Category Archives: House Flips

Edington Terrace Trifecta

We have a first today: a property that is a flip, a knife-catcher and a WTF award winner — the kind of property that really makes this hobby fun.Edington Kitchen

IrvineRenterAsking Price: $1,890,000

Purchase Price: $1,485,000

Purchase Date: 2/27/2007

Address: 18991 Edington Terrace, Irvine, CA 92603

Bedrooms: 4

Full Baths: 2WTF

Partial Baths: 1

Square Feet: 2,831

Lot Size: 9,000 Sq. Ft.

Year Built: 1970

Listing Date: 06/09/07

On Market: 2 days

Type: SFRKnife Catcher Award

Status: ACTIVE

MLS #: P582554

1st Loan $1,000,000.00

2nd Mtg. $250,000

Lender — Americas Wholesale Lender

From ZipRealty, “‘spectacular view of city lights and mountains’. This hard to find turtle rock terrace home has 4 bedrooms, 2.5 baths all on one level. This is the model 70 presidential home. Enjoy the city lighs view from the master bedroom, living room & family room. This house is at the end of a single loaded street with only 6 houses. As an additional bonus, take the pull down ladder to the attic and view all the storage space. This house is ready for you to put your own creative touch on it.”

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Lets take a look at the rest of this home:

Edington Living RoomEdington Paneling

So here we have a house built in 1970, and it hasn’t been updated since then — unless perhaps the white tile kitchen was an 80’s update. How about the exposed white brick living room, or the paneling and yellow carpet upstairs. This property is a joke.

I will give these sellers credit for having enough sense to recognize this when they said in the description, “This house is ready for you to put your own creative touch on it.” In other words, you have to do the renovation. So what have these people done to warrant the $405,000 price increase? Are they such savvy buyers that they purchased this property that far under market? These people paid $524 per square foot, and they are asking $667/SF for the property. This is insane!

I have to admire the delusional thinking. They put $235,000 of their own money into this transaction, and they plan to walk away with $640,000 after six months. That is a great internal rate of return (near 600%). It certainly would be better than 5% at the bank. Of course, I think they will be lucky to get out before this becomes a short sale, but only time will tell.

So what about the comps? We happen to have a great comparable property:

GT FrontGT Kitchen

Price: $1,498,000

19041 GLENMONT TER

Irvine, CA 92603

Beds: 4

Baths: 2.5

Sq. Ft.: 2,605

Lot Sq. Ft.: 8,670

Year Built: 1971

Stories: 1

Type: Single Family Residence

View: City Lights, Peek-A-Boo, Trees/Woods, Other

County: Orange

Neighborhood: Turtle Rock

$/Sq. Ft.: $575

MLS#: S483106

Status: Active on market

On Redfin: 61 days

From Redfin, “Elegant & Sophisticated Style! Det. Single Level on Oversized Corner L ot, Popular Plan 60 w/ a Gourmet’s Dream Kitchen, All new Stainless Appliances, Custom Cabinets & Granite Counters. Extensive Upgrades incl. new Tile flooring, new Dual-Paned Vinyl Windows & Doors, new Roof-Furnace-AC, Upgraded Electrical systems, Custom Fireplace Mantle, Remodeled Powder Room, All new Shower-Tubs w/ Intricate Tile Inlays & More! Pool sized yard w/ view offers total privacy. Quiet, single loaded cul-de-sac street.”

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Does the front elevation look familiar? These houses are nearly identical, and they are so close together than the Edington Terrace house actually looks over the roof of the Glenmont Terrace house. Is the view worth $400,000 extra (plus renovation costs)? In my opinion, the Glenmont Terrace house is overpriced as well (it is priced $200,000 over its 2005 purchase price), but as a comparable, it clearly establishes Edington Terrace is in WTF territory.

WTFTurtle Rock appears to be the last bastion of kool-aid drinkin’ maniacs. When I look around at listings, most are priced in the $500/SF range. There are a few over $600/SF, and they have been on the market for a long time. There is nothing I can see to justify the price this flipper paid much less the $405,000 extra they want for the property. I am dumbfounded, and being so means they have truly earned today’s WTF award.

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I would like to express a special thanks to JoonB for alerting me to this property.

Deodar of Destruction

Asking Price: $380,000

IrvineRenterPurchase Price: $515,000

Purchase Date: 10/12/2006

Address: 23 Deodar, Irvine, CA 92604

Beds: 2

Baths: 2

Sq. Ft.: 1,000

Lot Sq. Ft.: 2,800

Year Built: 1976

Knife Catcher Award

Stories: 1

Type: Condominium

County: Orange

Neighborhood: El Camino Real

$/Sq. Ft.: $380

MLS#: S485757

Status: Active on market

On Redfin: 40 days

From Redfin, “Single story home in a corner lot overlooking a huge greenbelt. Beautifully remodeled throughout. This is an as is short sale.”

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This short sale price will probably not be approved by the lender as it is too far outside of their loss limitation guidelines. It is probably priced this low to entice bids in order to give the bank an idea of where the market will be after they take the property back in foreclosure. The bank will lose money, but they will follow their guidelines for loss mitigation which will not permit a 30% haircut after a little over 7 months.

