Peaches — Presidents of the United States of America
Millions of peaches, peaches for me Millions of peaches, peaches for free
There are still people successfully flipping properties even in our declining market. It isn’t the usual suspects from the bubble, no-money-down fools, it is the moneyed professional with plenty of cash. During the bubble, banks were handing out 100% financing to anyone who wanted it, so flippers everywhere bought and sold properties at will.
Now that banks are paying a heavy price for their foolishness, they are no longer loaning money to flippers. Being a flipper requires more cash–much more. In fact, the only way to flip today is to go to a foreclosure auction with 100% cash and buy properties on the courthouse steps. Needless to say, this greatly diminishes the buyer pool.
The auction flip works due to the fact that the diminished buyer pool makes for depressed pricing. A flipper can obtain a property at auction for 10% to 20% less than its resale value in the finance-dominated market. If a flipper can obtain a property cheaply and sell it quickly, there is an opportunity to profit.
This kind of flipping is not for the foolish amateur or the faint-of-heart. If you overpay, you will lose money. If you overpay and hold on, you will lose even more. Prices of these properties are still well above rental cashflow levels, so holding them as true cashflow investments is not a viable option. These are pure speculative flips.
I wouldn’t do it.
Today’s featured property was purchased at auction, and the flipper is trying to make a quick 20%. Good luck with that [As I secretly hope this flipper goes down in flames].
Large Home in Presigous Westpark. Spacious Living Room with Cathedral
Ceilings Spacious. Kitchen Opens to Large Family Room with Fireplace.
All 3 Bedrooms Upstairs with Loft/Den as 4th Bedroom, Office or Gym.
Master Suite has Separate Tub/Shower and His/Hers Walk-In Closets. Nice
Back Yard with Built-In BBQ, Spa, Landscaping and Sprinkler System.
Community Pool and Tennis Courts. Award Winning Schools. Great Parks.
Close to Shopping and Entertainment. Low Association Dues. A Great
Place to Live on A Quiet ‘Cul-De-Sac’ Street. Not a Short Sale! Not an
REO, The owner is in process of Upgrades, Flooring, Countertops,
Appliances, etc. CAN MAKE ‘AS IS’ OFFER NOW BEFORE WORK BEGINS!
Notice how the seller would generously consider offers before putting more money into the property? I will offer $475,000. That is where the resale value is headed. Somehow, I doubt he will take it.
Presigous?
Why Is This Description Written In Title Case?
Actually, buying a house from an auction flipper is not a bad way to go. If you can get the property renovated to your taste prior to move in and have these improvements rolled into your loan, you can have an at-market property that is exactly what you want. You won’t get a good deal, but you can at least get what you want.
The previous owners of this property spent their house. Are you surprised?
The property was purchased on 9/5/2001 for $465,000. The owners used a $372,000 first mortgage and a $93,000 downpayment.
On 4/16/2002 they opened a HELOC for $80,000.
On 5/28/2002 they opened a HELOC for $100,000.
On 11/6/2003 they opened a HELOC for $108,000.
On 11/17/2003 they opened a HELOC for $248,000.
On 6/2/2004 they opened two HELOCs for $195,000 and $67,000 respectively.
On 6/24/2004 they opened a HELOC for 67,000 (probably redid the last one).
Total property debt was $634,000.
Total mortgage equity withdrawal was $262,000.
That explains why this property went to auction for $600,000. At least the lender didn’t lose too much. Wells Fargo was lucky these borrowers were not even more aggressive. The borrowers are members of an ethnic minority known for their frugality, so perhaps this is being conservative. I can’t say…
{book3}
Movin to the country, Gonna eat a lot of peaches Movin to the country, Gonna eat me a lot of peaches Movin to the country, Gonna eat a lot of peaches Movin to the country, Gonna eat a lot of peaches
Peaches come from a can, They were put there by a man In a factory downtown If I had my little way, Id eat peaches every day Sun-soakin bulges in the shade
Take a little naps where the roots all twist Squished a rotten peach in my fist And dreamed about you, woman, I poked my finger down inside Make a little room for it to hide Natures candy in my hand or can or a pie
Millions of peaches, peaches for me Millions of peaches, peaches for free
Peaches — Presidents of the United States of America
We've been asked to review a product on Loan Modifications for which we are an affiliate. As stated in the Liar's Poker post, lenders do discriminate in regards to who they give loan mods to. Since my background is in land planning and not lending, I thought it would be best to get someone from that industry to do the review. Morgan, our blogging buddy from Blown Mortgage, has written a guest post for us regarding this program. Thank you Morgan!
