properties and flip them. Individuals investors are being crowded out by an increasingly professional group.

Irvine Home Address … 52 CAPE COD Irvine, CA 92620

Resale Home Price …… $949,500

That ain't workin' that's the way you do it

Money for nothin' and your chicks for free

Now that ain't workin' that's the way you do it

Lemme tell ya them guys ain't dumb

Dire Straits — Money For Nothing

When the housing crash first began, there were few funds organized to take advantage of it. As the need for more liquidity at the auction site grew, so did the discounts which enticed more bidders. At first, these were mostly wealthy individuals, but now, the hedge funds have moved in to the auction market.

Professional investors move into flipping foreclosed homes

Squeezing out amateurs, private equity funds and wealthy individuals are buying distressed properties at public auctions, refurbishing them and selling them for quick profits.

By Walter Hamilton and Alejandro Lazo

Los Angeles Times

August 20, 2010

Hoping there are big profits to be made in the aftermath of California's housing collapse, professional investors are flocking to the business of buying foreclosed homes at distressed prices.

The investors, primarily private equity funds and groups of wealthy individuals, purchase the homes at public auctions, which are held daily on the steps of local courthouses. They refurbish the properties and try to sell them for quick profits.

Not long ago, the typical home flipper was an amateur tapping a home equity line or savings for an investment property. But professionals have rushed in, partly because of sparse investment opportunities elsewhere.

There are huge differences between the amateur flipper of the bubble and the professional flipper of the bust. Amateurs used leverage to buy resale properties. Professionals use cash to buy auction properties. Amateurs made money because the frenzy drove prices higher. Professionals make money because they buy at a discount and resell at whatever price the market will bear. Amateurs can only make money when the market rallies. Professionals make money in any market where they can reasonably forecast prices 90 days out.

"In crisis there's opportunity," said Rick Hudson, president of investment firm Prosperity Group Real Estate in Irvine. "Right now there's huge opportunity with flipping houses."

Closely watched gauges of professional buying have surged over the last two years.

The number of homes sold at foreclosure auctions statewide increased to 4,336 in April, from 884 in January 2009, according to research firm ForeclosureRadar. It eased back to 3,483 in July as banks offered fewer properties for sale. The auctions are dominated by professional investors who shop with cash (although not usually with actual greenbacks, for practical reasons).

Another measure, the percentage of all homes sold to absentee buyers, paints a similar picture. In the hard-hit Inland Empire, for instance, 30% of all homes sold in April went to absentee buyers — up from 19% at the end of 2008 and the highest level in at least seven years, according to San Diego research firm MDA DataQuick. It was at 28.2% in July.

The binge of professional buying has helped spark a nascent housing recovery in Southern California because investors have cut significantly into the glut of foreclosed properties after the subprime mortgage meltdown.

Professional flippers have not stabilized the market. If anything, the continued activity of flippers adds more supply to the market and keeps appreciation in check. Auction flippers are merely a conduit between the two markets.

The main reason funds are forming to buy these properties is because there is a huge need for liquidity at the auction site. The banks have far too many delinquent borrowers, and there is not enough cash at the auction site to absorb the inventory of these foreclosures.

Banks gauge the liquidity at the site through dropped bids. Not every dropped bid gets purchased by an investor. It is quite common for a lender to drop their bid 20% below resale value and no third party steps forward to purchase the discounted property. When banks see their dropped bids are not being purchased, they don't bring more properties to auction because it will become another REO.

The reason you are seeing articles like this one is because the banks want more liquidity at the auction site. By telling the investment world about this opportunity through articles like this one, lenders hope more funds will form to absorb their massive shadow inventory.

Home sales in the six-county region rose 7.2% in June from May and 2.6% from a year earlier, according to MDA DataQuick. In July, overall sales tumbled primarily because of the expiration of federal tax credits, falling 20.6% from the month before in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties. But the region's median home price of $295,000 was off only 1.7% from June.

The fragile rebound in the broader market contrasts with the behind-the-scenes scramble at foreclosure auctions.

"There's a tremendous amount of capital that is desperate to just buy anything right now," said Gil Priel, principal of a real estate investment firm in Woodland Hills.

That is nonsense. This guy simply doesn't want other competitors at his auction site.

