Some readers had concerns about the La Costa lowball short sale mentioned on Friday.
https://www.bubbleinfo.com/2009/07/buyer-representation/
My intention was to point out the future of the real estate business – it’s going to get tougher on agents who can’t keep up with the hustlers.
There are plenty of questions about the ethics of this type of deal, where the agent approaches an over-encumbered homeowner and puts together a sale with their waiting buyer, without exposing the property to the open market. They then throw it on the MLS for all to see a new listing they can’t buy, because the deal is already done.
But let’s examine this case further, shall we?
Here’s is the property in question:
3302 Azahar Place, Carlsbad
4 br/3 ba 2,536 sf
YB: 1975
Lot size = 11,100sf
SP: $580,000 1/04
LP: $450,000 7/09 Contingent
The photo above is in the current listing, but the agent got it from the old 2004 listing. Here’s how the house looked early this morning (click for close-up):
The owners have received their NOD, so they won’t be there much longer anyway. What can the lender, Wells Fargo Bank, look forward to if they were to foreclose on their $650,000 worth of refinance loans, instead of allowing the short sale to go through?
The agent involved didn’t include any additional photos, but mentioned that the house needed TLC, which is code for full makeover required. These are 1970’s tract houses that’ll need $100,000 just to get started, so I’m not sure that WFB would get much more than $450,000 on the open market, between the lousy condition and other action nearby.
Here’s what they’ll see within a couple of blocks:
3004 Azahar St., Carlsbad
4 br/2.5 ba 2,636 sf
YB: 1979
Lot size = 10,890sf
SP: $315,000 1/98
LP: $459,900 4/09 Contingent
This is the agent who started the run in the neighborhood, though this house might be the worst floor plan ever conceived. In April we didn’t have the ‘contingent’ status yet, so we don’t know exactly when she contracted with the buyer, but with comps in the $600,000s and higher nearby, it was probably another “smoke-job”. But it probably isn’t worth any more than list anyway.
If you look closely you’ll see a ‘door ornament’ on this one, but it isn’t a foreclosure notice – but similar. Bank of America has been aggressive in sending crews in person to monitor the condition of the defaulting properties, and they are maintaining the vacants. More on this later.
3020 Levante St., Carlsbad
4 br/3 ba 2,653 sf
YB: 1979
Lot size = 12,632 sf
SP: ?? (in escrow)
LP: $575,000 Pending
This is the other version of the ‘smoke-job’. The buyer (soon-to-be-seller) of this home has already processed the package with the seller’s lender, and is wrapping up a short sale. Feeling confident being able to close that deal, he has now put it on the open market to flip it to a second buyer. This is what’s known as a “double escrow”, which is illegal if not disclosed to all parties.
But look at what could go wrong – the current homeowner is facing his trustee sale on Wednesday, and the amount owed is $735,547. If the trustee sale doesn’t get postponed again, and both deals fall apart, and the bank takes it back to try their own resale, probably in the $400,000s. Or if the trustee sale is delayed again to allow for the short sale to close, at what price is it worth it for the flipper to buy? It must be around $450,000? Which, based on these other two deals, would be seen as retail if the second buyer’s appraiser gets picky. The flipper could get stuck with this one over appraisal issues on the flip.
All three of these houses are old and hammered – a minimum of $100,000 in improvements are needed to bring them into the 21st century. If you are bummed about missing these “deals”, think again.
These three “low” sales are expediting the price declines.
Here’s why they are better than REOs:
1. No open market exposure probably means lower-than-market pricing, for now.
2. No repairs means low pricing.
3. Long, drawn-out escrow probably means lower pricing to get buyers to stick around.
These short sales WILL BE THE COMPS that will help determine the future pricing – especially if the foreclosure tsunami runs through here. Long-time homeowners who are thinking of selling might ignore these, but the foreclosing banks won’t – they’ll price all the REOs in the nighborhood over the next six months based on these.
The goal for buyers is to LET THESE HAPPEN, and then scoop the future listings that are in better shape, but priced about the same.
Back to BAC monitoring the homes in default, but not yet foreclosed. I spoke to one of the field techs, who is one of the fifteen independent contractors state-wide that handle the lock-changing/cleanouts/lawn-trimming tasks for BAC. He said that they are cutting the list of 15 contractors down to three for the entire state, and those three will be responsible for sub-contracting.