{book6}
Hi Irvine Housing Blog Readers,
My name is Morgan and I manage and own the blog BlownMortgage.com. BlownMortgage.com, like the Irvine Housing Blog, has been about telling the truth during this housing mess. From the moment I started it in February of 2007 it received a lot of attention as the only honest mortgage blog on the Web. It's regularly linked to by the Mortgage Lender Implode-O-Meter, and we've been fortunate enough to be published in the most prestigious publications in the country including many of the leading newspapers in the nation. Our one motto at Blown Mortgage has been to tell the truth and I believe that is what has made us successful. I also believe that is why the Irvine Housing Blog has been such a success.
I'm a huge fan and regular reader of the Irvine Housing Blog. I have a ton of respect for the work that Irvine Renter and the rest of the team do on the site. Because of that I'm very grateful that they've asked me to write a review for a new product that they offering to their readers. As a former owner of a mortgage bank (yes, we closed our doors in the contraction) and now owner of the blog I've seen a lot of pitches about loan modification products and services. Some of them mediocre, some of them outright scams, most of them not worth the time it took to look them over. But I found one product and service (and more importantly individual) who I think gets it in terms of helping people get loan modfications themselves. Continued after the jump
The product is called Loan Mod Secrets and it is a do-it-yourself guide to doing loan modifications. Richard Geller owns the company and also provides other products like Short Sale Secrets and other courses.
His do it yourself loan modification ebook and seminars on loan modifications and short sales have been some of the best material I've found on the internet to-date regarding the subject. After reviewing the material upfront I was confident in recommending the product to my readers. Hundreds of books have been sold to date and I've had exactly one email from an unsatisfied customer. I rested easy knowing that Richard offers a full, 365-day money-back guarantee on his products and that this person would get their investment back. PLEASE NOTE: I AM AN AFFILIATE FOR LOAN MOD SECRETS AND MAKE A COMMISSION FOR EACH BOOK THAT SELLS. But I have literally reviewed dozens of these courses, ebooks and programs and found this one to be the best.
It's inexpensive compared to other loan modification programs. Do-it-yourself means no retainers, no lawyers and no four-or-five figure fees.
It's ethical. They renounce trying to cheat the process by providing fraudulent information to secure a loan modification.
It's practical. There's not a lot of magic here, just straight commonsense and how-to information to help you get the loan modification you need.
It's complete. Richard goes through all aspects of the loan modification process and gives you a system and tips to manage all of the moving parts of the loan modification process.
It's got some great, unknown information. Do you know how you can get a market price and short sell your house in 9-days? Neither did I until I read his book. I thought it was brilliant. The other nuggets of advice are worth the price of the ebook as well.
It's risk-free. You can try the program risk-free for 365 days without it costing you a penny. That's a pretty good trial period.
It's above board. I've never had any complaints from customers who felt jerked around or cheated with this ebook. After hundreds of sales I consider that significant.
So if you're looking for a solution to getting a loan modification on your home mortgage without having to pay an attorney thousands of dollars in retainers I recommend this Loan Mod Secrets ebook and/or course. And if you're in the business and want to help people with loan modifications there's a course on that as well. The information in the ebook will help you help others. And trust me, there is a real need for more qualified, honest people to help with this crushing problem. In addition to the books I've sold I get over 100 inquiries a month from people looking for help with their loan modification (they don't want to do it themselves, they just don't have the time and need help).
Try Loan Mod Secrets. The Irvine Housing Blog will make a commission on the product, but you're helping yourself with a product I believe can help you and you're supporting a great resource that has helped shine the bright light of truth and honesty on this housing crisis. Thanks for your time.
