Bungalow REO – Interior
Here’s a tour for those wanting a peek inside what most women would call the “cute” beach bungalow, built in 1928:
Tricklin’ Down
Speaking of contests, we have a pair of Chargers playoff tickets riding on the amount of homes for sale on December 1st.
In December, 2008 the average amount of homes for sale was 15,116.
On August 11, 2009, the total amount of active listings was 11,457.
On September 22, 2009, the amount of actives was 8,149.
Today’s inventory count is 7,955.
Here are the guesses:
https://www.bubbleinfo.com/2009/08/16/chargers-contest-review/#comments
CA renter is the front-runner currently, with three weeks to go!
The lower inventory counts are excruciating for the ready, willing, and able buyers. Any decent houses that list with an attractive price are still being scooped up quick.
**********************************************
The pending count has held up, but will we see a load of closings this month of those getting in before the previous tax-credit expired?
September 22: 11,011
November 18: 10,528
**********************************************
How about the REO counts, any flood happening yet?
| Week | New REO listings |
| Oct 1-7 | |
| Oct 8-14 | |
| Oct 15-21 | |
| Oct 22-28 | |
| Oct 29-4 | |
| Nov 5-11 |
No flooding sighted, but steady flow for now.
What would happen if buyers take the holidays off, come back after the Super Bowl all fired up about getting a tax credit, and there’s not much to buy? Hopefully we’ll be able to count on some of the 10,580 properties on the trustee-sale auction list to make it to market!
Finding Our Way
Cielo, a gated community at the edge of Rancho Santa Fe, has struggled to build sales momentum.
There are 26 active listings (this house is number 13th on the list), ranging from $1.595 to $7.999, and five contingent/pending listings currently, but only seven have closed over the last six months, averaging $301/sf:
The nine lots at the end were listed for $4+ million, but the listing expired.
More Review of REO Listings
When considering buying a trustee sale, you have to wonder, is it better to buy after the property goes “back to bene”?
With inspection contingencies and title insurance included on a regular sale, the risks are lower, but you will probably have the burden of additional comeptition on an open-market sale.
What about price?
We’d like to learn something from the opening bid amounts – are they accurately depicting the property’s value, or just a wild guess based on what’s owed? Will the pricing get better, later?
Does the price get better, or worse, once they hit the open market?
Here’s a review of 100 detached REO listings from Carlsbad to Carmel Valley, listed since 6/1/09:
Listing Status:
ACT: 16
CONT: 7
PEND: 25
SOLD: 52
They aren’t having much trouble finding buyers – how’s the pricing?
**********************************************************
Relationship of opening bid-to-list price:
List Price more than 20% higher than Opening Bid: 13
10% to 20% higher: 18
Less than 10% higher: 21
Less than 10% lower: 20
10% to 20% lower: 13
More than 20% lower: 15
If almost half of the failed trustee sales end up listing for less, should we just wait? Yes, especially if we can determine which banks/servicers are dumping.
Aurora and WaMu are the ones cutting 20% or more off their opening bids – if you’re thinking of buying one of theirs at the court house steps, you may want to re-evaluate.
**********************************************************
Of the 52 solds:
Closed over list: 33
Closed at list: 3
Closed under list: 16
The euphoria of paying over-list has dwindled a bit.
**********************************************************
How did buyers finance the 52 solds?
VA: 2
FHA: 4
Conventional: 29
All-cash: 17
There’s still a heavy influx of capital being used to buy houses, one-third of the sales were all-cash. Are the banks showing their preference? Probably, and a reason to try to be a cash buyer – and once there, you might as well consider the trustee sales too.
Beach Cottage Contest
The REO tsunami dripped another drop today, I was assigned this property whose trustee sale was just last Thursday, November 12th.
The former owner was from Newbury Park, which, according to wiki, has the highest median prices in Ventura County, and among the most affluent areas in the country. It is typical for these types of folks to come to Oceanside, thinking they are going make a killing on beach real estate.
This is a unique property, so let’s have a contest!
Guess the eventual sales price!