It could be another indicator of how B of A will be handling the Countrywide REOs in the near future: to send them to a third-party REO outsourcer who’ll then contract with individual realtors to sell them (which has been long-rumored on the street), a method which has proven to be less-productive, and very frustrating for all parties.
Great summary, Jim. The thing I like most about your blog is when you do “front-line” reporting of what’s going on in the market. It adds a perspective that you can’t always get just by looking at statistics.
Very interesting jim.Seems like the crooks in the real estate business just find another way to screw people and banks over.They are always a couple steps ahead of regulators.
Thanks Jim, this write up is a perfect explanation of the current San Diego Real Estate marketplace.
This state has really made a mess of the system. California used to be so revered, so progressive now it’s just plain embarrassing. This is a state with little ethics and it shows.
The question is: Will the banks take IOU checks from the state of California? I was thinking about looking for houses at the end of 2009, but now it’s looking more like 2010. This is going to be one long cluster-f.
Re: farming out blocks of REO’s to brokerage firms – I read that CA Sen. Diana Feinstein’s husband (hedge fund/investment guru) bought a huge block of additional CB stock just before it was announced that the FDIC had chosen that firm to exclusively handle the listings of major blocks of REO properties. Supposedly there was a “bidding” process prior to selection of CB. I don’t know what other brokerage firm(s)(if any) lost the bid. The article said that CB is getting 8% commission plus an additional amount for “handling fees” upon closing of each sale.
Excellent post Jim. Your insight is much appreciated. You give me hope that eventually my patience will pay off. Odds are now at 60% I’ll be moving to Carlsbad, or somewhere between there and La Jolla, before the end of the year, and it seems that things are finally starting to line up.
The line about the IOU checks cracked me up. California may have its own currency soon.
One way or another, a market will work itself out.
BofA has already stated that if California doesn’t have a budget in place by the end of the week, they will stop taking California Bucks as Dollars. When asked if they would change that date, they stated the date was firm. Their concern is that if California doesn’t have the budget solved soon, that they’ll get so far behind the IOUs won’t be paid.
BofA
One of the other interesting quotes on the page is this
Bank of America is accepting state-registered warrants for deposit only. Registered warrants cannot be redeemed for immediate cash and cannot be used as direct payment for mortgages, loans and credit cards.
Thank you very much for the work you’ve done on this, Jim. It’s very much appreciated.
Yes, that 3004 Azahar has a very weird layout, and has been on and off the market for years.
You’re right about letting these deals go through — from the perspective of a buyer. My problem with these deals is from the perspective of a taxpayer and consumer advocate. I despise fraud and funky games. When the taxpayer is potentially on the hook for a financial firm’s losses, I believe the market should be as transparent and fair as possible…even if we stand to lose personally as buyers.
Still, this recession is not over by any means, and there really is no reason to jump the gun here. It’s just frustrating to see all the fraud and shenanigans going on after having to tolerate them for so long on the upswing.
Tough talk from a bank that owes the Fed $25 Billion in IOUs and is on the brink of collapse. Can’t blame them though.
Thanks again Jim!
BTW for anybody that receives a “California Buck” IOU and wants to redeem it for cash ASAP. Don Laughlins Riverside casino is excepting them for 100% of the face value. I don’t know how long they’ll be able to do this. But, you might as well be the first in line to take advantage.
I’ve been a Realtor for many years. At times, I’ve questioned your reasoning (and motives). Now, I may have to admit you’re one of the best in the profession. Thanks Jim for helping the public understand what’s going on. I wish you were the real estate police going after the bad guys. Go get’em Jimmy.
I’m embarrassed to admit this, but I submitted an offer on 3004 Azahar. It has the worst layout I’ve ever seen. We saw a home up the street had sold for mid 600’s so we offered a little over 460k, figuring that left us money to change the layout and remodel. The agent accepted offers for a week then picked the “best” one and we were second back-up. So the “winning” offer was either for much more than 460k, or it was an inside deal.
So if these two short sales go through, do you think it will bring homes in good condition down to 500k?
Janell,
So if these two short sales go through, do you think it will bring homes in good condition down to 500k?
Unless the “good” houses have gold bars in the walls they will be valued at whatever the most recent “comparable” or “comp” has sold for assuming all the physical statistics are the same. Sellers will argue with you that their house is worth more because they painted the walls pink back in 1988 and therefor you should pay 100k more. But, don’t listen to them it’s all a matter of supply and demand. If another buyer wants to buy the house you’re looking at and is willing to pay 100k extra for pink paint from 1988 there’s not much you can do.
