They have to do something, right?
As servicers receive more and more REOs, they have to be discussing their options:
1. Use the trustee sales as a primary liquidation channel to off-load more properties quickly, cheaply, and without recourse.
2. List the habitable properties with realtors, and sell for retail.
3. Sell the fixers at auctions.
4. Bulk Sales.
They have to be encouraged about the tax-credit extension, and dozens of bidders at trustee sales around the country. They have to be loading up the truck, and thinking they should take advantage over the next six months.
I think buyers will flock to any well-priced new listing, but take particular interest in stealing one from the bank. You can probably expect that options 2 & 3 above will be very active channels of re-distribution.
But if they get to the point where they really want to off some property, doing it at the court house steps is very handy.
Let’s be there to take advantage:
I won’t do that on camera.
Awwwwww.
BTW, regarding that first house… perhaps someone waxed those locks because they want to limit competition? Really busy street, that.
How are you going to handle the 3 month seasoning? Just wait it out ? Or do you have another strategy in mind?
I really don’t understand California… these houses are so big.. really big in every way. Square feet, price and just the way they look!
Out where I live in the sticks… people are happy to live in 1200sq/ft homes that sell for $150. Who needs all of that room? Just seems a bit crazy but whatever.. million bucks for a house? I could do a lot of better things with that kind of cash.
I agree Franklin. Ive been looking for a small 3Bedroom home 1500sqft or under and all I find is condos with “Golf Course views” and $500 monthly HOA’s, crazy people.
JTR your brakes were squeaking because of all the nice stops you take at the stop signs. 😛
Franklin,
We’d all prefer to pay 150k for a house as well. But what do you do when nothing in a reasonable neighborhood is selling for less than 400k? Then throw in the easy money which allows the idiots to put down 5k on a 500k+ purchase enableing them to buy much more than they’ll ever be able to afford.
Then you have have to listen to people that shouldn’t be able to buy a 150k house tell you the 500k+ house they just purchased was a great investment.
And as one final kick in the nuts the people that purchased at 500k stop paying their mortgage and the bank puts off foreclosing allowing the idiot to live free for over a year.
While all that’s going on you feel like a chump for being responsible and playing by the rules never a day late with your rent check.
That’s what it’s like to live in SD right now.
Anyone paying $1 mil for these houses thinking the bottom is in is a fool. Relative to incomes, unemployment and the economy, So Cal RE prices are still WAY TOO expensive.
“You just ran a red light, buddy.Right there! A stop sign! I NEVER do that! (JtR)
Mahalo for the early-morning chuckles, Jim.
“JTR your brakes were squeaking because of all the nice stops you take at the stop signs.” (AD)
Yes, JtR is now the model citizen–he stops at ALL red octagon signs. Right, Jim? Right?
jim do you never show us tiny little 1200 sq ft cape-like houses because that isn’t your market segment, or because they just don’t exist in san diego?
“While all that’s going on you feel like a chump for being responsible and playing by the rules never a day late with your rent check.That’s what it’s like to live in SD right now. (shadash)
It’s NOT just San Diego. Count me in as one more “responsible idiot”.
Recently, the property management guy (working for the landlords) asked me: “You’re not thinking of moving out, are you?” I didn’t feel one ounce of guilt for not divulging the fact I’ve been looking to buy a home, and may well move in December or January. (Not the easiest time to re-rent, I’d think.)
*Calculator Whirling* I just figured out I’ve paid out over $75,000 in rent to these “landlords who reside on another planet”. You’d think they’d be grateful for a responsible renter like me who pays her rent every month on time.
But oh no, I realized who the landlord truly was the first week of 1-year lease when he declared: “You won’t be getting your deposit back.” (I now rent month-to-month.)
One of Maya Angelou’s quote fits perfectly here: “When people show you who they are the FIRST time, believe them.”
I’m just relieved that I have an awesome relationship with the property management guy, and my deposit and outrageous pet deposit are with that company and not in the bank account of the landlords.
*End of renter rant* We now return to our regularly-scheduled bubbleinfo with host, Jim the Realtor, who, thankfully, is one of the good guys in real estate land…
When is the avg worker in america going to be able to afford a house? S. CA real estate is like a casino for god sake.Prices start to get affordable and then we have all the funny money from FHA try to inflate the market agian.
After all the fraud with the tax credit they still extend it, unbelievable.they have to add it on to unemployment benefits, give me a break here.
If you can get a hard money source for these TS’s that would be a great coup if they don’t require leveraging another property in your portfolio to backstop the loan. Is that the case?
Jim,
I think your trustee sale package concept is very smart, because the legwork and lining up cash are incredibly high barriers to entry for most folks. I predict you will kill it if you get that model up and running.