In some cases, well-financed newcomers are elbowing out smaller investors at auction sales.

"The people who want to go and buy a house to flip, and do one or two, are already exiting the market," said Jan Brzeski, who manages a residential investment fund at Standard Capital in Los Angeles.

That much is true: small investors are being crowded out.

I have watched the big fish at the Orange County auction site bid up small investors to prevent them from getting a good deal. The big fish didn't want these properties, but he reads the poker faces of the small investors and knows he can bid them higher. After one such incident, I heard him quip, "I would have taken the property." True enough, but he didn't want the property, he merely wanted the small investor not to make any money so he wouldn't come back and become a competitor.

The swarm of new investors, however, is making a treacherous and labor-intensive business even tougher.

Investors must do their homework on dozens of homes for every one they buy. Legal and other impediments usually prevent them from going into homes prior to buying them, leaving no way to gauge repair costs. And despite being foreclosed on, the original owners often still live in the houses. That forces buyers to pay them to leave, a dynamic known as cash-for-keys.

The influx of new players is pushing up auction prices and squeezing profits. The average discount at auctions — the difference between a home's sale price and its actual value — is 21.6%, down from 28% in January 2009, according to ForeclosureRadar.

Shall we shed a tear for the auction investor who only makes a 21.6% profit?

Last year, Chase Merritt, a Newport Beach private equity fund management firm, notched strong returns from auction sales, said Chad Horning, its chief executive. Chase Merritt bought a property in Costa Mesa in June 2009 for $315,500 and sold it 21/2 months later for $470,000. It bought a Mission Viejo home for $305,371 and sold it within two months for $375,000.

Chase Merritt launched its first foreclosure fund in May 2009 and has started two more funds since then. But "it's literally gone from a business that's very attractive, even lucrative, 12 to 18 months ago to something that almost doesn't make sense," Horning said.

"It's just like the housing bubble," he said. "It's almost like we're in a bubble at the courthouse steps."

Spoken like a man who doesn't want any more competitors…. Ask any auction buyer, and they will tell you that the margins are poor now compared to some past golden era. The truth is that margins are still pretty fat, and they want to keep them that way.

The scramble was on display recently at an auction at the Norwalk courthouse.

A semicircle of people crowded around auctioneer Elwood Brown. Most were clad in cargo shorts and flip-flops. A few sat in lawn chairs. But their laptops and cellphones, as well as the thousands of dollars' worth of cashier's checks they clutched, marked them as professional investors girding for battle.

Brown took a swig from his oversized water bottle and announced that bidding for a four-bedroom duplex in Hawthorne would start at $179,598.60.

The price shot up within seconds as two men and a woman raised one another's bids in $1,000 increments.

"It's at 229, Daryl," a man in a polo shirt and sunglasses whispered intently into his cellphone. "About to close. Do you want it?"

He increased his offer, but a rival bidder claimed the home a few seconds later for $237,000.

I have watched these guys on the phone at the auction site. I think they are crazy. Don't they know the most they are willing to pay in advance? Why would you be exercising discretion on the bid amount at the auction site? In my opinion, it is a recipe to overpay on emotion.

Competition at the auctions is brutal, said Bruce Norris of Norris Group, a real estate investment firm in Riverside.

Norris unwittingly bought a house that was the site of a gruesome double murder. No one else bid — a rare occurrence that showed others knew the history — leaving Norris with less cash to bid for other houses.

"It's a very lonely place out there," Norris said.

That's only one of many risks in the foreclosure business. People who've lost their homes through foreclosure sometimes vent their anger by smashing walls, knocking over water heaters or ripping out toilets.

"We've literally had people take $20,000 of cabinetry out and feel perfectly justified doing it," Norris said.

Aaron Norris stopped my on August 11, and relayed the following comment: "We’ve had to kick out the same “tenant” from two houses that we’ve purchased. Some will hop from house to house knowing they can draw up fake lease agreements and go for cash for keys."

They have seen everything.

The daily auction ritual begins each morning when banks signal which homes they are likely to dispose of that day. That sets off an early-hours scramble as would-be buyers speed through suburban neighborhoods to investigate the homes.