On the tax rolls it’s 3 br/2 ba, 1,300sf on a 1,500sf lot. There aren’t any great comps, and no appraisals or BPOs have been completed, so I don’t know what the list price will be. But the opening bid at the trustee sale last week was $513,000 with no takers.
The vacant lot in the video below had listed for $499,000 but had to get down to $275,000 before going pending (sellers paid $399,000 in 2004), and the new condos featured in a previous video have all closed between $405,000 and $781,000, so it appears there is still an appetite for beach real estate in Oceanside!
You can see photos at this link, where they are asking $1,900 per week in winter, and $2,000 per week for summer rentals:
http://www.vrbo.com/71346#photos
The person with the closest guess to the sales price will win a T-shirt!
Housing Tax Credit Summary
For those looking for the latest on the housing tax credit, the WSJ has a good summary:
The highlights:
Q: If I buy a new home and live in it, do I also have to sell my old one in order to take advantage of the credit?
This is unclear. The law appears to allow repeat buyers to retain their old home, for which no tax credit was given, while claiming a credit for the new one. What is clear is that if you buy a new home using the credit, you must use it as your principal residence.
Q: What is the definition of “principal residence”?
If you own more than one home, your principal residence is usually the one where you spend most of your time. In determining residence the IRS may also consider where your family lives and your mailing address for bills and correspondence, among other factors.
Q: Can a principal residence be something besides a conventional house?
Yes. A principal residence may also be a condominium, co-op apartment, attached or semi-attached townhouse, or even—if it has eating, sleeping and toilet facilities—a boat, motor home or trailer. Manufactured homes qualify in some states.
Q: I need the credit refund to help make the down payment. What can I do?
There’s no rushing the IRS. But one option is to adjust your current withholding from your paychecks to reflect the fact that you will be taking the credit later. But be careful: If you don’t make the purchase, then you may owe interest and penalties. Consult a tax adviser.
Q: Is it possible to qualify for a credit if I am building a home on a lot I already own?
Yes, according to the National Association of Home Builders. The purchase date is usually considered to be the date of first occupancy, so you would need to move in before July 1, 2010.
Guaranteed-Sale Program
The corporation recently spent under a billion dollars conducting an exhaustive scientific research and quantitative anaylysis project to construct a fool-proof state-of-the-art cutting-edge guaranteed-sale program.
This plan is so thorough and exhaustive that it’ll work for any home seller – even those who insist on listing their house for 10-15% over value! It is a powerful plan, so please watch this video with caution – it might make you a bit woozy:
Re-Calibration Gauge
Calibrate def. to make corrections in, or adjust a procedure or process.
I don’t know if re-calibration is a word, but I’ll use it to describe what realtors have had to do over the last few years.
It wasn’t enough to just make corrections or adjustments to our thinking and practices from the bubble years. The market conditions changed so radically that agents needed to re-program their own thinking. But have they?
Whether you are buying or selling, here’s how you know if your agent has re-calibrated:
Agents Who Haven’t Re-Calibrated from Bubble Mentality
1. Complain about how bad the market is.
2. Promise that “The market will come back, it always does”.
3. Say things like, “The market is picking up” in a vague, non-specifc, non-involved way.
4. Tell their sellers to list high, you can always come down.
5. Think their job is to defend the list price at all costs, even if it means no sale.
6. Have listings sit on the market for months, and expect that ‘somebody will come along’.
7. Tell their sellers to hold out over 1-2% on price.
8. Reject a $2,500 request for repairs on a million-dollar sale.
9. Tout the comps as the reason for every action taken.
10. Tell their buyers to offer full price, or higher, with no justification.
Agents Who Are Re-Calibrating
1. Recognize that price is everything.
2. Know when a house is priced too high.
3. Don’t have listings that are OPTs (over-priced turkeys).
4. Don’t make promises about the market coming back.
5. Know that comps don’t mean much to buyers, unless they are low.
6. Recognize that REOs and short sales are valid comps.
7. Reduce the price on listings early and often.
8. Can be reached by phone.
9. Are urgent with sellers.
10. Are patient with buyers, and know that there will be other houses.
When talking to agents, use this as a guide to figure how much they might be able help you!
