bubbleinfo.com

The 92130 zip code continues to hang in there – the month of July is showing 40 detached closings already, matching last year’s total, and none of the sales were REOs.  The same-house sales did OK too - 36 out of the 40 sold for at least as much as the last sale, or more.

How did the other four do?

Here are this month’s prices, compared to the last sale:

$695,000 / $865,000 May 2005 (-20%)

$860,000 / $1,020,000 April 2006 (-16%)

$910,000 / $1,010,000 June 2006 (-10%)

$1,050,000 / $1,072,000 June 2006  (-2%)

There will continue to be homeowners in Carmel Valley who bought at the peak and now end up selling for less, but no massive meltdown yet.  Do we just go on our merry way?

Let’s look at one example – the short sale that closed for $910,000.

13195 Sunstone Point is in the Soleil tract in Pacific Highlands Ranch.  It is your typical 4 br/3 ba, 2,730 sf tract home on a smaller lot with $277/month in HOA and Mello-Roos fees.  There are two other similar models, one at 2,673sf and another at 2,726sf. 

On this street there are 29 houses that are one of these three models, and as far as appraisers (and buyers) are concerned, they are going to be considered very comparable.  Yes, some back to the canyon, but have off-setting street noise, so let’s call them all equal.

Considering that this short sale is the new comp, what does it do for the rest of the street? 

All but two of the 29 houses on the street paid more than $910,000 (though I was impressed that only 4 of the 29 had loans over $910,000).

If any of these homeowners are thinking of selling, how will they feel about giving their place away?  If their loan amount is low enough to permit a sale without bringing in money, will their ego be able to handle selling for less?  Are they are motivated enough?

They won’t like the thought of $910,000 at all, and will likely pack it in “until the market gets better”.  Another couple of months of this and the only sellers left will be those that HAVE TO SELL.  Expect the number of sales to dwindle further.

We’ve been following the same four realtors who specialize in selling REOs for a year now.  The industry has always had the reputation of loading up the same agents who are experienced in selling REOs, rather than spreading them around.  So it’s hard to explain why these counts are dropping like they are.  The agents were checked individually, and the counts were evenly distributed, so nobody retired to screw up the numbers.  I guess the backlog is paralyzing all involved?

Here is the history:

Jun 11 – 328 Actives/98 Pendings = 3.35

Aug 21 – 382 Actives/111 Pendings = 3.44

Sep 20 – 425 Actives/97 Pendings = 4.38

Nov 9 -  486 Actives/128 Pendings = 3.80

Nov 25 – 484 Actives/138 Pendings = 3.51

Dec 14 – 446 Actives/147 Pendings = 3.03

Jan 15 – 474 Actives/149 Pendings = 3.18

Feb 7 -   482 Actives/187 Pendings = 2.57

Mar 13 – 477 Actives/205 Pendings = 2.33

Apr 18 – 467 Actives/247 Pendings = 1.89

May 13 – 418 Actives/298 Pendings = 1.40

June 10 – 344 Actives/288 Pendings = 1.19

June 27 – 261 Actives/261 Pendings = 1.00

July 30 – 169 Actives/195 Pendings = 0.87

Wouldn’t you think that if the REOs were selling so well, (which they are) the banks would push to get more of them on the market?

I’m not sure if it’s my computer or youtube, but this video took about six hours to upload (new computer due in tomorrow). While off at work, youtube published it and calculated risk picked it up before I got back.

But here at bubbleinfo.com I include an extra snippet – the shot of what happened after I ran out of gas and stopped at the 7-11 down the street to fill up my tank:

There was a new listing on the MLS, and I wanted more information.  The brokerage doesn’t answer the phone, you can only contact them by email, and this was their response.  No wonder the banks want to out-source, they might as well have computers or off-shore folks handle their business if this is the best available:

Thank you for your inquiry, and we look forward to your offer.  We only List REO Properties, and the seller is Institutional.  This email should answer almost all of your questions.

All properties that are ‘Active’ in the MLS are available; they are vacant, please show anytime, and please submit all offers.  We will not answer questions on how many offers we have on a particular property, or what purchase price your client should submit their offer.  We do get multiple offers on most of our Listings, please submit your offer with your client’s Highest-And-Best purchase price!
 
All properties will show in the MLS as ‘Active’ until we have an accepted offer that has been executed by the seller.  It is always recommended that if you have a buyer that is interested in writing an offer, please do so, as we keep all offers on file until the property is sold.
 
