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.

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.

Fannie and Freddie underwriting guidelines will require that borrowers applying for a mortgage to purchase a property, and who already own another, must verify that they have at least 30% equity in the old property - or they can't get a loan.

Countrywide has already instituted the new guideline, and is also applying it towards FHA applicants as well.  This came into play on the Arthur deal, and as a result, we don't have a winner yet - but stay tuned, tomorrow is the day!  In an interesting twist, Countrywide is applying the rule towards FHA loans, and Bank of America is not - at least, not yet.

After the gloom in the media and on Wall Street about housing values, someone forgot to check the stats!

Recently there have been a lot of stories about isolated areas that have seen 20% reductions in home values. Most agree that these areas saw the highest run-ups over the last few years. What seems to be working is the fact that housing affordability is now driving a reversal. Again, not everywhere, but the stats need to be appreciated. Interest rates are still very attractive and stable these days. In fact, the Mortgage Bankers Association reported increased mortgage applications and listed stable rates as an indicator.

The National Association of Realtors has now reported four straight months of rising housing prices, but it seems no one is listening.  According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index (which will be revised on July 24) had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It has also risen every month since February of this year.

'I just don't know where Wall Street's brains are today,' said David Michonski, CEO of Coldwell Banker Hunt Kennedy in New York City. 'Everyone on the Street is wringing their hands over housing when in fact the average American has been out this spring buying homes and pushing the median price higher. This has got to go down as one of Wall Street and Main Street's biggest disconnects in history.Rising prices on expanding volume should not a crisis make on Wall Street,' says Michonski.

So why the crisis?

They say that there are bulls and bears on Wall Street but there are also pigs. Pigs try not just to profit from a crisis but create one to profit from. Today there are just so many people who have positioned themselves to profit from a crisis that they refuse to admit the reality of what is happening on Main Street. It might hurt their positions.
Is this the bottom?

No one can know for sure, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.

It is possible that it will not be Hank Paulson or Ben Bernanke who will pull this country out of a housing recession, but the good common sense of the average American whose affordability to buy a home is at a five year high and is acting on it.

The period given to submit offers has closed, and here are the three highest contenders:

1.  $202,000, all-cash

2.  $209,000 net, FHA ($219,000 with a $10,000 credit for costs) B of A lender

3.  $213,000 net, FHA ($220,000 with a $7,000 credit for costs) mortgage bkr

Tomorrow morning the bank will decide which deal to take.

To assist with the decision-making, I called the B of A lender who I've known for years, and discussed the appraisal concerns.  The house is in disrepair, and on a FHA deal the appraiser has the ability to require repairs he deems necessary, which then fall on the seller to complete.  In our purchase contracts it has a blank to fill in the limit on the amount of repairs to the seller, but neither agent put in an amount.

If you are the asset manager, do you take a chance on a higher sales price, even though the FHA appraisal could set you back?  Or do you take the sure bet, the cash deal that doesn't need an appraisal?  We don't fear the appraisal not coming in at the right value, the last two sales were $234,000 and $250,000 in the last sixty days for the same floor plan.  It is the possible-repair issue that has the potential to turn into a blank check from the seller.

Here are the contest entrants - price, name, and # of offers:

$149,000 - No_Such_Reality, 1

$150,000 - JE, 1

$174,000 - doughboy, 1

$180,000 - Simone, 7

$184,000 - ericabiz, multiple

$184,000 - mybleachhouse, 7

$189,000 - Merc Mont, 5

$190,000 - Chuck Ponzi, 3

$190,100 - First Time Renter, 11

$191,500 - money market, 5

$193,000 - SMC, 5

$195,000 - GLG, 10

$197,500 - Don, 7

$199,900 - CVman, 5

$200,750 - Al in IC, 7

$206,500 - FreedomCM, 7

$210,000 - Mojo, 7

$210,000 - Mr. T, 14

$210,000 - loharp, 20

$212,000 - Neil Diamond, 27

$215,000 - Steph in RB, 5

$219,500 - CVBidder, 10

$224,500 - Rob Dawg, 5

$237,000 - Stephen Watts, 14

$240,000 - Coconuts, 11

It looks like the winner will be either Al in IC, or Neil Diamond, unless B of A gets favored as the company lender - then it'll be Mojo! 

