Ship of Fools — Robert Plant

Today we are breaking with our tradition of profiling a $250,000 loss, and we are going big time — $500,000 lost on one property. This flip is sunk. These flippers are so far underwater, they are not on a ship of fools; they are on a submarine.

Asking Price: $799,000

Income Requirement: $199,750

Downpayment Needed: $159,800

Monthly Equity Burn: $6,658

Purchase Price: $1,299,000

Purchase Date: 6/8/2007

Address: 20 Silver Cres, Irvine, CA 92603

Beds:	4
Baths:	2
Sq. Ft.:	2,128
$/Sq. Ft.:	$376
Lot Size:	6,741 Sq. Ft.
Property Type:	Single Family Residence
Style:	Contemporary
Year Built:	1977
Stories:	1 Level
View:	Hills
Area:	Turtle Rock
County:	Orange
MLS#:	S529152
Source:	SoCalMLS
Status:	Active
On Redfin:	17 days
Fixer-upper

hughe?

Someone paid $1,299,000 for a property needing a complete remodel?

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The transactions surrounding this property smell fishy to me. It was purchased by a guy for $1,299,000 in March of 2007 who put 25% down. 3 months later, the property was sold to a couple for the exact same price who used 100% financing. Now, 10 months later, it is being offered for sale for $500,000 off the purchase price. What gives? Did the original buyer find a straw buyer to bail him out? Why would someone sell it 3 months later for the same price, and why did the second buyers use 100% financing and try to sell it 10 months later for a $500,000 loss? It looks suspiciously like a bank “put” that bailed out the first buyer. I don’t know. The bottom line is this: JP Morgan Chase Bank is going to lose $547,940 after a 6% commission less than 10 months after originating the loan. That is a huge loss, particularly for such a short ownership period. It is possible that some contractor will bid more than asking and minimize the lenders loss, but I rather doubt it. This place must be trashed inside if they won’t show any pictures.

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On waves of love my heart is breaking
And stranger still my self control I can’t rely on anymore
New tides surprise – my world it’s changing
Within this frame an ocean swells – behind this smile I know it well

Who claims that no man is an island
While I land up in jeopardy – more distant from you by degrees
I walk this shore in isolation
And at my feet eternity draws ever sweeter plans for me
I know why – I know why
Crazy on a ship of fools
Crazy on a ship of fools
Turn this boat around – back to my loving ground
Oh no, oh no – ship of fools —

Ship of Fools — Robert Plant

Silent Scream — Slayer

It doesn’t look like we are going to have a bear rally this spring. The rate of price decline is accelerating, credit is still tightening, foreclosures are still increasing, job losses are mounting, mortgage interest rates are rising, inflation is rising, the economy is sputtering, and sales are still anemic. Did I forget anything?

Rachel Carson wrote Silent Spring in 1962 about the death of eagles caused by DDT. Who will write about our silent spring? Oh yeah, I did.

Asking Price: $670,000

Income Requirement: $167,500

Downpayment Needed: $134,000

Monthly Equity Burn: $7,166

Purchase Price: $860,000 (via Sitex)

Purchase Date: 5/19/2006

Address: 36 New Hampshire, Irvine, CA 92606

Desirable parkside
location. I call BS on this one. It is far from the park, but immediately adjacent to the 5. I hope it has triple-pane glass and air purifiers.

That kitchen is the original cheap white tile.

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Since this house is not currently lived in, we can assume our flipper gave up. They do have $43,000 of their own money in the deal, but values have long since put them underwater. Apparently they are not readers of the IHB, or perhaps not believers, as they purchased this property in February of 2007 as a flip. Lenders put up $817,000, so we are looking at another lender bloodbath. If this property sells for asking price and a 6% commission is paid, the resulting loss on the property will be $230,200. The seller will lose their $43,000 downpayment, and the lender will lose $187,200. You know, I don’t feel very bad when flippers lose money.

Another day, another quarter million dollar loss….

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Have you noticed how the position of the market bulls has been evolving? Awgee has. He went on a rant in our forums making fun of the bulls arguments. I will quote him here:

At first, it was, “Prices will continue to appreciate at this rate.”

Then it was, “Prices may not continue to appreciate at the same double
digit rate that they have, and it will be healthy for the market if it
slows down to single digit appreciation.”

Then, “Prices will level off, but they will never decline in Irvine, (Newport), (take your pick).”

Then, “The market is experiencing a small. temporary correction.”

Next, “Prices have fallen, but interest rates are low and inventory has never been better. It is a great time to buy.”

Now, “We realtors are seeing greater market activity. The bottom is
in. Serious buyers are making offers. You may be surprised by multiple
offers on the home you are interested in. If you plan to live in a
home for ten years, it does not matter when you buy.”

Next month, “This latest decline is just the final blow-off before
prices start to rise again.” or “You can’t lose in this market.”

or ( Tell us what the next Kool-Aid sales pitch will be ).

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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Nightmare, the persecution
A childs dream of death
Torment, ill forgotten
A soul that will never rest

Scattered, remnants of life
Murder a time to die
Pain, suffrage toyed
Lifes little fragments destroyed

Silent Scream — Slayer

Short People — Randy Newman

Short sellers got no reason to hope. They got little houses, little pets, they go round borrowing great big debts. They got little kitchens, little stoves, granite counters; they are selling in droves. Don’t want no short sales, don’t want no short sales round here.

Today’s featured property is a typical 100% financing deal gone bad. There are two types of distressed properties that have caused the 20%+ declines we have seen in the last year: 100% financing deals and HELOC abusers. We have profiled many of each type. They have set the stage for the next wave of foreclosures when all the ARMs begin to explode. We haven’t begun to see the fallout from that problem yet.

Asking Price: $780,000

Income Requirement: $195,000

Downpayment Needed: $156,000

Monthly Equity Burn: $6,500

Purchase Price: $960,000

Purchase Date: 5/19/2006

Address: 26 Midsummer #1, Irvine, CA 92620

HARDWOOD FLOORS, ckeck.

STAINLESS STEEL
APPLIANCES, check.

GRANITE COUNTER TOPS, check.

Pergraniteel.

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This seller demonstrates very poor market timing. This property was purchased very near the peak with 100% financing. It has been a cashflow drain, and with the market heading south, the owner is bailing out. What a surprise. If this seller gets full asking price, the lender who is going to eat the loss will lose $226,800 after a 6% commission.

Have you gotten bored of $250,000 loses? They are so common now that you forget what $250,000 could buy, and what it really means. We are documenting about $1,000,000 a week in losses here in Irvine, and that is only because we run 5 posts a week. There is actually much more being lost in the market each day, and that is just in our little piece of America. Is it any wonder the banks are taking multi-billion dollar write offs?

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Short People got no reason
Short People got no reason
Short People got no reason
To live

They got little baby legs
And they stand so low
You got to pick ’em up
Just to say hello
They got little cars
That go beep, beep, beep
They got little voices
Goin’ peep, peep, peep
They got grubby little fingers
And dirty little minds
They’re gonna get you every time
Well, I don’t want no Short People
Don’t want no Short People
Don’t want no Short People
‘Round here

Short People — Randy Newman