From the latimes.com – an excerpt:
Competition at the auctions is brutal, said Bruce Norris of Norris Group, a real estate investment firm in Riverside.
Norris unwittingly bought a house that was the site of a gruesome double murder. No one else bid — a rare occurrence that showed others knew the history — leaving Norris with less cash to bid for other houses. “It’s a very lonely place out there,” Norris said.
That’s only one of many risks in the foreclosure business. People who’ve lost their homes through foreclosure sometimes vent their anger by smashing walls, knocking over water heaters or ripping out toilets. “We’ve literally had people take $20,000 of cabinetry out and feel perfectly justified doing it,” Norris said.
The daily auction ritual begins each morning when banks signal which homes they are likely to dispose of that day. That sets off an early-hours scramble as would-be buyers speed through suburban neighborhoods to investigate the homes.
On a recent day, Norris steered his sport utility vehicle into the driveway of a 3,300-square-foot McMansion on a corner lot in Moreno Valley. The front lawn was brown and the backyard was littered with garbage. But the windows were intact and there was no visible damage — far better than many foreclosures.
Aiming for an all-important look inside, Norris rang the doorbell and delivered the bad news to the teenage boy who answered the door that the home was scheduled to be sold that day. “Do you mind if I poke around a little bit to see what kind of condition it’s in?” Norris asked, angling his body to get a glimpse of the living room.
Then another car sped up and a rival buyer hurried up the driveway. She studied the house for a few seconds and craned her neck over the wooden fence protecting the backyard. “This is a dream compared to a lot of them,” she said in a satisfied tone as she rushed back to her car.
In the end, no one bought the home. The sale was delayed after the owner filed for bankruptcy protection. Norris was philosophical, knowing that there were plenty more foreclosures. “If you miss one,” he said, “oh well, tomorrow’s another pile.”
And yet people still talk of the economy recovering, the stock market poised for launch, green shoots, etc. I chuckle. It is only very recently that I have heard people in the top 1 or 2% wage bracket talk openly about throwing in the keys. More pain awaits.
People have been throwing in the keys for hundreds of years, including the richest of the rich. 2007/2008 especially. Nothing’s changed on this front other than your hearing got better.
Even the big pros choke at this game….should be ample warning for us non-fulltime guys to stay far away.
All your successes can easily be wiped out in one quick moment.
There are some people who would pay a premium for a house where a double murder took place, It just needs proper marketing! Do wear your kevlar vest when showing it,though.
There is so much juice in that article, but I’ll try to keep it concise.
Remember when one of the “red flags” during the original part of the bubble was when ~43% of the buyers were buying “investments” or “second homes”?
People will rush into things as long as there is money to be made, and they will be quick to exit when there’s not. These “investors” were using the leverage provided by all the govt bailouts and stimulus to feed their profits. Unless the govt starts a new round of housing stimulus (and it will have to be bigger and more sweeping than before), these deep pockets will exit the market just as quickly as they entered it, IMHO.
The flippers (and investors of all stripes) were being forced into asset purchases because of the interest rate environment. These low interest rates are at the root of our problems, and have been for the past decade.
From the link (bold is mine):
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Closely watched gauges of professional buying have surged over the last two years.
Another measure, the percentage of all homes sold to absentee buyers, paints a similar picture. In the hard-hit Inland Empire, for instance, 30% of all homes sold in April went to absentee buyers — up from 19% at the end of 2008 and the highest level in at least seven years, according to San Diego research firm MDA DataQuick. It was at 28.2% in July.
The binge of professional buying has helped spark a nascent housing recovery in Southern California because investors have cut significantly into the glut of foreclosed properties after the subprime mortgage meltdown.
…In July, overall sales tumbled primarily because of the expiration of federal tax credits, falling 20.6% from the month before in Los Angeles, Orange, Riverside, San Bernardino, San Diego and Ventura counties.
“There’s a tremendous amount of capital that is desperate to just buy anything right now,” said Gil Priel, principal of a real estate investment firm in Woodland Hills.
“The people who want to go and buy a house to flip, and do one or two, are already exiting the market,” said Jan Brzeski…
The influx of new players is pushing up auction prices and squeezing profits. The average discount at auctions — the difference between a home’s sale price and its actual value — is 21.6%, down from 28% in January 2009, according to ForeclosureRadar.
Chase Merritt launched its first foreclosure fund in May 2009 and has started two more funds since then. But “it’s literally gone from a business that’s very attractive, even lucrative, 12 to 18 months ago to something that almost doesn’t make sense,” Horning said.
“It’s just like the housing bubble,” he said. “It’s almost like we’re in a bubble at the courthouse steps.”
I’ll bet that not all of those “absentee buyers” are flippers. Out here in the IE, it is frequently profitable (at least on paper) to buy a house to rent out.