The all-cash offer had gone up to $208,000, but the buyer and agent went back to the property this morning and found that the neighbor across the street was sitting in his car, on his lawn, blaring the music at full volume.  They lowered their price back to $202,000 - sorry FreedomCM.

This is a bank decision - what would a regular home-seller do?  If this were a typical seller, and not a bank, most would go for the higher offer, or want to counter-offer the cash deal at $209,000.  I'm not kidding - most sellers would pass on the cash deal, or at least try to get them up higher.

Town/Amount Owed/Trustee Sale date

Carlsbad

3553 Calle Palmito  $1,071,433  7/24/08

3570 Calle Palmito  $1,756,702  7/31/08

6493 Wayfinders   $998,893  8/6/08

7365 Calle Conifera  $1,102,102  8/7/08

6562 Petunia   $1,029,411  8/11/08

6443 Merlin  $902,675  8/15/08

1005 Canvasback  $1,126,742  8/18/08

Carmel Valley (92130)

4442 Shorepointe  $997,230  7/23/08

Del Mar

13443 Caminito Carmel  $1,070,985  8/7/08

1157 Highland  $1,264,195  8/11/08

Encinitas

574 Park  $1,046,317  7/23/08

La Jolla

254 Playa del Norte  $2,208,841  7/23/08

6616 Tyrian  $1,261,558  7/28/08

2497 Darlington Row  $1,005,793  7/31/08

5491 Bahia  $1,626,079  8/1/08

5712 Rutgers  $1,788,665  8/11/08

Mission/Pacific Beach

3333 Ocean Front Walk #4  $1,074,933  7/25/08

1040 Van Nuys  $1,152,701  8/1/08

2056 Emerald  $989,997  8/14/08

Rancho Santa Fe

7965 Camino de Arriba  $2,208,841  7/24/08

6347 Las Colinas  $1,761,385  7/28/08

4538  Via Gaviota  $2,421,936  7/28/08

16625 Via de la Valle  $1,684,797  7/28/08

4S/Santaluz (92127)

1007 Winecrest  $1,400,858  7/25/08

16834 Stagecoach Pass  $1,233,165  7/28/08

7436 Rancho Cabrillo  $1,063,825  7/30/08

14629 Arroyo Hondo  $1,463,731  8/5/08

17075 San Antonio Rose  $1,317,626  8/21/08

7419 Rancho Cabrillo  $1,089,316  8/25/08

17165  San Antonio Rose  $1,128,063  9/3/08

The lenders and trustees are still doing a miserable job of informing the public of what the minimum bids will be on these - none have an opening bid published at this time, and some of the sale dates are this week!  Possible bidders are reluctant to get a cashier's check and go down to the courthouse without knowing what to expect, price-wise - and here's an example of what can happen:

7071 Cordgrass, Carlsbad

4 br/4.5 ba, 3,199 sf

$300,000 in upgrades

$1,541,249 owed

$880,000 opening bid on 7/16/08

no bidders, back to beneficiary

If people knew that they could buy a newer 3,200sf house with a load of upgrades and nice ocean view for $880,000, I'm pretty sure they'd take advantage of it.  But nobody knew - or they didn't have all-cash, another problem with properties sold at the courthouse steps.  I'll cautiously mention that I have arranged private financing for those who have their eye on a defaulting property, but are a little short of the total needed to buy one at the courthouse steps.  Contact me for more details.

On a side note, please endure the new formatting inflicted upon us by my blog host.  Much like Sandicor, they have rolled out a new package and are trying to fix it along the way.  Crazy changes too - for example, they took away the ability to all-justify a paragraph.  You can justify right, left, or center, but not all-justify like it used to.  Adding images got messed up too.

The builders give incentives to buyers to use the in-house guy, and it's usually enough money that it's crazy to NOT use them, as long as the rates and programs are competitive.

Take Pardee Home Loans, for example.  They are a joint-venture with Wells Fargo, and though Wells has had their share of write-offs lately, they weren't from neg-am loans - they've never done one.

So those of you who might consider buying in a Pardee tract around Carmel Valley, and are waiting for the resetting neg-ams to kick in, you might be disappointed.  Work with a five-year and seven-year timetable instead, Wells Fargo is more of 5 and 7-year-fixed lender, for those borrowers who may have taken a loan other than a 30-year fixed. 