I have been asked on many occasions why banks don't announce their dropped bids in advance. It seems obvious that they would get more bids and a better recovery if they announced a dropped bid well in advance. I wish I had a good answer for that question. My guess is bureaucratic incompetence, but I honestly don't have a good answer. I do know that it costs them money, and it makes the job of finding deals much more difficult.

On a recent day, Norris steered his sport utility vehicle into the driveway of a 3,300-square-foot McMansion on a corner lot in Moreno Valley. The front lawn was brown and the backyard was littered with garbage. But the windows were intact and there was no visible damage — far better than many foreclosures.

Aiming for an all-important look inside, Norris rang the doorbell and delivered the bad news to the teenage boy who answered the door that the home was scheduled to be sold that day.

"Do you mind if I poke around a little bit to see what kind of condition it's in?" Norris asked, angling his body to get a glimpse of the living room.

Then another car sped up and a rival buyer hurried up the driveway. She studied the house for a few seconds and craned her neck over the wooden fence protecting the backyard.

"This is a dream compared to a lot of them," she said in a satisfied tone as she rushed back to her car.

In the end, no one bought the home. The sale was delayed after the owner filed for bankruptcy protection.

Norris was philosophical, knowing that there were plenty more foreclosures.

"If you miss one," he said, "oh well, tomorrow's another pile."

Yes, tomorrow's another pile. At our current rate of absorption, it will take another 18 months just to deal with the visible inventory and another 60 months to deal with the shadow inventory. The flipping funds will be busy for a while.

Private Placement Hedge Funds

The funds described in the article above are private placements, also known as hedge funds. These funds provide a mechanism for investors to pool their money to invest in opportunities that may be too large or too risky to purchase on their own. This makes them ideal for trustee sale flipping.

Smaller investors may have $25,000 to $100,000 available to invest, but with houses costing $200,000 or more, auction properties are out of their reach. However, if ten or more investors band together, they have sufficient buying power to be successful at auction. A wealthy individual takes significant risk investing in auction properties on their own. It is difficult to diversify into a large number of properties due to the high capital requirement. Pooling smaller investments into a large fund creates more investment opportunities and diversifies risks into a broader collection of properties.

Private Placements are typically open to what are termed "sophisticated" or "accredited" investors, and usually have some minimum threshold for investment. These aren't like mutual funds that take small contributions and are available to anyone.

Accredited investors are usually one of the following:

Either individually or with a spouse, a net worth (i.e., total assets in excess of total liabilities) currently exceeds $1,000,000;

A natural person who has an individual income in excess of $200,000, or $300,000 jointly with a spouse, in the last two years and reasonably expect an income in excess of $200,000, if an individual, or $300,000 if jointly with a spouse, in this year.

There are trusts and institutions that can also qualify as accredited investors.

Sophisticated investors are defined as:

not an accredited investor possessing such knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of, and protecting personal interest in connection with investing in the Interests. The total investment in the Interest does not exceed 20% of the Investor’s net worth at the time of purchase of the Units (excluding personal residence(s), furnishings, and automobiles).

Private placements qualify under an exemption from SEC regulations, and as such, they must maintain fewer than 35 sophisticated investors to maintain their exemption. There is no limit to the number of accredited investors.

Private placements are limited to these special investment classes because they are risky. The SEC doesn't want to see grandma put her life's savings into a risky investment and lose it, so these regulations are designed to bar those who are not financially savvy from participating in them.

Expect to see more of these funds popping up over the next few years as the foreclosure crisis grinds on. There is a huge need for liquidity at the auctions, and hedge funds are just now starting to deliver the capital to where it is needed.

Renovation gone wrong

Today's featured property was the wrong project at the wrong time. The property was purchased near the peak on 3/21/2006 for $699,000. The owner used a $559,200 first mortgage, a $139,800 stand alone second, and a $0 down payment. No risk on his part.

The owner then formed an LLC and deeded the property to it. On 12/28/2006, he found a private party to loan him $1,000,000 to cover the original loan and renovation costs. Presumably the property renovation was complete at that time, but the bird's eye view shows the construction in progress, and based on the auction price, this renovation may have been only partially complete.