Most of the trustee sales happen below the $500k mark currently, because that’s the only way it makes sense from an ROI standpoint, if you’re either looking for a positive cash flow rental or a profitable flip, so alot of opportunity exists in the $500k-$1m trustee sales.
Quick note about the post. You said banks had four options:
1. Use the trustee sales as a primary liquidation channel to off-load more properties quickly, cheaply, and without recourse.
2. List the habitable properties with realtors, and sell for retail.
3. Sell the fixers at auctions.
4. Bulk Sales.
But option no. 2 requires the property to go to trustee sale first and have no bids, option no. 3 is the same as option no. 1 (unless I misunderstood what you were trying to say) and option no. 4 means selling whole portfolios of loans, which could happen but is complicated by the pooling of those loans into securitized trusts, so unless the bank holds all the securities (pass though certificates), they may not be able to sell the pool of loans, and even if they do, it’s just changing who owns the loans – the new owner has to go through the foreclosure process on the nonperforming ones. So I think it just adds up to more delay.
But option no. 2 requires the property to go to trustee sale first and have no bids
The bank has the option of not setting the minimum bid at the loan amount so it has a chance of being bought at the trustee sale. Nobody is going to buy a house at trustee with a vintage 2005 loan value on it. The bank just needs to set the minimum low and let it be bought at auction, if they set the minimum at year 2005 prices it will go back to bank and sold another way.
Shadash, your bitter is showing… 🙂
I think the theory in urban areas of SoCal is that if you can’t afford 3,000 sq ft, you should buy a condo. For the most part, new home builders have figured out that big houses on small plots of land is the best return on their investment (that is, two 3,000 sq ft houses on .1 acre each makes the builder four times as much money as one 1,200 sq ft house on .2 acres). So that’s all they build. Now, there are older houses that small, and some newer ones on the fringes (although a lot of newer houses in the sticks are also 3,000 sq ft, just on larger lots). But that’s about it.
@16 is right. As a builder it’s about maximizing footprint of the house on the parcel.
JtR, how much is the hard money financing going to cost?
For the most part, new home builders have figured out that big houses on small plots of land is the best return on their investment (that is, two 3,000 sq ft houses on .1 acre each makes the builder four times as much money as one 1,200 sq ft house on .2 acres).
This is exactly right and with the cost of developing the land for sewer, water etc. and paying the city of SD $50,000 in tax per house it makes a lot of sense to make as expensive house as possible. Once you factor in fixed costs of land, taxes and development costs no matter the cost of the final house, it’s not that much extra money to build a 3,000 sq ft house over a 1,200 sq ft house.
For me I’d rather a smaller house on a bigger lot, but developers know that people only pay a little extra for double the lot, but a lot extra for double the house.
Sad, but makes sense. Count me in the “smaller home with bigger lot” crowd, but that doesn’t describe my current situation.
A big house is obviously important to some people.
I just bought a little house close to the beach on a big lot. If you’re going to overpay for S.Cal real estate you might as well pay for what makes it so damn expensive… to live near the ocean where the weather is mildest and the bikinis are skimpiest. Those mcmansions that a mile inland are hotter than shyt in the summer time.
I guess, I just keep coming back to what how my mom and dad grew up. Mother was raised in a 900sq/ft house with 8 other children in southeast michigan. My dad grew up in a 400-500sq/ft “shack” (best way to say it) in northern ontario with 2 other kids… best part of it was the DIRT FLOORING AND AN OUTHOUSE….
Imagine that situation when it’s -40 celcius during the winter and you have to chop wood to keep the house warm, sit your ass down on a frozen toilet and sleeping in the same room with a bunch of other kids!
Did either of them grow up thinking their childhood was ruined because of it? Of course not…
So when I see these homes it just makes me wonder what the hell is going on here! I really shouldn’t even ask if people need or require this space because ultimately to each their own… more power to em if they can have all of that but it still does have me wondering.
Hmmm. Franklin is in a better house than his parents (I’m assuming you don’t have a dirt floor and outhouse, Franklin)…why shouldn’t Franklin’s kids by a better house than Franklin?
Time marches on people.
And yes there are 1200 sf houses in San Diego – I’ve toured many of them house-hunting with my son. They are older, but many have been been refurbished very nicely.
I do… a 900 sq/ft house built in 39. It’s not much but the point I think I’m trying to make is that a bigger, badder and meaner mcmansion doesn’t automatically mean a better place to live… especially when it comes to children.
Sure it’s nice to have all of the extras but how does it really add value to our lives? The question is probably more philosophical than anything, quite a bit off topic.. sorry.