Here’s a youtube tour of a few more Encinitas houses on the foreclosure rolls.
The first clip looks like it was an A.I.T.D., an all-inclusive trust deed – also known as a wrap-around mortgage. It was advertised on the MLS as a no money down deal, where the seller’s mortgage stays in place, but not assumed. The seller collects payments higher than what he owes, skimming a little interest for the remaining $400,000 extra owed on top of the loan balance, in this case.
But when the buyer quits making payments, he still has possession and occupancy, but the seller is responsible for the loan. These are a glorified lease-option, with more burden on the sellers. Here is an example of the math: Example of a Wrap
We’ve seen and heard about flippers paying more and more (too much!) in the competitive trustee-sale environment at the court house steps. With the backlog of occupants not vacating the foreclosed properties, there is bound to be some overlap.
The 3,278sf house in this video went back-to-bene in December, but only recently vacated. A few doors up, a flipper paid $810,000 on April 28th for a slightly bigger model on the same side of the street, but there you have to look through the trees to see the golf course.
Lo and behold, both hit the MLS within three days of each other, both priced at $899,000 – and the race to get out first, was on! This one was marked pending today:
But Diane Saatchi, senior vice president at Saunders & Associates, a real-estate firm in Bridgehampton, N.Y., says downsizing nowadays “costs more than people have in mind.” In her area, she says, total transaction costs easily exceed 10% to sell and buy simultaneously. When you add in the possibility of capital-gains taxes and moving costs, she says, “you need a big spread to make it worth the effort, and sellers often think they’re going to get more than they can for the sale.”
Kay Carpenter, 59 years old, and her husband Robert, 58, wanted to sell their 5,900-square-foot, seven-bedroom house in Windsor, Colo., and buy a home about half that size in Denver, where Mr. Carpenter currently commutes to his job as a hospital laboratory director.
But their current home, which they purchased for $810,000 in 2003, has received only one offer, for $575,000. “It is difficult to sell because it is a large home,” Ms. Carpenter says. The couple, whose last child left the nest in 2005, are finding that they will have to spend about $450,000 for a suitable house. Throw in the transaction costs, and the financial benefit of downsizing basically disappears.
Trading down is a bit easier in some parts of the country, like the Chicago suburbs, where there is a mix of housing types and lower-tax communities co-exist with higher ones. “It’s actually very typical, a classic scenario here,” says Richard C. Gloor, a real-estate broker/owner in Oak Park, Ill. “More traditionally, people wait until the last kid is out of the house, five or 10 years. But now the last child is in college still and people say they don’t need the space and especially don’t need the taxes.”
In pricey coastal cities like New York, Washington and San Francisco, desirable lower-cost housing is often hard to find in neighborhoods of upscale homes, real-estate experts say. In many affluent neighborhoods where aspiring retirees want to be, the supply of smaller homes is limited, due to zoning restrictions and high land prices. As a result, many homeowners find they would have to move a considerable distance to reduce their housing costs significantly.
Other hurdles beyond the slumping real-estate market are getting in empty-nesters’ way, too. Many people of retirement age are still working, for example, and need to stay near their jobs, meaning out-of-state moves are out of the question. Some are in two-income households, complicating the decision to relocate even more.
What’s more, adult children are becoming more of an issue than they used to be. In the aftermath of the Great Recession, “more and more kids are moving in with parents and grandparents,” says Jim Gillespie, president and chief executive of Coldwell Banker Real Estate LLC.
Hat tip to SM for sending this along, from theSeattle Times:
The 8,000-square-foot mansion was dark and in foreclosure for years. So last weekend when the for-sale signs came down and the lights lit up, neighbors were relieved. “We were like — ‘finally, somebody’s going to make that place a home,’ ” says one. But then some new signs went up.
“No trespassing,” the signs say. “Privately owned property. Not for sale.”
That’s odd, neighbors thought. The West of Market neighborhood in Kirkland is friendly, easygoing. So one of them called the real-estate agent to ask what was up. What he said floored them. The house is still for sale for $3.3 million. Whoever is living there had broken in. They’re squatters.