Foreclosure Record

Recording Date: 01/19/2010

Document Type: Notice of Sale

Foreclosure Record

Recording Date: 10/14/2009

Document Type: Notice of Default

According to ForeclosureRadar, this property sold for $400,727 at auction. If that is accurate, and if the property did not require major work to complete, the flipper is going to make a fortune. Since this auction was back in February, I suspect there was significant renovation work still to be completed.

The current asking price of $949,500 suggests this property is overbuilt for the neighborhood, but at $256/SF, it will likely find a buyer.

If you would like to learn how you can get involved with trustee sales, please contact me at

Irvine Home Address … 52 CAPE COD Irvine, CA 92620

Resale Home Price … $949,500

Home Purchase Price … $491,727

Home Purchase Date …. 2/9/2010

Net Gain (Loss) ………. $400,803

Percent Change ………. 81.5%

Annual Appreciation … 118.3%

Cost of Ownership


$949,500 ………. Asking Price

$189,900 ………. 20% Down Conventional

4.51% …………… Mortgage Interest Rate

$759,600 ………. 30-Year Mortgage

$185,784 ………. Income Requirement

$3,853 ………. Monthly Mortgage Payment

$823 ………. Property Tax

$0 ………. Special Taxes and Levies (Mello Roos)

$79 ………. Homeowners Insurance

$0 ………. Homeowners Association Fees


$4,755 ………. Monthly Cash Outlays

-$919 ………. Tax Savings (% of Interest and Property Tax)

-$998 ………. Equity Hidden in Payment

$318 ………. Lost Income to Down Payment (net of taxes)

$119 ………. Maintenance and Replacement Reserves


$3,274 ………. Monthly Cost of Ownership

Cash Acquisition Demands


$9,495 ………. Furnishing and Move In @1%

$9,495 ………. Closing Costs @1%

$7,596 ………… Interest Points @1% of Loan

$189,900 ………. Down Payment


$216,486 ………. Total Cash Costs

$50,100 ………… Emergency Cash Reserves


$266,586 ………. Total Savings Needed

Property Details for 52 CAPE COD Irvine, CA 92620


Beds: 4

Baths: 3 full 1 part baths

Home size: 3,710 sq ft

($256 / sq ft)

Lot Size: 4,725 sq ft

Year Built: 2006

Days on Market: 42

Listing Updated: 40411

MLS Number: S624928

Property Type: Single Family, Residential

Community: Northwood

Tract: Kb


Fantastic custom home remodeled from the ground up! No Home Owner Association Dues! No Mello Roos! Located in the highly sought after, award winning Northwood High School District! Travertine and granite features accent the architectural beauty of this home. A gourmet kitchen offers new cabinetry with plenty of storage and a island. This open floor plan is perfect for entertaining while enjoying the ambiance of a fire in the fireplace on those cool evenings. This home has two master bedroom suites: a main floor master suite as well as another on the second floor with a private retreat and fireplace for those relaxing times. A walk-in closet and balcony overlooking a lovely, serene greenbelt are just two more of this home s special features! The second floor provides an open area perfect for study, den or media niche. The third floor offers a unique opportunity for the creative. . . a home theatre? a library? a music studio? or maybe a romantic hideaway?

43 thoughts on “Professional Investment Funds Take Over the Foreclosure Flipping Market

  1. Rex

    Calling these real estate investment funds “hedge funds” is a bit of a stretch, don’t you think?

    1. Perspective

      Yes, they’re more like “private equity” funds than “hedge” funds. Private equity pools money to purchase an interest in an undervalued asset and improve it; then resell it. Whereas hedge funds typically have a strategy that bets and hedges risk.

      1. chipotle

        Interestingly, the term “hedge” in “hedge funds” isn’t necessarily a reference to hedging or offsetting risk, but is a phrase coined in reference to the secrecy and lack of transparency surrounding these vehicles. Think of a tall hedgerow surrounding an estate for privacy. Hedge funds, in the classic sense, have historically operated beyond the reach of regulators and disclosure obligations, they do this by forming off-shore (Grand Caymans, BVI, for example) and by limiting investments to a class of investor that is one step higher on the sophistication scale than even “accredited” investors — QIBs.

        I would argue that these flipper funds are not even “classic” private equity. In a broad sense, they are (and frankly, hedge funds are also technically private equity — any securities offering that is not effected through an SEC registration statement is private equity). Although they use the same private placement exemption that the private equity funds use, these flipper funds are so small in dollar amounts that they are really the fund equivalent of an angel investor or a friends & family round.

