This Ole House — Stuart Hamblen

Today’s property sets a new low standard in Irvine. This is the first property I have seen below $200/SF. Granted, it is a fixer-upper, but those properties will always be the low-price leader. I really did not think we would see price levels this low in 2008.

This is the kind of property that will interest me in a couple of
years. If you find a house in need of major cosmetic surgery (but
nothing structural), you can buy it with FHA financing and take what
would have been your 20% downpayment and renovate the property to your
taste. After the renovation, you can get the property reappraised, and
hopefully, you will have added enough value to be able to stop paying
private mortgage insurance. At that point, you are in a house finished
the way you want it for equal to or less than a “normal” property in
the community. Right now, it would just be a money pit, but when we are closer to the bottom…

Asking Price: $499,000

Income Requirement: $124,750

Downpayment Needed: $99,800

Monthly Equity Burn: $2,991

Purchase Price: $760,000

Purchase Date: 10/25/2005

Address: 4361 Sandburg Way, Irvine, CA 92612

Beds:	4
Baths:	3
Sq. Ft.:	2,682
$/Sq. Ft.:	$186
Lot Size:	3,328 Sq. Ft.
Property Type:	Single Family Residence
Style:	English
Year Built:	1967
Stories:	2 Levels
Area:	University Park
County:	Orange
MLS#:	P635582
Source:	SoCalMLS
Status:	Active
On Redfin:	12 days
Fixer-upper

potencials, remodelling, deosnt?

Current owner
deosnt want to finish the work? Big surprise. We received an email from the producers of Flip This House a few days ago asking us if we knew of a flipper in trouble. Here he is.

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As you might have guessed, the lenders, Countrywide and Washington Mutual, are getting hosed on this one. The property was purchased for $760,000 in October of 2005. There was a $608,000 first mortgage, a $76,000 second mortgage, and a $76,000 downpayment. In February of 2007, the borrower opened a HELOC for $80,000 and withdrew the rest of his money from the transaction. You have to wonder if this was a precursor for walking away from the property, but there is no way to know for sure. Washington Mutual was stupid enough to give him the money.

If this seller obtains his asking price and pays a 6% commission, the total loss on the property will be $294,940. Washington Mutual will lose $80,000, Countrywide will lose $214,940 and our flipper will walk away with $4,000 of lender cash. Who needs highway robbery when they will deliver it right to your home?

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.

😉

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This ole house once knew his children
This ole house once knew his wife
This ole house was home and comfort
As they fought the storms of life
This old house once rang with laughter
This old house heard many shouts
Now he trembles in the darkness
When the lightnin’ walks about

This ole house dog lies a-sleepin’
He don’t know I’m gonna leave
Else he’d wake up by the fireplace
And he’d sit there and howl and grieve
But my huntin’ days are over
Ain’t gonna hunt the coon no more
Gabriel done brought in my chariot
When the wind blew down the door
CHORUS

This Ole House — Stuart Hamblen

P.S. This guy is great: Mr Mortgage – HERE COMES THE ALT-A CRISIS

Two as One — First to Last

When your playing blackjack and the dealer has given you great cards, you have the option of taking one more card and doubling your initial bet. When the odds are in your favor, it is a smart play. Since the real estate market was a “sure thing,” and prices always go up, it makes sense that people would have doubled down in the real estate market. The more property you owned, the more money you made. Well, at least that was the idea after a few kool aids. If you made the mistake of drinking the kool aid in the summer of 2006 and buying two low-end properties right at the peak, your double-down bet was a short cut from first to last.

Asking Price: $359,000

Income Requirement: $89,750

Downpayment Needed: $71,800

Monthly Equity Burn: $2,991

Purchase Price: $500,000

Purchase Date: 8/30/2006

Address: 15 Bellevue #1, Irvine, CA 92602

Great corner lot location, quite interior with view balcony. Locate in
a gated community, direct access 2 car-attached garages. No one above
or below, plush carpet with custom paint, narrow tree line corridor
leads to the front door, a gem not to be missed. Kitchen is centrally
located with walk in pantry. New custom paint and new barber carpet.

It it just the photograph, or does the color of the “new barber carpet” clash with the “custom paint?”

Is that a St. Joseph Statue in the corner?

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Property number 1 was purchased one day before property number 2. Do you suspect this was done so neither lender would know the other just loaned this guy a great deal of money? Do you think the second lender would have extended the loan knowing they guy had just taken on another huge mortgage? I suppose those questions are rhetorical because we all know the answer.

This first property was purchased with a $400,000 first and a $50,000 second, so he did put $50,000 into this first transaction. A year later, he took out a third mortgage with a private party for an additional $25,000, most likely to cover his debt service. The private-party lender has an Asian name. Lets hope he isn’t a member of the Boryokudan (Yakuza). They have interesting methods of collection.

If the seller gets his asking price, the total loss on the property after a 6% commission will be $162,540. The seller is out his remaining $25,000, the lender is out $112,540, and our Mafioso is out $25,000 — for now.

Asking Price: $359,000

Income Requirement: $89,750

Downpayment Needed: $71,800

Monthly Equity Burn: $2,991

Purchase Price: $585,000

Purchase Date: 8/31/2006

Address: 22 Daffodil, Irvine, CA 92618

Beautiful home in Oak Creek. Home is situated in the desirable Montilla
tract. Enjoy the convinience of a carriage unit. Great model boasts no
one above or no one below. 2 large terraces are perfect for relaxing.
The open floor plan is very light & bright. Cozy fireplace in the
living room.

light & bright

convinience? Is that like connivance?

