For those who were on vacation last week and are interested in trustee sales, we did an informative trilogy with Adam Rappoport. Click here to start at the beginning, and scroll up from there – and read the comments, Adam was very candid in responding numerous times!
At first glance it would seem crazy to take the additional risks when buying at the court house steps, and once you consider Adam’s thoughts, they might convince you further!
But here are the reasons you should consider buying at the trustee sales:
1. Less competition.
Adam and the other flippers are competing intensely over the cheaper homes they can turn and burn. For those who want to buy a house over $600,000, the competition thins out quickly – those properties are more risky for flippers, and most buyers don’t have the cash or guts to purchase off the ‘steps.
2. More selection.
On the MLS there are only 1,311 active detached listings of detached homes between Carlsbad and La Jolla. On foreclosureradar.com there are 3,951 properties in the same area (567 SFRs on the auction list, and another 3,384 on the NOD list).
3. No listing-agent involvement.
The listing agents are running interference for the sellers. The pricing is all over the map, they’re reluctant to provide any real help, and they leave the bidding open for days or weeks. As a result, you don’t know anything about the competition, if any. At the trustee sale, if there is competition, you’re looking them in the eye, and can walk away as a homeowner.
4. All homebuying is risky.
The risk seems more alarming when you hear that you aren’t guaranteed a tour or inspection of the house, and there could be undiscovered liens. A regular transaction has safeguards, but all houses are sold “as-is” without warranty – the only difference is that you’d have more people to sue if something went wrong on a regular sale.
As you’ve seen here I’ve been working on my own trustee-sale program for clients, where I help find the right properties, navigate the inspection/lien concerns, and help arrange for bridge financing.
I am being very deliberate in putting this together, and it’s coming along nicely. We are going to attempt 1-2 in December, and use video to help document the process so you can see how it works.
If you are in the $600,000+ price range and have at least 30% down payment (with a maximum loan amount of $697,500), then contact me for more details if you’d like to consider buying a house at the trustee sales!
If you think it sounds too risky, no problem, it is.
I don’t mind battling it out with you for those regular sales, and I think that’ll still be my primary service provided. But the activity doesn’t appear to be waning for the “quality” properties. Here’s a short-sale listing that looks fairly plain-jane in the photos:
Here is a collection of typical tract houses around Carlsbad that help illustrate the market in motion.
I mis-spoke, the second house sold for $1,019,000, not $1,190,000.
The house that just got foreclosed on Corvidae had an approved short sale, and was ready to close escrow, and the sellers decided to blow the deal because they didn’t want to move….yet.
WASHINGTON, DC — Fannie Mae (FNM/NYSE) today announced that the company has launched several initiatives supporting neighborhood stabilization and promoting home purchases by owner occupants and buyers qualifying for public entity housing programs.
To provide owner occupants and public entities an advantage in purchasing Fannie Mae-owned foreclosed properties, the company has created the First Look initiative.
With First Look, only offers from owner occupants and buyers using public funds are considered during the first 15 days a property is on the market.
Offers from investors will be considered only after the first 15 days have passed.
“First Look provides owner occupants and public entities that are committed to the community an early opportunity to purchase one of Fannie Mae’s Real Estate Owned properties,” said Terry Edwards, Executive Vice President for Credit Portfolio Management at Fannie Mae. “As a result, we believe First Look will help us make progress toward stabilizing neighborhoods and building stronger communities in this difficult market.”
In addition to First Look, buyers using Neighborhood Stabilization Program (NSP) funds from the U.S. Department of Housing and Urban Development’s (HUD) Community Development Block Grant (CDBG) program, HOME Investment Partnerships Program funds from HUD, local housing trust funds, or charitable foundation funds may also qualify for the following benefits:
Deposit Waivers – Fannie Mae will waive the earnest money/deposit requirement for public entities using public funds to purchase a Fannie Mae-owned property. Individual homebuyers who have qualified for public funds and want to purchase a Fannie Mae-owned property do not have to meet the usual earnest money/deposit requirement. Deposits for these buyers can be as low as $500.
Reserved Contract Period – Upon receipt of an acceptable offer, buyers have the ability to renegotiate their offer after obtaining an NSP-required appraisal.
Extra Time for Closing – Buyers receive up to 45 days to close — 15 days more than is usually permitted for purchases of Fannie Mae-owned properties.
Fannie Mae’s First Look initiative was piloted in August and is rolling out across the country. Initial response to the initiative has been positive.