In my opinion the real story here is probably in the sale history:

Sales History

Date Price

10/12/2006 $515,000

10/27/2005 $465,000

08/01/2000 $218,000

It appears to me the buyer on 10/12/2006 was a straw buyer bailing out the 10/27/2005 buyer. The $515,000 sales price, after a 6% commission, would net this seller $20,000 — enough for a payment to a straw buyer and/or the person who arranged the sale. This is pure speculation on my part, and the previous seller may simply have gotten lucky, but when you see a short sale after 7 months, it is probably a first-payment default fraud. This may be a flip gone flop, or it may be fraud, either way this never should have transacted at a price over $500,000, and its next transaction (after the bank buys it at a foreclosure auction) will likely be less than the 2005 price.

The sellers who will really be displeased by this whole mess are the neighbors. The above sale won’t feed their fantasy price, but then again, they probably will ignore its significance as an aberration, drink some kool aid, and deepen their denial.

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13 DEODAR

Irvine, CA 92604

Price: $565,000

Beds: 3

Baths: 2

Sq. Ft.: 1,178

Lot Sq. Ft.: 3,035

Year Built: 1976

Stories: 1

Type: Condominium

County: Orange

Neighborhood: El Camino Real

$/Sq. Ft.: $480

MLS#: P579755

Status: Active on market

On Redfin: 7 days

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19 DEODAR

Irvine, CA 92604

Price: $585,000

Beds: 3

Baths: 1.5

Sq. Ft.: 1,517

Lot Sq. Ft.: 2,112

Year Built: 1976

Stories: 2

Type: Condominium

County: Orange

Neighborhood: Orangetree

$/Sq. Ft.: $386

MLS#: P572471

Status: Active on market

On Redfin: 49 days

Insulting Asking Prices

When buyers look for properties, realtors often try to intimidate them into making higher offering prices in order to avoid an “insulting offer.” How exactly making an offer on a property is insulting is beyond me, but the ruse seems to work, so realtors use it. However, isn’t the opposite also true? Isn’t it possible for an asking price to be so high, so ridiculous that it insults the intelligence of every buyer in the marketplace? I think so.

It was suggested in the comments on a previous post that perhaps our series on WTF pricing could shame sellers into setting reasonable asking prices. When an asking price is beyond ridiculous, there should be a sense of shame for the insult to potential buyers everywhere. There is a lack of respect in a WTF price: A lack which feeds the beast of schadenfreude currently dining on flips profiled by our blog. Just as realtors hope the fear of insult will cause the buyer to raise their offer, maybe the fear of insult will make a seller pause before listing an embarrassing asking price.

Today’s WTF award: Location, location, location.

Banyon Tree Map

Perfectly positioned to maximize road noise between the 405 Freeway and Michelson Drive is the small, old 3 bedroom offering for a mere $900,000:

Banyon Tree Front Banyon Tree Kitchen

Asking Price: $900,000

Purchase Price: $460,000

Purchase Date: 12/5/2002

Address: 13 Banyan Tree, Irvine, CA 92612

Beds: 3

Baths: 2

Sq. Ft.: 1,714

Lot Sq. Ft.: 6,500

Year Built: 1973

Stories: 1

Type: Single Family Residence

County: Orange

Neighborhood: University ParkWTF

$/Sq. Ft.: $525

MLS#: P566551

Status: Active on market

On Redfin: 80 days

From Redfin, “BEAUTIFUL HOME!!! EXCELLENT SCHOOLS!!! Large backyard with built in fire pit. Real distressed maple wood floors in kitchen and living room. New copper plumbing throughout. New gas range, kitchen sink and dishwasher.”

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So is this really a WTF price? The asking price per square foot of $525 is the one of two properties in all of University Park over $500 — even including the small stuff which warrants a high per SF price. The other property, 46 Sequoia Tree Lane, has been on the market for 305 days. Based on a cost per square foot metric, this price is way, way too high.

Let’s see what $900,000 will buy in University Park today:

26 Tahoe Front26 Tahoe Kitchen

26 TAHOE

Irvine, CA 92612

Price: $879,900

Beds: 4

Baths: 2.5

Sq. Ft.: 2,778

Lot Sq. Ft.: 2,880

Year Built: 1976

Stories: 2

Type: Condominium

View: Park or Green Belt, Trees/Woods

County: Orange

Neighborhood: University Park

$/Sq. Ft.: $317

MLS#: S474582

Status: Active on market

On Redfin: 115 days

This unit has an additional bedroom, 1000 SF of additional living space, and a beautiful kitchen for $20,000 less.

Or how about this one:

53 Mann Front 53 Mann Kitchen

53 MANN ST

Irvine, CA 92612

Price: $849,000

Beds: 5

Baths: 2.5

Sq. Ft.: 2,291

Lot Sq. Ft.: 5,060

Year Built: 1965

Stories: 2

Type: Single Family Residence

County: Orange

Neighborhood: University Park

$/Sq. Ft.: $371

MLS#: P568091

Status: Active on market

On Redfin: 71 days

This one has two additional bedrooms, 500 SF of additional living space, and an upgraded kitchen for $50,000 less.