        1. DarthFerret


          While your explanation sounds very interesting, it’s not what led to the original term “hedge funds”, which WERE created to protect against or offset risk. Do you have a link or some other proof of your new definition other than that’s what you would like it to mean?

          This isn’t meant as an attack (given my…err, ‘relationship’ with PR, I can understand why you might assume that). I’m actually looking to see if there is some backup for your new definition, as it isn’t one I’ve heard before. It sounds like the sort of thing that HuffPost would make up in order to further a political agenda, but I’d like to give you the benefit of the doubt and offer the opportunity for you to give some backup for your definition.


          1. chipotle

            Nope, no link to cite and I didn’t take it as an attack, so no worries. I work with hedge funds from time to time, and I once made the same comment that Perspective made in the company of a fund manager who corrected me, pointing out that the public perception of hedge funds as risk mitigation vehicles was inaccurate — hedge funds are flexible, high risk/high return AI vehicles and hedge is a reference to their opacity.

            But hey, it’s not an important point, I know that conventional wisdom is that “hedge” means “hedge against risk” and perhaps that’s accurate, notwithstanding what the manager told me. My point was more financial trivia than anything substantive.

            By the way, you don’t know me, but I would never cite the HuffPost and don’t share their political agenda. I actually like hedge funds! ๐Ÿ™‚

          2. DarthFerret


            Fair enough. I probably disagree with that fund manager’s opinion, but thx for the insight.


    1. DarthFerret

      Oh come now, Ben. I’m sure that Planet Realty will be along shortly to explain to us all how your linked article is nothing but a bunch of spin.



  2. Planet Reality

    Like any good arbitrage profits disappear very quickly as knowledge spreads. Being late to the trustee sale game doesn’t help as margins become paper thin and ponzi mentality takes over.

    1. DarthFerret

      With your vast wisdom and insight, how did you manage to miss the window on this trustee sale bubble?

      Yet another obvious and predictable ponzi scheme that you failed to take advantage of?



      1. winstongator

        Darth, you sound like the bulls in 2006/7 saying to the bears, “if you’re so smart and the market will crash, why aren’t you shorting it, getting rich.” Someone can be a small investor unable to access these trades, but yet still be right about the profits being squeezed as more people enter.

    2. tenmagnet

      Excellent point PR.
      That space has been saturated by both amateurs and professionals alike.
      No doubt this will continue making it even more difficult.
      To succeed, youโ€™ll need an ace up your sleeve or some type of advantage over the others.

      1. Planet Reality

        Hiring Darth to look like a doofus in cargo shorts, sitting in a lawn chair on the courthouse steps with a handful of cashier checks certainly won’t be a big enough advantage.

  3. winstongator

    I mentioned a few weeks ago how once more money came in, the profits from these flips would soon disappear. I would imagine that auctin prices would overshoot a little and there be quite a few flips gone bad.

    1. Walter

      “there be quite a few flips gone bad” sic

      There are always quite a few flips going bad. That is why you pool in a fund to spread out the risk. There was a lot of risk a year ago when investors bought at the auctions, and there will be a lot risk now and in the future. That is business.

      1. winstongator

        You missed my point. What I was saying was that as time goes by and more money flows to these auctions, there will be more and more flips gone bad. What these flippers are looking at is arbitrage between the auction price and the mortgage sale price. As more money comes in, auction prices go up, while mortgage sale prices stay flat – less profit available. This action is a function of time and is not flip-to-flip dependent.

        1. Walter

          By this logic there would be no point in trading stocks because since the market has been around so long, all the money has poured in and the profit is gone.

          After trading stocks for around 15 years, I don’t worry about a market having all the profit squeezed out. Instead, worry about being the best operator you can, and beat the competition.

          These funds are a business venture. Like almost all business ventures, the best operators will make money, the lessor operators will not have as pleasurable an outcome.

          1. winstongator

            AIG’s trade of taking small premiums to insure subprime mortgage backed bonds generated healthy profits until it didn’t. Also, putting down payments pre-construction, then selling homes once construction was done, was a can’t miss trade in SoFl…until it wasn’t. Thinking that every type of trade will work all the time if you’re just good enough at it is a strange idea.