A realtor had listed this house in June, noting that it was a short-sale flip in progress. They had arranged (conspired) with the seller to submit to the existing lender a short sale package at a lower price, and then listed it on the MLS for $598,321 before the short sale was approved – intending to pocket the difference.
Unfortunately, for low-income families, even deeply discounted foreclosures are out of reach because of competition from more prosperous first-time buyers and investors. “If it wasn’t for this program, they wouldn’t qualify for something like this,” Quezada said. “Someone like them wouldn’t stand a chance to an all-cash offer.”
The home, which was bought out of foreclosure by Habitat, will cost the couple $208,000. In order to afford the property, Habitat arranged for the couple to receive a $65,000 silent loan through the city of Lynwood. (A silent loan, repaid only when the property is sold or refinanced, is often offered by cities and other local governments to facilitate affordable housing.) They will get a traditional loan for the rest.
The couple put in 125 hours working construction sites and other jobs for Habitat to qualify to buy the home.
Habitat for Humanity, Greater Los Angeles, aims to buy and renovate 20 properties during the fiscal year ending June 30. Rank said she sees the new availability of bank-owned properties as a way to preserve the group’s mission despite sagging donations from traditional donors, including banks, builders and the entertainment industry.
“We have a heavy investment in these communities, and we don’t want to see the families fall down again because of a high number of foreclosed homes sitting boarded up and vacant in their neighborhoods,” Rank said. “Right now it is really hard for low-income buyers to get a loan on properties, so Habitat is the builder and the lender, and we lend at zero interest.”
Adam has been gracious in sharing his time and experience about buying at the court house steps, and flipping properties for profit, the least we can do is keep an eye out for him.
It’ll be easy to dismiss this one because of location, but this is where you’ll see the first signs of flips turning to flops – with the outliers:
The final installment of our three-part series with Adam Rappoport, talking about buying properties for cash at the trustee sales on the court house steps:
Here’s a guy who had poured his heart out for years on the blogs without obligation, just trying to help people. He deserves to be recognized as a team player first, then as a flipper showing the way:
Most of you know Adam as ‘SD Realtor’ from Piggington’s blog where he has been a valuable contributor for years.
He has been flipping properties this year, ones that he purchased at the court house steps. He was nice enough to share some of his thoughts and what he’s learned along the way.
We were talking about the sampling of 100 REOs in SD County that sold since 9/1/09.
Only 5 of those 100 sold by BofA/WFB ended up closing for more than $600,000, and ONLY ONE was in our Carlsbad-to-La Jolla stretch.
It seems like all we talk about here are trustee sales, foreclosures, REOs, etc. If you are waiting to buy one, let’s keep track of how many and the relative activity.
Let’s quantify how many properties are in trouble currently, and in particular, how many valued at $600,000 or higher in the Carlsbad-to-La Jolla region.
You can sort by ‘property value’ in foreclosureradar, and it is fairly accurate.
Foreclosureradar.com Carlsbad-to-La Jolla Properties Valued Over $600,000:
Town or Area
Zip Code
NODs
NOTs
REOs
Total
Oct MLS sales-all
Oct $/sf
Cardiff
92007
8
9
1
18
5
$577/sf
Carlsbad
08-11
108
135
28
271
53
$288
Del Mar
92014
26
12
7
45
17
$872
Encinitas
92024
72
58
7
137
25
$391
La Jolla
92037
57
69
10
136
43
$610
RSF
67+91
19
17
11
47
12
$398
Solana Bch
92075
20
18
12
50
9
$570
Carmel Vly
92130
72
43
9
124
28
$328
Totals
CBD-LJ
382
361
85
828
192
$457
There has to be several in each of the first two categories that still think they are loan-mod candidates, or in line for short-sale approval. We’ll see if they can pull it off, and why I want to track these stats over the next year or two.
The “Oct MLS sales-all” above includes attached & detached, REO and non-REO over $600,000.
How about the MLS REOs vs. Non-REOs?
Status
REO Listings, $/sf
Non-REO Listings, $/sf
ACT
19, $368/sf
1,494, $699/sf
CONT
5, $288
91, $358
PEND
15, $369
308, $461
SOLD-Oct
14, $286
178, $470
Use this data at your leisure – some people may find the tsunami moving so slowly there’s no use waiting any more (there are 828 in the pipe and only 14 closed on the MLS last month?).
Others may find the foreclosure pipeline a bit daunting, and wait some more. Consider the 743 NODs and NOTs and how many will loan mod or short-sale successfully vs. how many won’t.
I’m guessing 50/50, because I think there are plenty of loan-mod candidates that will cave when it comes down to it, and take a slight change in terms to stay in the house – for now.