“It’s blown everybody away around here,” said another neighbor, who asked me not to print her name. “It takes some real guts to just waltz into a house like that, I’ll give them that.”
We were standing across the street from the six-bedroom, six-and-a-half bath house, dubbed in the ads as “Mediterranean Natural.” With its rock exterior and terraces, it looks like a miniature hotel.
“Elevator to the theater, wine cellar & tasting room, game room, recreation room, nanny’s quarters, den/library, culinary artist’s kitchen, bonus room and the lavish master suite & bath,” reads a listing from 2008, when the house was for sale for $5.8 million.
If you’re going to squat, might as well do it in style.
Kirkland police say it’s true — someone just showed up and changed the locks a week ago. They now claim they own the place. Police don’t believe that, but also don’t tend to get involved in landownership disputes and so haven’t done anything, yet, to remove them.
There are studies of electro-magnetic fields that have been inconclusive, and “the Ghost Meter” is a curious name for scientific device. But nobody is going to want a green box in their front yard that sounds like this:
The Ghost Meter has been calibrated to ignore the extremely subtle EMF emissions surrounding the human body, yet is still sensitive enough to detect the small, distinct, erratic EMF energy fluctuations frequently found at reputed haunted locations. The Ghost Meter provides three corroborating indicators of EMF emission strength. A needle based display, LED lights, and an adjustable audio signal. The response time of this meter is excellent, easily outperforming more expensive EMF meters. It can also be operated in silent mode so it doesn’t interfere with EVP (Electronic Voice Phenomenon) recordings or distract other investigators during an investigation. Compare the value this meter offers compared to other brands. There is no other offer that comes close to providing these levels of features and performance for the price. You’ve seen television ghost hunters use similar detectors. Now you can get your own and start investigating the unknown.
What’s thought to be the only remaining house in Los Angeles designed by the Craftsman stars the Greene brothers is for sale. It’s beautiful, yes. It has four original leaded glass light fixtures. It’s been lovingly restored over more than 20 years.
And it’s listed at $775,000. By comparison, the much larger Greene & Greene-designed Spinks House in Pasadena — site of the architects’ gems the Gamble and Blacker houses — was on the market last year for $4.6 million.
So why is this one, the Lucy Wheeler House, on the market even long enough for a story to be written and published?
For one thing, although the historic status of the house might net the buyer tax savings under the Mills Act, it also means the owner can’t choose the living room paint colors or replace the original kitchen sink. For another, the house is in West Adams, a neighborhood near downtown that is loved fiercely by its defenders but that demands its newcomers to be, if not pioneers, at least residents ready for some scruffiness.
Hat tip to clearfund for sending this along, from cnbc.com:
Earlier this week a top executive at Bank of America told an REO conference in Dallas that the lender would be focusing more on short sales than ever before.
At first hearing this, I assumed it was because of the government’s Home Affordable Foreclosure Alternative Program, which provides cash incentives to servicers and borrowers for short sales and also streamlines the process, but of course there’s way more to it than that.
Said Bank of America exec, Matt Vernon, whose official title is National REO, Short Sale and Deed in Lieu Executive (his childhood dream title I’m sure), granted me an interview this morning, and was pretty clear as to why B of A is pushing these alternatives.
“We understand the reality; a large number of homeowners won’t meet the eligibility for the HAMP (the government’s Home Affordable Modification) program,” Vernon says. He also noted the sheer volume of borrowers now coming through the short sale process. He expects to see far more.
The big difference, he says, is that BofA, as well as some other big banks, are changing the model from reactive to proactive. In other words, instead of waiting for a borrower or real estate agent to approach the bank with an offer for a short sale, they are using a “cooperative approach, with homeowner, Realtor and servicer on behalf of investor, working to move that property through the process. All three of the interested parties holding everything together,” Vernon explains.
So the servicer sets a minimum value for a short sale and then the borrower and Realtor go out and find a buyer. When they do, the process then moves far more quickly because it’s already approved.