Okay, now I’m curious about exactly what is wrong with the floor plan to 3004 Azahar. I’d love to see a video from Jim of that house, although it’s probably too late for him to do so.
These are the weakest canaries in the coal mine.
They are awful lucky to get these prices and expect the new ‘owners’ will be upside down by Christmas, with one of these back on the market within 3 yeas as a partially-rehab’ed REO.
It’s such a messy business getting back to right-sizing expectations.
Jim,
I read on CR last night from “nevadabuilder” that BofA is no longer doing any short sales in NV. (I’m guessing too much fraud).
Any similar news out of SD?
“Don Laughlins Riverside casino is excepting them for 100% of the face value.”
Well that is great.Go cash your iou at the casino and piss it away on rigged slot machines.Got to love those casinos, they really care about you.
That is very interesting that bofa isn’t doing any more short sales in nv.Guess they figued out they were getting ripped off by to many crooked realtors.
RE: the layout of 3004 Azahar
As soon as you step inside you hit a wall. You can go up stairs to the right, or around the wall to go downstairs. Upstairs has a nice view with a living room, kitchen and master. Downstairs felt like a basement. 2 or 3 bedrooms, large open room, bathroom that needed to be gutted and a rotting laundry area. All rooms are original 70’s decor.
So probably not a very good deal when you factor in the work needed.
RE: the layout of 3004 Azahar
The realtor’s description calls it:
“Unique, bi level, custom built home with panoramic views.”
So, basically, a standard 1970’s split entry bi level home, except the bedrooms are downstairs (except the master) and everything else is upstairs, backwards of what is typical? Split level houses are stupid to begin with-too many stairs, horrible entrance. Of course, a traditional two story house is almost as bad, stair-wise.
“So, basically, a standard 1970’s split entry bi level home, except the bedrooms are downstairs (except the master) and everything else is upstairs”
A classic!
“Unique, bi level, custom built home with panoramic views.”
Gotta love the realtor spin!
This state has really made a mess of the system. California used to be so revered, so progressive now it’s just plain embarrassing. This is a state with little ethics and it shows.
Bingo Jim. That’s what I have been saying for past 10 years. The reason is simple most even general population has lost any ethics or moral values.
Everyone is out to screw you first chance they get.
Jim–What a great post and how helpful your information is. The lies, fraud and tricks in the real estate business are really bad. At least you help us by pointing out some of the less obvious ones. Thanks a lot.
Jim, off a bit of a tangent, but you’re saying these houses need $100K to drag them into the 21st century. Why? I am asking sincerely. I mean, the floor plan is probably old-style with formal dining rooms, etc, and you might want more bathrooms now, but that’s not a real reason to spend a ton of money. The ten-year old house I’m renting is presumably pretty close to 21st century, and I’m just not sure what it has that’s noticeably better. More breakers? GFCIs? Pipes made out of something sturdier? Given the various bits and pieces that fall off the house with alarming frequency (closet doors, drawers, slider tracks, sprinkler systems, water faucets, tiles, and so forth) and given how a 1951 house I used to have just didn’t have that level of structural leprosy, I’d have to say that older is a lot sturdier.
JtR, thanks for exposing what is really going on with short sales. That is why I don’t do them. RE agents, short-sellers and their “preferred” buyers, and politicians appear to be contributors to the newest crime wave of conspiracy. I would expect many lenders to follow suit in refusals to consider short sales in California as well as Nevada. An interesting investigation/arrest several months ago took place right in your neck of the woods – Rancho Santa Fe. Seller of mega-buck home conspired to short sell to friend and got caught. The details were on MortgageFraudBlog.Com. The banks should foreclose and get it over with.
Jes – as a former owner of a 1910 built house, and current owner of a 1965 house, I agree with you… Older was sturdier.
But style wise – preferences have changed… and I think that’s what JtR was referring to… Houses are considered antiquated if they don’t have the granite countertops and travertine shower surrounds. (Cosmetic fixes.) And most homes that are 20 years old or more don’t fit the “great room” giant family/kitchen combo that is preferred now, with the tiny “show” formal living and dining rooms.
Styles of living have changed… and will change again. If you just address the cosmetic fixes (flooring/countertops/update the bathrooms/paint) you can do it for a lot less than $100k.