Thanks to a little-noticed auction sale, a South Bay couple are the proud owners of one of the most exclusive streets in San Francisco — and they’re looking for ways to make their purchase pay.
Tina Lam and Michael Cheng snatched up Presidio Terrace — the block-long, private oval street lined by 35 megamillion-dollar mansions — for $90,000 and change in a city-run auction stemming from an unpaid tax bill. They outlasted several other bidders.
Now they’re looking to cash in — maybe by charging the residents of those mansions to park on their own private street.
Those residents value their privacy — and their exclusivity. Past homeowners have included Sen. Dianne Feinstein and her financier husband, Richard Blum; House Democratic leader Nancy Pelosi; and the late Mayor Joseph Alioto. A guard is stationed round the clock at the stone-gate entrance to the street to keep the curious away.
So imagine the residents’ surprise when San Jose residents Cheng and Lam wound up with the street, its sidewalks and every other bit of “common ground” in the private development that has been managed by the homeowners since at least 1905. That includes a string of well-coiffed garden islands, palm trees and other greenery that enhance the gated and guarded community at the end of Washington Street, just off Arguello Boulevard and down the hill from the Presidio.
“We just got lucky,”said Cheng, a real estate investor.
The homeowners, however, are crying foul and want the Board of Supervisors to negate the sale.
The couple’s purchase appears to be the culmination of a comedy of errors involving a $14-a-year property tax bill that the homeowners association failed to pay for three decades. It’s something that the owners of all 181 private streets in San Francisco are obliged to do.
LITHONIA, Ga.—On a muggy morning earlier this month, Paul Fuhrman pried the screen off a window to get into a two-story house in this Atlanta suburb.
It was just another day’s work for the 43-year-old executive at private-equity firm Colony Capital LLC, based in Santa Monica, Calif. After buying the house for $120,000 in a foreclosure auction, Mr. Furhman and his colleagues wanted to check out Colony’s new investment—and broke in because they hadn’t gotten the keys yet.
Mr. Fuhrman’s sweat and dirty hands show how the business of buying foreclosed homes, renovating and renting them out is morphing from a largely mom-and-pop business into the next big thing on Wall Street. Investors who once chased only big-ticket deals now are buying houses one at a time.
“We went from hunting elephants to whacking ants with a mallet,” says Mr. Fuhrman, who found stained carpets, piles of discarded clothing, a broken door and signs of a recent living-room camp out by squatters.
Colony owns about 3,600 foreclosed homes, including 133 bought in the Atlanta area in one day, and officials hope to increase the firm’s inventory to 10,000 by next spring.
At first, many investors hoped lenders would sell foreclosed houses in bulk. But most banks prefer to sell one house at a time, figuring that approach will fetch higher prices.
As a result, the foreclosure circuit hasn’t yet produced a giant windfall for buyers like Colony, though executives say early returns are promising. Yields on rents from houses owned by the firm are 7% to 8%, higher than many other types of real estate. Purchase prices have averaged 12% less than Colony expected, which should make it easier to sell the homes or borrow against them and exit with double-digit percentage gains.
Foreclosure buyers, the trash collectors of the housing industry, have been raking it in.
An anonymous foreclosure scout recently described the “ins and outs, all the dirty tricks, blatantly illegal practices” in a thread at Reddit. In fact as the thread became popular, the source deleted his comments out of concern that his identity would get out. His answers were preserved, however, at Pastebin.com (via Patrick.net).
We’ve picked out the highlights, edited for clarity. We can’t verify the identity of the foreclosure scout, but he sounds legit to us.
1. “Before you go to auction you need to actually scout the houses. It’s common for previous owners to gut the house or completely remove the kitchen. It was my job to drive to these houses and assess them, damage, repairs cost etc… Part of this was getting into the house which were many times locked, so we would break & enter all day, every day…
“Many banks will change the locks once the previous owners have been evicted but they only use 5-6 different locks. Somebody in my company somehow obtained copies of these keys which we kept with us, allowing access to many houses that would be too secure for other people to get into.”
2. “If you could gain access, a lot of times we would try and block as many windows and secure the house as much as possible. If I could block any view of the kitchen, other competitors will have to assume another 10K in cost because they cant verify an intact kitchen…”
“I would keep a bunch of old padlocks with no keys. If the garage was unhooked from the opener I could get in, padlock it on the inside and then when I left, I could walk out a back door locked from the inside. Essentially, removing the garage door as an access point. We would also put locks on side gates as well. If the other companies were using older guys to scout, they wouldn’t bother jumping the fences.”
3. “Sometimes with the little amount of time between scouting houses and and auctions, you can’t get to the bank to get actual certified checks. Before you can bid on any house you have to show your cash or checks to the auctioneer so you can’t overbid.Certain people would develop relationships with the auctioneers where they would show fake photocopied checks. If you won the house, you would just meet up with him later to pay, as well as give them a tip.””Most high rollers would “tip” auctioneers, my company would actually write it off on taxes as a “tip”. If we won a house we would meet up later and give the auctioneer a few hundred bucks. Now nothing was ever discussed about asking the auctioneer to do anything illegal, but when it came looking past not having money on the spot or saying “going once going twice sold” really fast and maybe not listening too well, the tips came in handy.”