Like poker players, people attempting cram downs with their lenders are playing a game where the strength of their hand often determines whether or not the lender will call their bluff.
Today’s featured property is a large 5/3 REO. The owner bought a little too late and borrowed a little too much.
Michael Lewis wrote a book in the late 1980s called Liar’s Poker. In it he describes the inner workings of Wall Street and how the culture rewarded trickery and deceit. (He also recently wrote Panic which features a post from the IHB.) In poker the players bet against each other based on the relative strength of each other’s hands. The strongest hand wins the money — most of the time… What makes Poker such an outstanding game is that the betting itself provides an alternate method of victory. In fact, actually playing the cards to determine the victor often does not occur.
There is a new game of poker being played all over the country between borrowers and lenders. It is a high stakes game with hundreds of thousands of dollars riding on the outcome. First a little background on how it is played.
Borrowers know they can get loan modifications with principal reductions that save them big bucks. This is the pot people are playing for. In a normal market, borrowers do not have the cards to play in this game. If they try to force a loan modification, the lender would simply foreclose and take back the property. However, since many borrowers are underwater, and since lenders already have too many foreclosures, borrowers have a much stronger hand. In fact, the hand gets stronger as the borrower falls further and further underwater.
In order to play this game, borrowers must petition their lenders for a loan modification. Simply asking isn’t good enough. To play their first card, the borrower must default on their mortgage. As I mentioned in the post Reverse Liar Loans, many borrowers are now doing this. What many borrowers do not realize is that this is the first gambit in a larger game. The loan modification is not guaranteed just because they default and ask for it.
{book}
Here is where everyone can get a schadenfreude overdose: many people who are defaulting on their mortgages to gain a loan modification are being turned down by their lenders. I mentioned in yesterday’s post that I had an extended conversation with a banker at a recent event. He told me his bank routinely turns down these attempted loan modifications, particularly if they believe the borrower has capacity to continue making payments, and if they are not that far underwater.
Think about what the lenders are doing. They are calling the borrower’s bluff. Now look at the borrower’s circumstances: 1. They trashed their credit with the series of late payments, so they have the damage of a short sale or foreclosure. 2. They are way behind on their payments (do you think any of them saved the money?) 3. Now they have to decide whether or not they are really going to walk away from their homes.
This is when borrowers realize the stakes they are playing for. Anyone who attempts to force a lender into a loan modification has to be prepared to walk away from their home because the lender may call their bluff. This is where the strength of the hand of the borrower is increased by being underwater. If they are way underwater, they actually benefit by walking away and starting over. It is easier to walk when there is little hope of getting back to breakeven. Banks know this too, and they are more willing to negotiate with these people. If a borrower is only a little under water, their hand is much weaker because the lender knows they are less likely to walk away.
The game of loan modification is just like playing poker. Anyone thinking about doing this needs to consider that like any bluffing game, the other party may call your bluff. If you are not prepared to walk away from your home, you probably shouldn’t play.
Today’s featured property is a large 5/3 REO. The owner bought a little too late and borrowed a little too much.
This Property in the city of Irvine features 5 bedrooms and 3
bathrooms, large open floor plan, near freeways, shopping,
entertainment and more. This Property is priced to sell and will not
last long, submit your offer today!!
This property was purchased on 1/31/2003 for $496,000. The buyer used a $396,800 first mortgage, a $74,000 second mortgage, and a $25,200 downpayment.
On 2/25/2004, the first mortgage was refinanced for $528,000 cashing out the downpayment plus an additional $32,000.
On 2/25/2004, the owner also opened a HELOC for $66,000.
On 12/22/2004, the owner opened a HELOC for $156,000.
In 2006, there was a lien filed by a bail bondsman…
On 6/21/2007, the owner opened a HELOC for $286,000.
Total property debt is $814,000.
Total mortgage equity withdrawal is $343,200 including the downpayment.