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WTFFor being a greedy seller who needs to experience the shame for insulting the intelligence of buyers everywhere, the seller at 13 Banyan Tree wins our WTF award!

The Villas of Shady Canyon – Mark McGwire's Old Place – UPDATE #1

Originally posted January 9, 2007

Address: 3 Redbird, Irvine, CA 92603 (Shady Canyon)
Plan: 4240 sq ft – 4bd/4 and 2 .5ba
MLS: U6601263 DOM: 238
Sale History: 3/8/2006: $3,950,000
4/15/2002?: $1,842,500 (From Zillow)
Price Reduced: 06/28/06 — $4,195,000 to $4,050,000
Price Reduced: 08/23/06 — $4,050,000 to $3,950,000
Price Reduced: 10/13/06 — $3,950,000 to $3,850,000
Current Price: $3,850,000

An astute reader emailed me about this flip last week (Thank you!). Here we have a Plan 2 in The Villas of Shady Canyon tract built by Taylor Woodrow. This is one of the few (3?) semi custom tracts in Shady Canyon. The rest of the homes are all custom. It’s a beautiful home and was originally owned by baseball power hitter Mark McGwire.

It appears that a flipper purchased this home from McGwire for $3,950,000 on 3/8/2006 (good timing for Mark but not for our flipper). It was listed back on the market about 2 months later for $4,195,000 with John McMonigle (recent article). At that price, the flipper would barely break even after selling costs.

Over the course of 2006, the flipper lowered the price three times. These are pretty significant dollar reductions. Also, from what I can tell off the MLS listing, this property is vacant and my guess is that the flipper never moved in. I also see a loan for about $1,500,000. The HOA dues are about $560/month.

Excluding carrying and opportunity costs (but assuming 6% in selling costs), if sold at the currenty asking price, this seller is facing a loss of over $330,000!

Private remarks also state: “CLIENT IS OFFERING $20,000 TO ANY BROKER (PARTICIPATING IN MLS) WHO BRINGS IN A BUYER THAT GOES INTO CONTRACT AND CLOSES ESCROW ON PROPERTY.” I suppose that is on TOP of the 2.5% the broker will receive for bringing in a client.

This is definitely the biggest $ flop we’ve seen in Irvine. If anyone has more insight into this (or has information contrary to what I’ve found), please post.

Anyone care to guess if the house will sell quicker if Mark McGwire is inducted into the Hall of Fame today?

UPDATE #1 – June 8, 2007

Thanks to a tip from a reader, I’ve come to find out that the price on this home has been reduced again:

MLS: U6601263
Price Reduced: 05/22/07 — $3,850,000 to $3,695,000

Excluding carrying and opportunity costs (but assuming 6% in selling costs), if sold at the currenty asking price, this seller is facing a loss of over $476,000!

Not an exact comparison.. But there is a Plan 1 on the same street (19 Redbird MLS #: U7000758) asking $3,250,000. It’s been on the market for 110 days. I don’t think anything has sold in Shady Canyon in the last 6 months. Anyone have more info?

More Jasmine Dew Drops in Quail Hill – UPDATE #1

Originally posted April 26, 2007

Address: 260 Dewdrop, Irvine, CA 92603 (Quail Hill)
Plan: 830 sq ft – 1/1
MLS: U7000571 DOM: 84
Sale History: 11/21/2005: $445,000
10/23/2003: $251,000
Price Reduced: 03/22/07 — $445,000 to $434,900
Current Price: $434,900

Many thanks to the reader who tipped us off to this property! Here we’ve got a Plan 1 in the Jasmine tract in Quail Hill. It was most recently purchased for $445,000 with 100% down (both loans from Greenpoint) on 11/21/2005. $445k for a 1bd? Yikes!

Fast forward about 14 months and the property is back on the market. Originally listed at $445k (hey, it should be worth at least what I bought it for right?), it was reduced a little after 1.5 months. Although this property does not qualify for a Knife Catcher award, the owner (or will it be the lender in this case?) is definitely bleeding money every month as the property is listed as VACANT.

The property taxes for the 2005 Roll Year were delinquent. Now, the website is showing them as paid on 3/26/2007. Also, the first installment for the 2006 Roll Year is also Delinquent. About $7k in property taxes (1st and 2nd installments) are due by 7/2/2007. It looks like they are trying but they probably got in over their heads.

{adsense}

The original owner (the buyer in 2003) made quite a nice profit in 2 years. From what I can see on title, it looks like they may have put up to $80k down on that purchase. So the original owner bought a $250k property, may have put $80k of their own money down, owned the property for about 2 years, got lucky with the timing and price of the sale, and made around $170k. Contrast that with the current owner who bought a $445k property, put $0 down, owned the property for 1.5 years, got unlucky with the timing and price, and will lose at least $36k (assuming 6% in selling costs)!

UPDATE #1 – June 8, 2007

Here’s a quick update. The price was reduced again a few days after the initial post.

MLS: U7000571
Price Reduced: 04/30/07 — $434,900 to $428,900

The loss will be about $42k if we assume 6% in selling costs. This one has gotta be going back to the bank.