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This seller must have felt $359,000 was a lucky number to price both properties that way. Everyone take notice of the purchase date being one day after the first property. Also, what do you think of the 39% drop in two years?

This property was purchased with a $468,000 first mortgage and a $58,500 second mortgage with $58,500 down. In February of 2007, he opened a HELOC for $108,500 and likely pulled out the $58,500 he put into this property and the $50,000 he put into property number 1. I imagine the $25,000 he borrowed from the mobster (I don’t know if he is a mobster, just go with it) was used to cover his debt service. So basically, he has taken all of his money out of these transactions, and he is letting the lenders hold the bag.

If the seller gets his asking price on this unit and pays a 6% commission, the total loss on the property will be $247,540; however, his total debt exceeded the purchase price by $50,000, so the lender is going to lose $297,540 on this one.

There you have it. Two properties, $410,080 in combined losses all absorbed by lenders. NBGI, Inc. Washington Mutual, Countrywide and our Mafioso all get to lick their wounds. Unless the private lender really is a Mafioso, then out boy has some explaining to do…

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two as one, a slight addiction
are we stuck, in the routine of this
but still more nights they come and go
the world keeps spinning all i know, i know
its just you and me, two as one

for all the nights we missed
f**k if i wasn’t such a pessimist
this chapter could’ve played out differently
for all the nights we missed
f**k if i wasn’t such a pessimist
this chapter could’ve played out differently

Two as One — First to Last

Nantucket Sleighride — Mountain

Don’t cry little Robin-Marie ’cause you know you’re losing your home…

It always makes me sad when I see these foreclosures and short sales with pictures from the children’s rooms. The disruption to family life caused by the Great Housing Bubble has only one precedent in the United States: The Great Depression. Hopefully, this family will be able to move into a comfortable rental rather than a tent city or Hooverville, but they will have to move. Basically, anyone who bought late in the bubble rally is underwater, and these homedebtors will fall into one of two categories: 1. Those who are forced from their homes (or choose to leave), and 2. Those who are trapped in their homes. It is difficult to determine who is worse off. Those who are forced from their homes will have ruined credit and difficulty in obtaining a home in the future. Those who are trapped in their homes have a complete lack of mobility to take promotions and crushing debt service payments that prevent them from doing anything else. All of these problems boil down to one bad decision: they bought a house during a wild financial mania.

Most people have no concept of the risks involved in investment.
This ignorance is reinforced by the kool-aid sales pitch of the
National Association of Realtors. Prices always go up. They are running
out of land. Buy now or be priced out forever. This self-serving
bull$hit is all too familiar (and repugnant) to the regulars on this
blog. People who bought into the bubble rally believed this nonsense,
and now that the foolishness of their decision is apparent, it is all
over except the crying.

For some people, the consequences will be limited. Those who used
100% financing and did not refinance have non-recourse debt, and they
will only face a ding to their credit rating. Those who refinanced have
recourse debt, and they will likely have to deal with debt collectors
before it is all over. Those who put some of their own money into the
transaction are facing a significant loss of equity, and it the case of
most properties we profile, a total loss. These are just the financial losses. The emotional losses can be even greater.

People develop emotional attachments to their homes. There is a wall in the bedroom where little Johnny’s height has been measured for the last several years. There is the patio with the children’s names etched into the concrete. There are the neighbors with whom people have shared cookouts. All of these little things create a sense of groundedness and a feeling of community. All of these things are lost in a foreclosure.

There are also the elements of ego involved. There are feelings of failure, particularly for those who feel the duty to provide for their families. There is the disappearance of illusions of wealth and status, and adjusting to a significant reduction in buying power is very stressful. We have had many foolish bulls post on this blog and others. Bulls have smugly commented on how renters have made “bad life choices.” The arrogance of some of the bulls is only surpassed by their ignorance. The embarrassment of being so completely wrong and the shame of losing face is very difficult for many to accept.

People who were wrong about the Great Housing Bubble paid a big price…

Asking Price: $789,000

Income Requirement: $197,250

Downpayment Needed: $157,800

Monthly Equity Burn: $6,575

Purchase Price: $948,500

Purchase Date: 1/24/2007

Address: 5 Nantucket, Irvine, CA 92620

What is a newer remodel? I suppose if it was remodelled in 1970, that wouldn’t count.

Nice that they put in pergraniteel.

ALL CAPS IS ANNOYING

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First, I would like to offer my kudos to the people who bought the property in April of 2002 for $520,000 and sold it to today’s seller for $948,500. The housing bubble seems to have worked out for them. The housing bubble has enriched many who bought and sold at the right times — assuming they are renting now. Today’s seller couldn’t have timed things any worse. The peak of the broader market was summer of 2006 in Irvine, but the high end appreciated into the winter of 2007. For properties like today’s January of 2007 was the absolute peak. Not long after these people bought, the market went over a cliff, and it continues to free fall. These people paid $948,500, and they put 10% down. That $94,850 is long gone. If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $206,840 — an average loss by Irvine standards (Isn’t that amazing?) The sellers will lose their $94,850, and the lender will lose $111,990. I imagine these people are not thankful for the housing bubble.

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Goodbye, little Robin-Marie
Don’t try following me
Don’t cry, little Robin-Marie
‘Cause you know I’m coming home soon

Three years sailing on bended knee
We found no whales in the sea
Don’t cry, little Robin-Marie
‘Cause we’ll be in sight of land soon

Nantucket Sleighride — Mountain

P.S. Check out Mr Mortgage April Foreclosure Report