4. “Go to auctions and hang out, half the game is actually buying the house and competing for the high bid. The atmosphere is a lot like that show “Storage Wars”, but you are dealing with WAY more money, though the biding techniques and rivalries are similar. For example, if big players are avoiding a property that appears like a win, there is obviously something you have overlooked… IRS Lean? Inside is trashed? Something screwy with the banks or the loan?Knowing the actual status of the title is VERY important, nothing is worse than seeing somebody buy a 2nd loan on a house. Essentially, he bought a loan, but not a house. Another example is a random guy who showed up, paid cash for a house that we knew had major sewage problems. If he planned to sell the house he would need to do 40K in sewage lines under a major highway, the guy basically [expletive] himself but walked off smiling from ear to ear.I guess what I’m saying is, if you want to buy a house at auction then take some serious time doing homework and learning the ropes. 95% of newcomers are gone after 1 or 2 houses because they are broke or made simple mistakes. I’d just try and find a short sale from the bank.”
A ban on foreclosure auctions outside the downtown San Diego Superior Court has forced those who conduct them to two other areas that already host such transactions, a spokesman with a trade group that represents trustees said Monday.
The ban, made official in a July 1 court order, takes effect Tuesday.
People who “cry” trustee sales now conduct business at the entrance of the East County Regional Center, 250 E. Main St. in El Cajon, and outside 321 N. Nevada St., the address of Oceanside’s Housing Division offices, said Richard Meyers, executive director of the Irvine-based United Trustees Association.
It’s up to the individual companies that publish and post the sales to decide where to go, Meyers said.
The downtown San Diego venue had been used as an auction site since the 1960s. Over time, court officials said, dozens of investors, their representatives and onlookers routinely crowded around the main entrance of the downtown facility throughout the day, causing safety and security concerns.
A reader noted that yesterday was an active day for trustee sales. But unlike last month, when I got snookered into thinking something was afoot, I went right to the auction.com website.
Yep, yesterday they conducted their latest installment of ‘trustee sales by ballroom auction’ – link here.
I can relate to what they are going through. Bank of America and others are dumping some of their worst properties on them – only two of the 117 properties were over $400,000, and the majority were under $200,000. There was also plenty of postponements. Of the 117 on the list, only 30 were sold – they postponed 58, and cancelled 29.
If you are looking to pay cash for cheap properties, and don’t mind buying without title insurance and inspections plus evicting the occupants, this might be for you. At least the parking is easier, and you won’t be tripping over the bums and hobos downtown.
But it is run by the same REDC auction house that has been exposed here previously.
Overall yesterday there were 68 trustee sales conducted throughout the county, with 38 properties being purchased by 3rd parties, and 30 going back-to-bene. It brings October’s total up to 672 trustee sales, with three days to go. In September there were 754 successful trustee sales.
Hat tip to shadash for sending this along, from thenctimes.com:
San Diego County court administrators will end the decades-old practice of selling foreclosed houses on the courthouse steps in downtown San Diego on Aug. 31, administrators said Monday.
Trustee sales, in which lenders auction off foreclosed properties, grew in popularity in recent months as investors went looking for cheap houses to fix up and sell or rent. What once attracted a dozen professionals can now bring in 40 or more interested buyers on any given day.
San Diego County joins Riverside, Los Angeles and other California counties in pushing the practice off its courthouse property. Sending the auction to a new, to-be-determined site could cost trustee companies, which sell the houses, thousands of dollars in advertising costs. But the courts have no obligation to host the auctions.
“Out of tradition, these sales have been held on the steps of the courthouse from a time when such sales were conducted by the court,” Michael Roddy, court executive officer, said in a written statement. “That is no longer the case; these are commercial activities being conducted on public property. These sales not only lack proper permits for conducting business in such a manner but they impact court business.”
Most of the sales at the downtown courthouse steps are run by Fidelity ASAP. The company did not immediately respond to request for comment.
Trustee Assistance Corp., based in Santa Ana, conducts most of its San Diego County auctions at a city-owned building on Nevada Street in Oceanside. The move by the San Diego courts won’t affect their workings much, said Renee Patrick, but she expects to fight the ban along with other companies.
When location of a trustee sale changes, state law requires trustees to send new notices to borrowers and re-advertise properties that would be sold at the new site, a practice that costs from $600 to $700 per property, she said.
“If we had to re-advertise on all these files, that’s an enormous amount of money,” Patrick said.
Hat tips to Jakob and Gene for sending this along fromsfgate.com:
Investigators look into whether there is collusion among real estate speculators involved in the courthouse sales.
Foreclosure auctions take place every weekday on the steps of courthouses throughout California. Now the FBI is investigating whether some real estate speculators are illegally rigging bids for these sales.
“Last week, the FBI conducted interviews and executed search warrants through the entire Bay Area as part of a long-term investigation of anti-competitive practices at trustee sales of foreclosed homes,” said bureau spokeswoman Julie Sohn.