This owner bought in early 2003, and he would probably fall underwater anyway before prices bottom. However, he added another $300K+ to the mortgage, and now it is hopeless. The property went into foreclosure, and it was purchased by the lender on 9/17/2008 for $548,666. (Notice that it is taking 90 days or more for these to hit the MLS.)
If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $212,494.
The auction price was 33% below the peak appraised value used to justify the final HELOC.
{book}
I wanna hold em’ like they do in Texas Plays Fold em’ let em’ hit me raise it baby stay with me (I love it) Luck and intuition play the cards with Spades to start And after he’s been hooked I’ll play the one that’s on his heart
I wanna roll with him a hard pair we will be A little gambling is fun when you’re with me (I love it) Russian Roulette is not the same without a gun And baby when it’s love if it’s not rough it isn’t fun, fun Oh, oh, oh, oh, ohhhh, ohh-oh-e-ohh-oh-oh I’ll get him hot, show him what I’ve got Oh, oh, oh, oh, ohhhh, ohh-oh-e-ohh-oh-oh, I’ll get him hot, show him what I’ve got
I won’t tell you that I love you Kiss or hug you Cause I’m bluffin’ with my muffin I’m not lying I’m just stunnin’ with my love-glue-gunning Just like a chick in the casino Take your bank before I pay you out I promise this, promise this Check this hand cause I’m marvelous
A drowning sorrow floods the deepest grief, how long now? Until the weather change condemns belief, how long now? When the night watchman lets in the thief Whats wrong now?
Ever since the post Tax Policy and Housing, I have been carrying on an email conversation with Bill McKim, author of a pamphlet titled The Financial Crisis of 2008.
We have been discussing methods of preventing future housing bubbles.
With as painful as the deflation of this bubble is, we both hope that
as a society we recognize the importance of stopping this from
happening again, and through our politicians, we can do something to
prevent its recurrence.
My proposal for Preventing the Next Housing Bubble (PDF) focuses on limiting the supply of lender money that enables people to
borrow excessive amounts which inflates housing bubbles. Mr. McKim’s
proposal is to curb the demand for borrowing and for speculative real
estate in general by taxing the profits out of existence. If people
can’t make money beyond adjustments for inflation, they will not
speculate in real estate. If implemented, his proposal would be very
effective; however, I don’t think it could be successfully implemented.
Real estate is religion in California. If you try to tax away
everyone’s profits, it is as if you were telling them they could not
worship their God. It is a false God, and it is one they should not
worship, but telling them they cannot would be a very difficult sell.
Perhaps I overestimate the resistance to the idea.
I want to share with you a snippet of our conversation as Mr. McKim
does a great job of laying out the case for taxing the gains on housing
due to irrational exuberance at 100%:
Me: “Personally, I think the controls on irrational exuberance going
forward is going to come from the lender side. The banking industry is
going bankrupt due to their stupidity. They are going to lose more than
a trillion dollars by the time it is all added up. Congress is going to
step in to regulate them to death in order to prevent it from happening
again, particularly since they ended up picking up the tab. Of course,
regulations need enforcement, and over time there is always pressure to
relax or repeal regulations.
For as much as I would like to see demand-side regulation or
borrowers like taxation would create, I think it far more likely that
Congress will focus on supply. It is easier. It will be much, much
easier if we end up nationalizing our banks (which seems likely at some
point).”
{book}
The following is Mr. McKim’s response. The [italics] in brackets are my comments.
Mr. McKim: “You
say “The banking industry is going
bankrupt due to their stupidity. They are going to lose more than a trillion
dollars by the time it is all added up”.I posit that they are not currently
short a trillion dollars because of their stupidity, but because they were the
ultimate losers in the 2003 to 2006 housing bubble.
During the
bubble all segments of society, government, and media were entranced by the
marvelous opportunities to make money in the residential housing market.Buyers were eager to buy houses that had
increased in value 20% in the past year because they assumed that the houses
would increase 20% during the next year.Sellers were eager to sell because they had made far more on their house
during the Exuberance than they had made in the prior five or ten years.Lenders were eager to lend far more than
was currently owed on the house because its price (and, they thought, the
security value) was going up like crazy.