          2. Walter

            Exactly what I said. AIG was a lessor operator in selling this type insurance. Last I checked, there are still companies profitably selling insurance. Likewise with financing construction projects. Those with good underwriting and liquidity are still around.

          3. Kelja

            As we all, the stock and real estate markets are very different. For one thing, real estate is nowhere liquid as stocks. But even in the stock market, or any market for that matter, when people see obvious market inefficiencies, opportunities for a fast buck, they pounce.

            winstongator is correct – as more people find their way into the flipper market, the profit margins will thin out to the point where there won’t be that much reason to do them.

          4. Walter

            “profit margins will thin out to the point where there wonโ€™t be that much reason to do them”

            Exactly. The good operators will stand down during the times prices don’t work, and will return when the dumb money moves on because they are tired of losing money and go to the next hot idea.

          5. winstongator

            Agreed. A couple weeks/months ago, money to get, now not so much, in the future it’ll come back.

          6. Planet Reality

            The real money is not made based on operational efficiency. It’s made by being early to the game an then understanding where the money is moving next… whether it’s cram down law or FNM/FRE bail out.

          7. Walter


            That is a joke?

            If not, please let Warren Buffet know he can make more looking out for taxpayer bailouts.

          8. Planet Reality

            Every dollar that is being made on housing now or was made in the past 10 years is special thanks to tax payer bail outs.

          9. winstongator

            I would disagree. There are no new subprime backed mbs offerings, and we are even further from the CDO and CDS type operations. Sure there are companies selling insurance, but not the type that got AIG in trouble. Even AIG is still selling some real insurance at a profit, and I would imagine that AIG’s real insurance division was always profitable.

            The CDO issuance for 2009 was 1/100th that of either 06/07 – that market & trade has disappeared.

        2. Interested

          As bids improve at auction sales and auction prices increase, banks will likely release more inventory which would pressure prices down.

  4. DarthFerret

    The theoretical “months of supply” rose nearly FOUR MONTHS just from June to July:

    Existing home sales dive to 15-year low
    With home sales tumbling, the inventory of previously owned homes for sale rose 2.5 percent to 3.98 million units from June, representing a supply of 12.5 months — the highest since at least 1999 and up from June’s 8.9 months.

    Keep in mind, these are national numbers. I would be surprised if California and The OC aren’t worse.


    1. AZDavidPhx

      Housing double dip is on the way. Anyone who bought a house this year overpaid. I hope that everyone who spent 100K to get the 8K tax credit enjoys the next leg down.

      1. BD

        Yep… double dip now arriving. The high-end is going to take a massive hit IMHO! Condos on the coast asking $600 / sf going to get cut in half…

        Newport Coast is toast…

        My .02


  5. awgee

    Armchair flippers and investors who have all the smarts, but none of the guts or capital, and can only way what others are doing wrong or right.

      1. winstongator

        Robert Shiller proposed something similar, although with real money. If there was an easier way to short housing during the bubble, he claims that the bubble wouldn’t have gotten so big. Or you could hedge – be long your house, short your neighbors. Although, people did the exact opposite, long their house, then buy more homes increasing their leverage.

  6. Alan

    I gotta admit I’ve always wanted a house with a turret, though I think of big windows all around for lots of light. Oh well …

    Do people who stay on in foreclosed and auctioned houses get a free pass? If the bank could at least theoretically go after you for stripping the house and selling everything possible, the flipper is buying sight unseen. The bank selling the place has not made any guarantees about granite counters, stainless steel appliances or even if the copper pipe is still there or not. Isn’t there a huge incentive to go for cash-for-keys or strip the place or both? Plus you get to maximize time without paying rent.

  7. ochomehunter

    My offer on one of the home confirms this post.

    I had an offer on a home in North Tustin fixer. Bank had it approved short sale at $440K but the cash buyer offered $375K. the property was in distress for two years. My offer was for $430K with 10K towards closing, net $420K. Today I heard back that “Investor” countered $460K! There you go! It appearst that the bank sold the defaulted loan to vulture investor who now wants $460K. Nice, it took out the cash guy for good as there can only be one guy who can flip it anyway, the vultures are going to take the cash buyers out. Also, I think dont know what these vultures approach might be to throw out the squatting homeowner! One thing for sure, these vultures have time, money, and attorneys to take care of the business.