SD County Closed Sales, Attached and Detached

Month	2007	2008	% chg	07 TDs	08 TDs	% chg
May	2,464	2,569	+4%	738	1,762	+138%
June	2,613	2,508	-4%	614	1,981	+223%

In hopes of providing some pricing data, I tried the Sandicor statistics function, but it came up with gobbly-gook. We're two months into the Tempo minus-five debacle, and they still can't get a simple statistical formula together, and furthermore, they prevent us from downloading big subsets. Pretty soon, people are going to think it's a big conspiracy or something.

Ray Ewing, president of Sandicor, has been telling others about me. He singled me out by name as a guy who, if I would have been practicing on Tempo 5 before it was released, I wouldn't have had a problem. Ray, if you can't get your basic programming down, what good is it for me to practice, and go to more trainings?

]]>http://www.bubbleinfo.com/journal/rss-comments-entry-2003997.xmlJim the RealtorSun, 20 Jul 2008 14:18:11 +0000http://www.bubbleinfo.com/journal/2008/7/20/some-relief-bill.html38296:325297:2001640 

FORECLOSURE RELIEF BILL BECOMES LAW

This week, the State Legislature enacted foreclosure reform law to address the adverse effects of high foreclosure rates in California. The new law requires lenders to contact homeowners to explore options for avoiding foreclosure at least 30 days before filing a notice of default. It also requires owners acquiring property through foreclosure to maintain the exterior of vacant residential properties. The new law also extends from 30 to 60 days the time for residential tenants to move out of properties that have been foreclosed upon, unless other laws apply. These requirements will remain in effect until January 1, 2013.

Highlights of the new law are as follows:

• Contact Between Lender and Borrower: Effective on or about September 8, 2008, a lender, trustee, or authorized agent may not file a notice of default until 30 days after contacting a borrower to assess the borrower's financial situation and explore options for avoiding foreclosure. A lender must generally contact the borrower in person or by telephone, or satisfy due diligence requirements for contacting a borrower. During the initial contact, the lender must inform the borrower of the right to request a meeting with the lender within 14 days. The lender must also give the borrower the toll-free number for finding a HUD-certified housing counseling agency. A subsequent notice of default must include the lender's declaration that it has contacted the borrower, tried with due diligence to contact the borrower, or the borrower has surrendered the property. A lender who had already filed a notice of default before the enactment of this law must include a similar declaration in the notice of sale. This requirement to contact borrowers applies to loans secured by owner-occupied residences made from 2003 to 2007. Certain exemptions apply if the borrower has filed for bankruptcy, surrendered the property, or contracted with a person or entity whose primary business is advising people, who have decided to leave their homes, on how to extend the foreclosure process and avoid their contractual obligations.
  
  
• Maintenance of Vacant Properties: Effective July 8, 2008, anyone who acquires property through foreclosure must maintain the exterior of vacant residential property. Violations of this law include permitting excessive foliage growth that diminishes the value of surrounding properties, failing to take action against trespassers or squatters, failing to take action to prevent mosquitoes from breeding in standing water, or other public nuisances. This law authorizes a governmental entity to impose a civil fine up to $1,000 per day for any violation, as long as the owner has been given notice and an opportunity to remedy the violation. A violator must be given at least 14 days to begin, and 30 days to complete, such remediation before a fine can be assessed.
  
  
• 60-Day Notice to Terminate Tenants: Effective July 8, 2008, a tenant or subtenant in possession of a rental housing unit that has been sold through foreclosure is generally entitled to a 60-day written notice to quit, not just 30 days. However, a borrower who remains on the property after foreclosure may be served a three-day notice to terminate. This law does not affect, among other things, rent-controlled properties with just-cause evictions. Effective on or about September 8, 2008, the lender, trustee, or authorized agent posting a notice of sale must also post and mail a specified notice of a tenant's right to a 60-day eviction notice from the new owner, unless other laws apply. This requirement to notify tenants of their rights applies to loans secured by residential real property where the borrower has a different billing address than the property address.

Still waiting to see or hear about the first former owner to receive a three-day notice - guessing that the lenders/eviction attoreys either can't process them that fast, or they don't want to risk bad publicity.

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