The probe is shaking up the tight-knit world of investors who bid at these auctions. The issue, sources say, is that some participants allegedly pay others to refrain from bidding on certain properties to keep their prices low.
Such bid-rigging violates the federal Sherman Antitrust Act and can carry a maximum penalty of 10 years in prison and a $1 million fine.
That maximum can be increased to twice the perpetrator’s gain or twice the victim’s loss.
“There have always been rumors of collusion at the courthouse steps,” said Sean O’Toole of ForeclosureRadar.com, a Discovery Bay company that provides detailed information on properties sold at the auctions. At a typical auction, many investors clutch clipboards with printouts from his website.
“If you have a small crowd of guys that talk to each other every day, it’s natural for them to say, ‘Why are we bidding each other up? Let’s just buy this and work it out afterward.’ ” O’Toole said. But when he speaks to real estate clubs and others, O’Toole said, “I am very clear. I say: ‘This is illegal. Don’t do it.’ “
Most properties revert to lenders at courthouse-step auctions, which are the final step in California’s foreclosure process, but about 20 percent get sold to outside investors.
Rules of the game
Bids are all cash; properties are sold as is, subject to existing liens and with no guarantees as to condition, so only deep-pocketed, experienced investors generally make bids, seeking properties that still have some equity that they can fix and flip, or hold onto for the long term.
A real estate agent who attended some San Francisco auctions in hopes of buying investment property described what he witnessed.
“If you start to bid, there are about five guys who work together and who box you in,” said the man, who asked not to be named for fear of retribution. “One guy came up to bid who clearly was not part of that crew. The guys were bidding. At some point, (their ringleader) turned to (the outsider) and said, ‘You must really like this property. It must be really important to you.’ He had a piece of paper in his hand; he showed it to the guy. The guy nodded OK and then disappeared into the building.”
The man said he was positive that the outsider was being paid off not to bid, although he did not witness money changing hands.
At Alameda County’s auction Wednesday, most investors declined to discuss the issue, but some said they welcomed the FBI’s interest.
“This has been going on for many years,” said one man who declined to give his name. “It’s a closed group that doesn’t always allow the properties to go up to their true value.”
O’Toole and others said the margins at the auctions are pretty thin.
In general, he said,“the opening bid is only 20 percent below market, and the average sale is only bid up 12 percent. It’s hard to make a living in this business – by the time you pay repairs and sales costs, you’re looking at about a 5 percent net return.”
In a case that resembles the current probe’s focus, in April a Stockton real estate agent pleaded guilty to bid rigging.
Anthony B. Ghio admitted “that he conspired with a group of real estate speculators who agreed not to bid against each other at certain public real estate foreclosure auctions in San Joaquin County,” according to a news release from the U.S. Department of Justice. “The primary purpose of the conspiracy was to suppress and restrain competition and obtain selected real estate … at non-competitive prices.”
The release said that after a “designated bidder” bought a piece of property at the public sale, the co-conspirators would hold a second private auction to determine who in their group ended up with the property. The difference between the two auction prices “was the group’s illicit profit, and it was divided among the conspirators in payoffs,” the release said.
The FBI encourages anyone with knowledge of anti-competitive practices at foreclosure auctions to call its tip line at (415) 553-7400.
A two-story house on the Seacliff Golf Course in Huntington Beach is the worst example of “malicious vandalism” of a foreclosed home that a top Realtor for bank-owned properties says he’s ever seen in Orange County.
The home, at 6581 Racliffe Circle in the guard-gated The Peninsula at Seacliff community, went back to the bank at $1,782,214 at a foreclosure auction last August after no one bid on it.
The roughly 3,000-square foot house now is undergoing about $250,000 in repairs, says broker Tom Moon of Pacific Moon Real Estate, who has the listing.
Among the destruction: Chemicals and cement were poured down drains, a Jacuzzi was left running for what may have been months, with most walls in the house splattered in mold, and a floor caved in from the weight of a huge pile of wet clothes and other junk.
The day I went by, workers in special bodysuits and masks doing mold remediation would not allow us into the house for safety reasons. As is typical with some foreclosed homes that are found stripped and trashed, the Realtor and the bank cannot prove who did the damage. And with a lack of eyewitness accounts in these cases, police rarely get involved.
Sean, our Los Angeles correspondent, files this report:
Up here in LA it looks like BofA/Countrywide just threw the foreclosure machine switch back to the “on” position. The number of Recontrust properties with opening bids set for tomorrow’s trustee sale auctions just spiked, so it looks like whatever self imposed delays or moratoria they had put in place during the past few months just came to an end. Let’s cross our fingers and hope that maybe last year’s misbegotten prediction that they would crank out 65k foreclosures is about to come true a year later.
Mortgage rates moved up significantly last week. Will rates continue to rise? Expect mortgage rates to go up this week closer to 3.1%. Freddie Mac will release the 30-year fixed mortgage rate tomorrow morning. Stay tuned.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!