Friday, April 4, 2008

The $600k club


When you are a little too good for the $500k club you need to join the $600k club. The newest member of this exclusive club is at 22383 Quiet Bay Dr. in So. Corona.

This home is in The Retreat and was built in 2006. It looks like it sold new for $1.31 million which is amazing for a tract home is So. Corona. The home is 4152 sq/ft and has 4 beds and 4.5 baths. The lot is small for the retreat at just over 9000 sq/ft.

This one went back to the lender in late Jan for $787k. That seems like a very small amount considering the original purchase price. I think this poor sap may have actually made a hefty down payment on this house.

The bank has listed this home at $670K which make this home nearly 50% off the original purchase price and a total loss of $640K (assuming they can actually sell it at this price)

But wait, this fella is not the only member of the $600k club on this street! 22369 Quiet Bay is also for sale as a bank owned propery. It's the same model as the first home just a few houses away. This home was purchased new for 1.38 Million in Jan 07!. The bank got it back a short 12 months later for $980k. This also looks like the buyer might have actually put some cash into the deal ( I just can't see them having a 2nd for 40% of the purchase price). The bank has this home listed for $750k. That is $630k less than the original purchase price for a loss of about 45% if they can get the price. That is highly doubtful now that a model match a few doors away is $80k cheaper.

19 comments:

Oh_canada said...

I am having a hard time wrapping my mind around the fact that anyone paid nearly 1.4 million US dollars for a tract home in south Corona. And that was back when the US dollar was still actually worth something.

Anonymous said...

Golfer,
The banks are also taking a long time with REO's also. It is puzzling when you consider the costs to carry the property. I have several offers on REO's, including one the realtard put in escrow based on lender's acceptance.That was 6 weeks ago......
The banks are in no hurry for several reasons:

1. Mark to Market accounting rule changes being proposed by congress
2. Trading of over-priced securties at the fed window.( using over-priced RE0's as collateral.}
3. Servicers(banks) make more fees the longer they stretch out the problem.
4.They are hoping for more bail out gifts by the Fed and HUD.
5. They are hoping for a spring/summer "bounce"

Add 5 more and we can send in to "Top Ten" reasons to the "late night Letterman show".
I am sure your readers have 5 more reasons, but trust me when I tell you at least 70% of the pendings are "REO's. and the pull through ratio's are under 30%.

golfer_X said...

6 they can't put all their REO on the market at once or the inventory would go into decades instead of months/years

7 they would need to double thier payroll. But at least that would help the dismal employment numbers.

8 putting too many on the market at once would have the effect of further tanking the prices as they competed for the few qualified buyers.

9 There is probably a shortage of real estate sign. Of course making millions more of them would help the troubled lumber market.

10 It would not look good on those fancy graphs and charts the Fed and the other gov agencies put out every month. Although they already look like flight path of a brick thrown from a tall building.

PS said...

Looking at foreclosure.com, in that tract of homes it looks like nearly every home is in trouble one way or another. The ones that are not REO's or don't have an NOD filed against them are delinquent on the property taxes. The HOA fees and the Mello Roos alone also add quite a premium for living in that development. In 5 years that might be a nice area to live but currently that area is foreclosureville and it will be for quite some time. I've also heard rumors that the private golf course is in financial trouble. Anyone else heard anything about it? (A friend on mine that knows a member told me this so it's a third hand rumor).

Anonymous said...

Golfer,
You added 5 more very good reasons for the banks/servicers slow process of bringing REO"S to the market. I am responding to your comments about "short sales" being a waste of time. Active REO's on the market are starting to go the way of short sales, the banks/servicers are delaying active REO's they have in the current market.
They tell the realtor they agree with the offer verbally, and then sit on your offer going on a fishing expedition. I have seen enough of this to tell a trend is developing, you have to have the patience of jobe in this market.
Hopefully by fall the buyer/seller stand-off of REO's will favor the buyer, but I am in contact with several banks, who are prepared to deleverage their balance sheets and spread this out over 12-24 months hoping to wear the buyers down. Many of the banks have found"support levels" in the form of vulture funds who will buy the distressed paper at 40-60 cents on the dollar. which is equal to 55-75 cents when you add the cost of foreclosure, etc.
In order to be sucessful your readers need to know the thought process on the other side(banks).

PS said...

That's an insane gamble on that banks part if they really are doing that. If the current recession turns out to be a bad one (ala the 70's) that could kill the already on life support RE market. That tactic would only work if every bank did it. One or two banks selling there REOs at what they should be going for would turn a plan like that into a big bag of crap. That just seems like an impossible thing to pull off.

I don't thing the banks are holding the properties for that reason. More likely they are hoping for some kind of government bailout program for the lenders.

Anonymous said...

PS,
Not sure how well you understand the banking business, but 84% of all loans are serviced by 10 banks/servicers.
This is not the 70'or 80's when the business was fragmented among hundreds/thousands of players.
This is a banking cartel. They are all playing games, I am dealing with 7 of the 10, and they are in no hurry to give out deals.
Not sure if you are in the market, why dont you make an offer that gets accepted and see, maybe you will become a believer.
Please re-read the post above(reasons 1-5) those rules existed only in the last few years my friend, this is not the 70's......this is a brave new world. Three banks control 30% percent of all deposits in the US, and 47% of all loans serviced.