We notify all parties who have written offers via email when the property goes into escrow, and each seller has different timelines for acceptance – some sellers accept offers within 48 hours, others can take 2 weeks or longer.  We apologize, as we know that you would like to get your client into a property as soon as possible, but please inform your client on the REO timelines, as most properties will take 45-60 days to close.
 
We look forward to your offer, and please be sure to see the confidential remarks section of the MLS prior to submitting an offer – each seller requires a specific offer submission package, and if the offer package is not complete, it will delay presentation of your offer.  It is our goal to get every offer accepted, so please follow the instructions in the ‘Confidential Remarks’ section of the MLS

We have a contest riding on the final sales price of the REO listing at 392 Compass in Oceanside.  It’s a 4 br/2.5 ba, 2,209 sf tract house built in 1979, and the list price was $359,900.

We had a handful of offers, and settled on a buyer with 20% down payment who offered $367,000.

While we are in the negotiating stage, this 4 br/2 ba, 1,672 sf one-story house down the street with a better view (and also an REO) went on the market, listed for $284,900.

Since then, the buyer of the bigger house does his inspection which verifies that it needs a new roof and other repairs.  Then the appraisal comes in short – only $330,000.  He says he isn’t going to pay more than appraised value, especially because of the repairs needed.

In the meantime, I find out that the smaller house got BID UP to $365,000, and is in escrow at that price.

My listing is going back on the market today, if you know anyone who wants a crack at it.

Hey Jim,

I don’t know if you saw this, http://www.imf.org/external/pubs/ft/wp/2008/wp08187.pdf, but count it as one more source predicting 2001 pricing when we reach “equilibrium.”  It basically comes to the same conclusion as the two year old National City pricing prediction report (which used a similar but different prediction model).  This one is a little more aggressive, since it assumes things in the west coast will bottom out closer to 1999 prices by way of overshooting.  Oh well: I’ll be quite happy if I can get the house I want, where I want, at 2001 pricing.

(hat tip to lgs for passing this along!)

We saw earlier this week that trustee sales/foreclosures aren’t for the faint of heart.

Here’s another example of what’s happening – heard from the tenant living in this home.

There was a 3 br/2.5 ba, 1,743 sf townhouse in the Bellarado complex that went to auction on Thursday.  The amount owed was $336,185, and the owner made no attempt to sell, he just went down with the ship.

Here are the three most-recent sales:

1,682 sf  $480,000  5/08

1,682 sf  $460,000  6/08

1,648 sf  $465,000  7/08

So this is a great candidate for a cash-buyer to grab at the trustee sale, and make a six-figure gain, potentially.  But you’d still check it out closely ahead of time, right?

The tenant never heard from the new owner until 5pm the day of the sale, after they had already given up their $337,877 (there were no other bdders). They made no attempt to inspect the property or talk to the occupants ahead of time, they just plunked down their dough and figure out the rest later.

The new owner did offer cash for keys, but balked at the tenant’s number – $4,000.  But he may regret that later if the market drops in the meantime.  Thanks to Arnie’s new law the tenant has 60 days to vacate, and selling in October will be different than selling in July or August.

With people throwing around cash like that with no investigation, how is the regular guy going to get a break?

July 25, 2008    from the SD Union-Tribune

When City Attorney Mike Aguirre staged a high-profile press conference this week to announce he was filing a lawsuit against Countrywide Financial, he failed to disclose one relevant fact: On two separate occasions, Aguirre himself defaulted on a $432,000 loan he had from Countrywide on the house he owns on Albatross Street in San Diego.

The second time he defaulted on the loan, Countrywide issued a “notice of trustee sale,” advising Aguirre that his house would be sold at public auction at the San Diego courthouse at 10 a.m. on July 21, 1997, unless he made good on his obligations.

Aguirre received his first notice of default from Countrywide on Jan. 13, 1995, according to documents filed with the San Diego County Assessor/Recorder/Clerk. He was $21,401 in arrears. His second default occurred in March 1997, when he owed $16,742 in overdue payments. In both instances, Aguirre forestalled the foreclosure proceedings initiated by Countrywide by paying the overdue loan amounts.

Asked in a phone interview why he twice defaulted on the loan, Aguirre replied, “Because I didn’t make the payments,” but declined to elaborate. He said his decision to sue Countrywide was not influenced by his personal experience with the lender. “I like Countrywide. They were very nice to me,” Aguirre said.