No Bulk For You
Having trouble finding those bulk purchases? You’re not the only one, from NMN:
Stan Kurland, the former Countrywide president who hoped to make a killing by purchasing distressed mortgage assets at bargain prices, is facing a cold reality that’s thrown a monkey wrench into his strategy: banks and Wall Street firms aren’t selling.
The financial garage sale of the century — with an anticipated $1 trillion in trash changing hands — is a bust or as Penny Mac notes in a recent public filing: “Through its interactions in the marketplace, our manager [a unit of the company] has observed that during our initial period of operations, relatively few holders of distressed mortgage loans have offered these loans for sale.”
In other words, Penny Mac’s entire reason for being has (for now) turned out to be a bad idea — even though in its IPO filing and “road show” to institutional investors Mr. Kurland and other company executives were talking as if it was the Gold Rush of 1849. The sky was the limit. Well, maybe not. Mr. Kurland and his team, which includes several former Countrywide executives, hoped to raise $700 million when it went public in August. It appears that even though the potential to make a killing in nonperforming loans is there, investors were queasy. The publicly traded REIT raised just $300 million — during a bull market.
To date, Penny Mac has bought just one portfolio of size, a $558 million pool of loans from the FDIC, which it paid just $226 million for. That’s it. Meanwhile, Penny Mac isn’t talking to the press these days, this columnist included. It recently pulled its profile from YahooFinance.com so if you want to take a quick look at who its top executives are and what they earn you’re out of luck unless you have an account with the SEC’s EdgarOnline system. (Luckily, I do.)
So, what’s its game plan? Let’s go to the SEC filing. It still believes there are opportunities in distressed mortgages, but its first quarter as a publicly traded company was less than stellar. It lost just under $1 million. And now it has a new idea. It wants to be a mortgage banker. Huh? Mr. Kurland wants to re-enter the lending arena by having Penny Mac start a conduit. Why? I guess it’s obvious. The firm isn’t making it as a vulture fund (and specialty servicer) but it sees an opportunity acting a middleman between the GSEs and what it calls “smaller mortgage lenders.”
It plans to find (presumably) nonbanks that are ineligible to become Fannie Mae, Freddie Mac and GNMA seller/servicers, buy their loans and securitize them using the government eagle. It also believes that in time the private-label market might come back and that its conduit (which is being organized as I write this) would be in the catbird seat should such a revival occur. Then again, maybe Mr. Kurland isn’t familiar with Sen. Chris Dodd’s bill to have nongovernment MBS issuers retain 10% of the risk.
More Short-Sale Negotiations
My dear freinds at Piggington are discussing the house in Leucadia listed for $1.3 million,
http://piggington.com/more_high_end_devastation_in_encinitas
and people are probably wondering why it hasn’t sold.
Is it the reluctance of buyers and agents to buy a short sale (even though this one has approval), or the relatively-modest neighborhood you have to drive through to get there, or is it the lack of jumbo financing?
Or is it just another example that the higher-end market is in big trouble?
Might be all of the above, but let’s add another.
The first mortgage holder has approved the sale at $1.3 million, but there is also a second lender that isn’t included in that payoff.
All the buyer has to do to purchase this house is the following:
1. Pay $1.3 million for the house.
2. Pay $20,000 to the second lender.
3. Pay $13,000 to the short-sale negotiator.
4. Pay $2,000 in back HOA dues, and boom, just like that you’ll own the house!
This is the third time I’ve come across the maxi-fee for short sale negotiating, and because I like this agent a lot, I had to call earlier this week. My complaint is that they don’t have any of this in the remarks, it’s a big surprise to the buyers and agents.
On the others I’ve come across it’s not discussed until you have an acceptable offer. Once you have agreement on price, the listing agent springs it on you, and reduces the sales price to compensate to make you feel better. But you have to pay cash, and have a separate agreement with the negotiator, who happens to be in Detroit and supposedly has mystical powers over the lenders to justify his fee.
My buyers don’t like any of this, and should this type of real estate practice continue, don’t be surprised if there is more buyer reluctance.
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