The media, and
therefore the government, were eager to extend this tremendous opportunity for
riches to all segments of society instead of its only being available to those
who could repay the money borrowed to buy the house out of the buyers’ income.
(After all, everyone knew that you could refinance after the buyer had been in
the house a few months or a year and take out enough money to make mortgage
payments.)
Then, as all
bubbles must, this one burst.The
winners were all those sellers who had sold during the bubble.The losers were those who had bought
late, and their mortgage lenders.
Who was
stupid?Who wasn’t stupid?Who was most stupid?What would have happened to a loan
officer of a lender if he had refused to make a loan to someone merely on the
basis that the borrower didn’t make enough money to be able to pay back the
loan? The answer to that one is
that the loan officer would have been fired from his job.
What would have
happened if some diligent regulator had told a lender that he couldn’t make a
loan to a buyer who didn’t make enough money to pay the loan back?The regulator might have been fired, or
the media would have castigated the lender for discrimination and having a black
soul, or a Congressman would have pushed through legislation making it possible
for the lender to make the loan.
That was the
then that was then.What is so
evident to us now was not evident to anyone then. [It was evident to some, and they were not listened to]
Therefore, the
late buyers that were losers have had to get second or third jobs to make the
payments, or give up the house.The
losers that were lenders are missing, as you said, a trillion dollars.
As long as the
lenders don’t have that trillion dollars they can’t lend that trillion dollars
to businesses to make payroll, order goods, or finance expansion even if their
business is booming.Without credit
there is no cash flow in today’s world.
As long as
lenders don’t have that trillion dollars they can’t lend consumers money to buy
cars, TVs, or cruises.
Obviously, an
economy that was productive and prosperous before the bill came due on the
housing bubble is not now inefficient, unproductive, and without customers
wanting to buy this short time later.
The “economy” is
not in the tank.Only the financial
system is broken.
So, if the
banking industry is given back the trillion dollars it loaned on real estate
that was worth a trillion dollars less than everyone thought, then the wheels
will start to turn and everything will be fine in the economy, with only our
grandchildren suffering, right?
Apparently not,
quite.That would seem to be what
Henry Paulsen thought when he asked for 700
billion dollars.The problem was
that no one had sat down and figured all this out, and no one could explain
where the 700 billion was going, and why it was going there.Without any understanding, pain in the
auto industry (which was caused by the lack of credit to buy cars) looked just
as serious and important as pain in the lending industry.
In order to fix
the current crisis two things are needed.The trillion dollars, and a comprehensive understanding of what went
wrong, how we are going to fix it, and that no one was more to blame than anyone
else.That what happened, happened
to all of us because we didn’t know as much in the past as we do now.
Right now
bankers, given money, are loathe to lend it, because they clearly realize that
they don’t always get it repaid.If
they, the government, the media, the economists, and, to as great an extent as
possible, the public know that the money that was lost by the lenders was
because of a specific and isolated event, then they will be able to just go back
to lending the way they always have.[I
don’t believe banks would lend right now even if they knew what they
did wrong because asset prices are too high relative to cashflow.
Prices must fall.]
Now (as though
this wasn’t too long already), you say that you think that Congress is going to
try to solve the problem by regulation or nationalization, because it is
easier.Left to their own devices,
I’ve no doubt that you are right.Certainly Congress will think that that is easier because that is what
Congress does.To them, it will be
easier to set up a severe new regulation scheme, and hire people to implement it
than to actually “change”.
Change would be
to think about the root cause of the problem and come to the conclusion that you
and I share: that irrational exuberance caused the problem, and that taxing it
out of existence would stop it in its tracks.Having done that much thinking, they
would then have to tackle the only really difficult part of the solution, which
is determination of the true value of property when it is sold.[I think this is actually the easy part. Index gains to the CPI plus 1%]
Once that very
difficult solving of the problem has been accomplished by Congress though the
implementation and enforcement of it will be hundreds of times easier and less
expensive than a new regulatory scheme or nationalization of the banks.“
The saints are coming, the saints are coming. I say no matter how I try, I realise there’s no reply.