Which raises the question of why Aguirre accused Countrywide in his lawsuit of “engaging in a pattern of unlawful, fraudulent or unfair predatory real estate lending practices…” Meantime, he announced his intention to sue other major lenders in San Diego, including Wells Fargo Bank, Washington Mutual and Wachovia.

Thinking about buying a property at, or before, the trustee sale?  At first glance, there looks like some properties that are being given away – is that happening?

For those who have followed the foreclosure market on a website like Realty Trac, you’ll see some properties getting foreclosed that have ridiculously-small loan amounts – can you really buy a house in Olivenhain for 20 cents on the dollar?

Let’s look at 2605 Lone Jack – the trustee sale scheduled for yesterday (but postponed to next month) was over a $170,000 balance.  Aren’t those million-dollar homes on Lone Jack?  Indeed, this 3 br/3 ba, 3,655 sf house on a half-acre is currently listed for sale at $1,399,000.

However, further investigation shows that the $170,000 is the second mortgage – but most foreclosure sites don’t tell you that there is also an underlying first mortgage.  In this case, the first is $335,000, and that’s the starting balance from 1994 – hopefully it’s less now.

Do we have a possible giveaway candidate here?  Say that the first has been paid down to $250,000, and add that to the second loan the combined balance is only $420,000 – not bad if it’s a million-dollar house. 

If the $1,399,000 list price is overly optimistic (market time is 47 days) and it’s only worth $900,000 – there is still a nice profit available if you buy it at the trustee sale for the $170,000, and take over the first loan of roughly $250,000.

But wait – you have to keep looking for more.  We also found the dreaded federal tax liens, which like the first mortgage, don’t get washed out in the trustee sale – the new buyer has to pay them off too.  In this case, liens of $51,579, $33,759, $126,173, and $29,143 – that’s over $240,000 and those are just the ones that were easy to find.

You might still be interested though, the total is $420,000 + $240,000 = $660,000.

The property’s ownership was transferred into a professional trust – there might be additional liens in the individuals’ names, and more searching required.  You really need a preliminary title report to know exactly what liens are on record.

One of the burdens of buying at a trustee sale, however, is no title insurance – but with the right investigation you can get reasonably good assurance about what liens will travel with the property.  Make sure to double-check on the morning of the sale too!

Once you have checked that the equity position is sufficient enough, then it’s time for the field investigation.  Ideally it would be nice to find a vacant property, at least you don’t have to worry about evicting some upset folks.  But if there are occupants, you can try to gain access to inspect the interior – it’ll take some sweet-talking, and possibly some money, but it’s worth a shot.  You may want to review some old ‘Rockford Files’ episodes before you go.

if you find a property that you feel comfortable with, call your insurance agent to make sure you can obtain coverage immediately upon a successful trustee sale.

Check the comparable listings around the property, and search for other notices of default too – try to predict where the next few sales in the neighborhood could take the future value.  Look back in time as to what year’s price you are comfortable paying – are you getting in at 2003 pricing? 2002?  At this stage of the game you should be buying a trustee-sale property at 2002 prices or older, depending on area. 

Some of the guys who buy properties at the courthouse steps for a living are happy to buy at $50,000 off, but I think you should expect to pay at least $100,000 below today’s prices to ensure an adequate buffer for any problems that could arise – especially other low sales that may be a result of a future buyer using your sale for a comp.

Some readers have asked to examine the latest insanity from Michael Aguirre, the City Attorney for San Diego.

Like Carl Luna said, “Mad Mike is a cross between Rasputin and a paranoid Dick Nixon off his meds”, and his latest stunt is nothing more than a desperate politician pandering for votes – he faces a runoff election this fall.

Suing banks to stop foreclosures?

Jerry Brown beat him to the punch, filing a similar suit on behalf of the State of California, and the federal government passed their own version of insanity yesterday – but Mad Mike thinks his suing of the banks will force them to re-negotiate their mortgages? 

Will the banks cave?

Lenders have terminated their wholesale operations, got out of the jumbo-loan business, stopped other loan programs, and cut staffs all in an effort to be more efficient. 

Won’t they take one look at Mad Mike and cross San Diego off their list too?  That won’t help the local real estate market, Mike. 

Don’t be surprised if we see a severe tightening of underwriting standards by lenders – they don’t have to visibly delete San Diego from their map, just make it unbearble to get a loan.

Aguirre doesn’t think about the ramifications of his lawsuits – he just thinks about himself.