Anonymous said...

Hi Golfer,

I love your blog. Maybe you could do some post on the Green River area of Corona. The little gated neighborhood below the dam has dropped severely and the homes off Green River near Prado View Elementary are also tanking hard. Also there is another gated neighborhood that were over million dollar homes Sierra Peak I think that are down in the $600K's I believe. I used to live in the area so I would enjoy seeing these "close to OC" homes profiled.I remember laughing at the prices in 2005 when my husband and I refused to buy and everyone saying what a sure thing that area was especially being so close to OC!

Anonymous said...

The Servicer's actions with the REO property is very predictable. Their actions are governed by agreements that require an appraiser or Broker Price Opinion before selling. The sale price must be close to such values. At present, the BPOs and appraisals do not reflect the current market, probably due to so few real comparable sales. So the offering prices are too high. The Servicers cannot simply accept your low ball offer to move the property. They must wait a certain number of months, 3 at a minimum, before they can lower the price. Even then, the price can only be dropped by a fixed percentage, 5 or 10 percent. After one year with no acceptable offer the Servicer can get a new appraisal or BPO and set a new price accordingly.

PS said...

Does that mean a REO is property that is actually owned by the bank would have a better chance of a quick sale at a lowball offer? If the property is owned by investment pool but serviced by a bank I could see where that would slow the process but if there is no middleman it seems like you could get a better deal.

I suppose a quick title search would tell you who actually owns the thing.

Anonymous said...

Anonymous at 1:49 am is correct. Keep in mind that around 8 out of 9 mortgages were sold to investment trusts where ownership and risk was dispersed to multiple investors.

The "servicer" that deals with defaulted loans in a trust often has no skin the game. He doesn't make any more or any less money if he gets a good quick recovery or a lousy slow recovery. His only financial interest is to avoid liability from investors, and that liability will only arise if he deviates from the governing documents of the trust. You won't get rational economic behavior from someone with no economic interest in the assets.

Anonymous said...

Not to change the subject. But has anyone else seen the big bus caravan limo rides?? The banks are now setting up to take many potential buyers around the neigborhood in big groups to look at numerous properties all at once.

Kind a of a open house bus ride. Limo Style
Just saw one of the hopefull buyers on a tv new bit saying this is the time to buy.

I cannot believe this is what the banks are doing. I think they should just lower the prices and let the chips fall where they fall.

golfer_X said...

They had one this weekend in Corona. The Big foreclosure bus tour. 18 people signed up, I read in a press enterprise article that only 4 showed up.

They've been running the repo bus tours up north for months now and they have started in Vegas and Pheonix. I'm sure this will be common in the high foreclosure areas.

I double this will have much of an impact. Driving a dozen people around once a week is not going to dent the amount of foreclosures on the market and the ones coming onto the market.

The prices need to drop, that is the only thing that's going to fix this mess. Right now you get a dozen people trying to get one well priced property. Only one gets it so the other 11 buy nothing. If there were 12 well priced properties you might get 12 sales. The other problem right now is the dismal percentage of buyers that can actually complete the sale. I don't know if it's any better this month but the first couple of months of the year is was something like 3 out of every 10. That just ties up a bunch of properties in limbo while these idiots try to find some way to pay for the house.

I don't expect to see much movement until fall possibly winter. Then I'm expecting the real fire sales to start.

Santa Ana River Rat said...

Hi I'm new to this blog. Very interesting and entertaining. I have a question. I see a lot homes out at Victoria Grove and I hear a lot of agents are making a big deal out of homes there. What's the big deal about this place?

golfer_X said...

I don't think there is any "big deal" about Victoria grove. It's a nice tract but not any more so than many other around. It sits right below the dam for Lake Mathews so keep the flood insurance paid up if you ever buy there. I've looked at quite a few places in the tract. There are a ton of distressed properties just like with most newer developments. I've not seen anything listed that I would say was a smoking deal. The best I've seen in there recently was just over $100 s/f. Most of the REOs still seem to be around $130-$150 s/f which I think is way too high.

Santa Ana River Rat said...

friend of mine just snagged a home for 124 per sqft so is she getting a decent deal than? He's all excited. I went and checked out the house and it looked okay but nothing to write home about. In fact it was REO and the interior was like most repo homes...things ripped out in hurry, closet doors busted and the nice message from the previous owner with a few choice words. Should've taken the pics...

golfer_X said...

In today's market that is a decent deal but it's not a steal. In 6 to 12 months there is a very, very, very good chance that he will have overpaid by 25% or more. Prices are falling about $3k per week right now on average. If you carry that out 6 months that's another
78K. I do think the price declines are might slow a little through the spring and summer.

John said...

Golfer, any comment on the Green River area?

golfer_X said...

I don't watch the green river area. It's not an area I'm interested in so I don't pay much attention to it. I have watched some of the bigger homes on the westside up neat the hills plummet in price but they are a little stickier than the South Corona homes. I'm sure all of the area will see similar declines once this all plays out. The price declines are moving west, like a ripple in a pond.