At some point, Congress will tackle the issue of what to do about
the housing bubble. Hopefully, it will be a carefully considered debate
rather than part of some emergency measure. One fundamental question
Congress must consider is whether to try to curb demand or limit
supply. I favor limiting supply because I believe they could accomplish
it. It will be a difficult argument for an insolvent banking industry
to oppose any regulations from the government considering the
government is the only entity keeping them afloat. I believe Mr.
McKim’s proposal is interesting because it would be very effective. If
Congress wanted to tackle this problem through tax policy, specifically
by taxing capital gains on property sales, it could go that route as
well. Whatever approach they take, I hope they come up with a workable
solution to the problem. Since this is the US Congress we are talking
about, I have my doubts they will get it right.
{book}
Today’s featured property is a 2003 rollback that recently sold at auction for 40% off its peak purchase price.
Second level 2 bedrooms 2 baths offers open floorplan. Spacious living
room, open to dining area. Large master suite separate from 2nd
bedroom.
Do you get the sense that the bank can’t think of any reason why someone would want to buy this place?
This property was purchased on 6/19/2006, right at the peak. The owner paid $465,000 (LOL) by using a $372,000 first mortgage, a $46,035 second mortgage, and a $46,965 downpayment (ouch). Downey Savings had the first mortgage, and Washington Mutual has the second. Two brilliant lenders with solid balance sheets… The property was purchased by Downey at auction on 9/2/2008 for $277,500. That is 40% off its peak purchase price. The amazing thing is that they were willing to take a $100,000 loss on their first mortgage position on the courthouse steps, and no flipper stepped forward to take it.
If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $154,800.
I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we
continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
🙂
{book}
There is a house in New Orleans, they call the Rising Sun It’s been the ruin of many a poor boy, and God, I know I’m one.
I cried to my daddy on the telephone, how long now? Until the clouds unroll and you come home, the line went. But the shadows still remain since your descent, your descent.
I cried to my daddy on the telephone, how long now? Until the clouds unroll and you come home, the line went. But the shadows still remain since your descent, your descent.
The saints are coming, the saints are coming. I say no matter how I try, I realise there’s no reply. The saints are coming, the saints are coming. I say no matter how I try, I realise there’s no reply.
A drowning sorrow floods the deepest grief, how long now? Until the weather change condemns belief, how long now? When the night watchman lets in the thief Whats wrong now?
The saints are coming, the saints are coming I say no matter how I try, I realise there’s no reply. The saints are coming, the saints are coming I say no matter how I try, I realise there’s no reply.
From all of us at the Irvine Housing Blog, we want to wish all of you happy holidays.
So this is Christmas And what have you done Another year over And a new one just begun Ans so this is Christmas I hope you have fun The near and the dear one The old and the young
A very merry Christmas And a happy New Year Let’s hope it’s a good one Without any fear And so this is Christmas For weak and for strong For rich and the poor ones The world is so wrong And so happy Christmas For black and for white For yellow and red ones Let’s stop all the fight A very merry Christmas And a happy New Year Let’s hope it’s a good one Without any fear
For those of you taking a break from your Christmas activities to surf the web, I thought I would share with you a listing with a few strange listing photos.
One of the best plan 2 in Centennial Tract by California Pacific Homes
to come on the market. A True Turnkey 4 Bedroom charmer! Relocation
forces this Pride of Ownership to come on the market. Located in one of
the premium inside street on an oversized lot. Entertainer’s delight
backyard w/extensive stamped concrete & matured tropical trees.
This desirable and popular floorplan features: Formal Living &
Dining Room, a separate Family Room w/cozy stone fireplace adjacent to
family kitchen. Hardwood Floors throughout downstairs, designer custom
paint, custom baseboards, upgraded recessed lightings, extra storage
under the stair case & ceiling fans in all bedrooms. Private Gated
Community with own private central park, Sport Court, Jr. Olympic Pool
& Tot Lot & Family Oriented activities. Centrally located in
the #1 Safest City of Irvine, close to Fwys, award winning schools
& awesome shops. Don’t miss this one!
I wanna roll with him a hard pair we will be