    1. ochomehunter

      Agreed, but in my case where bank turned down $375K cash buyer, it appears that bank probably sold it at a bit higher price to the investor vulture, leaving the vulture with less room to work with given that highest offer on the home was only $430k. I will post here once we make any headway. I think vultures are in for a bad wakeup call soon. there always comes the time when people start to puke talking about homes, this time would be no different.

      1. Soapboxpolitico

        Hi Kids! I’m back for my monthly IHB fix! Not disappointed to say the least.

        ochomehunter – if you could share your experience with your bid, etc. I personally would find it informative and I’d appreciate it.
        On another note …

        Ironically (and WARNING … this is a little revolting) vultures are known to vomit on themselves or possible predators as a means of self defense. Go figure. So your comment is closer to actual truth than you may have known. ๐Ÿ™‚

  8. theyenguy

    I have a question and a statement.

    How is it that “The owner used a $559,200 first mortgage, a $139,800 stand alone second, and a $0 down payment. No risk on his part.” Yes, how could no money down have happened? I know money flowed like water from Wall Street Firms; but why was there no controls what so ever?

    Today August 24, 2010, Mortgage Finance Firms, traded by the ETF, KME, fell 3.8%; this ETF moves in jumps and starts; it fell fitfully below support of a head and shoulders pattern that goes on the weekly chart back to July 2009. In other words support has given way; all I can say is “lookout below”

    Stock market participants know that the end of profiting from securitizing mortgages is done and over.

    I want to repeat that statement, in a little different way so it “sinks in”. Those who buy and sell on the stock market have seen the track removed from the mortgage train and have taken flight before disaster strikes.

    The 3.8% fall in mortgage finance today heralds the likelihood to a soon coming liquidity evaporation and liquidity crisis, where the banks will no longer be participating in securing mortgages, but rather foreclosing and leasing of properties.

    It was the Bloomberg reports entitled U.S. Existing Home Sales in Record Plunge, that caused Mortgage Firms to fall. The report revealed that sales of existing houses plunged by a record 27 percent in July as the effects of a government tax credit waned, showing a lack of jobs threatens to undermine the U.S. economic recovery.

    Its 100% clear to me that today marks “the beginning of the end of mortgage lending”.

    Not only that, today marks the “beginning of the end of banking, credit and lending as it has been known,” as banks, KBE, fell 2.1%, and in so doing fell from a head and shoulders pattern of support that goes back to January 2010 effectively wiping out all the equity value that came by the Fed’s QE Tarp Facility.

    It is noteworthy that Financial Preferred, PGF, and Ford Motor Credit Co, FCZ, turned lower today. It’s now time to sell the ETF, and investment vehicle short. As investment value runs out of these investments, banks and lenders as a group will become stock market decapitalized, and many will be responsible for collateral calls. Lending is going to dry up fast. The Russell 2000 companies which rely upon lending to meet payroll, buy inventory, and cut accounts payable checks are going to bite the dust very soon.

    But the greatest financial and economic risk is that of the bubble in the US Ten Year Note, IEF, and the 20 to 30 year US Government bonds, TLT, bursting with not enough buyers for sellers, resulting in liquidity evaporation.

    Out of a liquidity crisis, I see a credit seignior, meaning a top dog banker who takes a cut, arising to manage banking, credit and lending; with the bulk of credit being extended for the security needs of the country.

    And I see no hedge funds coming forward to invest in real estate, as I see them moving to gold and silver.

    (I’ve provided a link to my article Bonds Soar And Gold Rises As Stocks Fall On Sell Off Of Bank And Basic Material Shares)

  9. Soapboxpolitico

    My $.02.

    This house is indeed overbuilt for the neighborhood. If you go to Google Maps and do the sat view you’ll notice it occupies a huge chunk of the lot and “street view” is curiously informative too. Clearly the last pass Google did was mid-renovation and the thing sticks out like a sore thumb compared to the adjacent homes.

    On the plus side, visitors to your home would have no trouble finding it on the street. “Just look for the turret. You’ll know it when you see it.”

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