Of course there’s always the financial incentive as well. With so many borrowers either falling out of or not qualifying for the modifications, a huge flood of properties are moving to REO (bank owned). In fact, the latest report from RealtyTrac Thursday showed a record number of REO’s in May.
Which leads me to another report from Clayton Holdings,which finds short sales cut risk severity by 13 percent more than REO sales. And in some states where the foreclosure process is more lengthy, short sale loss severities can be as much as 26 percent lower than REO loss severities.
“I would say that’s generally accurate in what we see,” agrees Vernon. “It really comes down to time. The quicker you can facilitate the property moving.”
The good news is, that will cut down on foreclosures. The bad news is that short sales, like it or not, are comps. They sell for less, and consequently bring down the values of properties around them.
(JtR note: I have not seen nor heard of any pre-approved short sales in the field….at least not yet, and am skeptical of the homeowner’s enthusiasm for ‘holding everything together’.)
Someday, I’ll stop selling real estate/blogging, and it would be a shame if nobody took it over.
Our eldest child survived freshman year of college, and is back home for the summer. She doesn’t want to be a realtor (so far), but just in case her future college degree doesn’t land her the dream job, maybe she’ll have a little something to fall back on.
Over the next three months I’m going to give her a crash course in being a realtor.
At the end of summer either she’ll love the thought of being a realtor, and quit college to get started, or she’ll hate it and be motivated to excel throughout the rest of her college days.
Not sure if you folks will get much out of it, but feel free to tag along:
As with prices, San Diego home sales were up sharply in May.
The graph below shows that activity first dropped in April as people delayed closing to get into the tax credit double-dip window (as described in the prior entry on prices) and then surged by 17 percent once the window arrived. The window will remain open through June, so we should see another strong month in June followed by weakness in July as buyers pull their purchase dates forward to maximize their tax credit haul.
Despite the number of homes being purchased, inventory rose yet again in May. The increase was modest — under 3 percent — but this next graph shows that the sustained rise in inventory this year is unlike anything we saw in 2008 or 2009.
If supply keeps rising like this, the post-tax credit lull in demand (should the various tax credits ever end) could create some price weakness. But that is a possibility in the future. The incentive-laden reality as of now, or at least as of last month, is that prices are strong and homes are flying off the shelves.
Hat tip to Blue Streak for sending this along – link here for full article, with excerpts here:
June 10 (Bloomberg) — Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal.
Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed — known as a short sale — without disclosing that there were better offers. They then flipped the houses for a profit.
“Short sales are an important tool that can help both the bank and the borrower,” said Morgan McCarty, executive vice president for mortgage servicing at Birmingham, Alabama-based Regions Bank, which lost money in the Connecticut case. “It’s just that criminals are always trying to find ways of profiting.”
A prevalent scam involves a practice called “flopping,” Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.
“Flopping” occurs in more than 1 percent of short sales and may cost lenders $50 million this year, according to estimates from CoreLogic Inc., a real estate data and research company in Santa Ana, California. About 12 percent of existing home sales, or almost 622,000 houses, were short sales in the 12 months through April, data from the National Association of Realtors show.
(JtR note: We could find $50 million in flopping fraud in SD County!)
The Treasury has “put reasonable protections in place” to prevent short-sale fraud, requiring that the buyer and seller have no hidden relationship and banning most resales within 90 days, said Laurie Maggiano, policy director of the department’s Homeownership Preservation Office in Washington.
“We have language in our short sale approval letter that prohibits the flipping of a property and after closing we will audit transactions to identify ‘flips’ or ‘flops,’ ” Bauwens wrote. “It’s not in the best interest of our investors or communities at large to encourage or allow flipping.”
The company requires a full appraisal before a resale, McCarty said. It also demands short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property.
In the Connecticut case, Regions Bank in April 2008 agreed to a short sale of a Bridgeport house for $102,375, unaware that Natera and McElaney had a bidder willing to pay $132,500, according to the plea agreements. Eight weeks after the bank sold for a loss, the pair resold the house for a $30,125 gain.
