Real Estate Crash thread

[cramer]

http://seekingalpha.com/news-article...mes-fell-in-1q

Foreclosure sales, which include homes purchased after they received a notice of default or were repossessed by lenders, hit the highest share of overall sales in a year during the first quarter, foreclosure listing firm RealtyTrac Inc. said Thursday.

"It's an astronomically high number," said Rick Sharga, a senior vice president at RealtyTrac. "In a normal market, you're looking at the percentage of homes sold in foreclosure to be below 5 percent."

The pace at which homes are entering the foreclosure process has slowed in recent months amid bank and court delays. But distressed properties remain a fixture of a housing market still searching for a sustained recovery. The properties, often in need of repair, typically sell at a discount, weakening prices for other types of homes.

As a slice of all home purchases, foreclosure sales peaked two years ago at 37.4 percent. In the first quarter, they rose from 27 percent in prior quarter, but fell from 29 percent a year earlier, according to RealtyTrac.

Sales of foreclosure properties didn't fare much better than other types of homes, however.

In all, 158,434 homes in some stage of foreclosure were sold in the first quarter, down 16 percent from the last three months of 2010 and down 36 percent versus a year ago. Sales of all other types of homes also declined sharply, according to RealtyTrac's figures, which differ from other home-sales estimates.

While the number of bank-owned properties sold declined, they grew as a share of all home sales. Bank-owned homes accounted for nearly 19 percent of all sales, up from 17 percent in the fourth quarter and up from 18 percent a year ago, the firm said.

That's not good news for the housing market.

RealtyTrac estimates there are 872,000 homes that have been repossessed by lenders, but have yet to be sold. At the first-quarter's sales pace, it will take three years to clear the inventory of 1.9 million properties already in some stage of foreclosure.

For bank-owned properties alone, that amounts to a 2-year supply.

"Clearly, the housing market is not out of the woods," Sharga said.

Homebuyers who purchased a bank-owned home in the first quarter saved an average of 35 percent versus the average price of other types of homes, RealtyTrac said.

That discount is unchanged from the previous quarter, but up from an average of 33 percent a year ago.

Buyers who snapped up other homes in the foreclosure process, including short sales, got an average discount of 9 percent, the firm said. That's down from an average of 13 percent in the fourth quarter and an average of 14 percent a year ago. In a short sale, the seller and their lender agree to sell the home for less than what is owned on the mortgage.

The biggest foreclosure discounts were to be had in Ohio, where foreclosure properties sold for an average of 41 percent less than other types of homes, RealtyTrac said.

The average sales price of a foreclosure property was $168,321, down 1.9 percent from the fourth quarter and 1.5 percent from the first quarter last year, the firm said.

At a state level, Nevada led the nation with foreclosure sales accounting for 53 percent of all home sales, RealtyTrac said. That was down from 59 percent the year before.

The state has the highest foreclosure rate in the nation and an inventory of nearly 28,000 bank-owned properties on bank's books. Buyers scooping up foreclosure properties there in the first quarter got an average discount of nearly 18 percent compared to the average sales price of other types of homes, RealtyTrac said.

In California, foreclosure sales accounted for 45 percent of all home sales in the first quarter, down from nearly 48 percent a year earlier. The average foreclosure property sold for nearly 34 percent less than the average sales price of homes not in foreclosure.

In Arizona, foreclosure sales represented 45 percent of all home sales for the quarter, down from 47 percent a year earlier.

Several other states had foreclosure sales that accounted for at least one quarter of all home sales in the first quarter: Idaho, Florida, Michigan, Oregon, Virginia, Colorado, Illinois, Georgia and Ohio.

Look for the loan mods, short sale and foreclosures to speed up. bofa is beefing up loan mod/short sale/foreclosure folks at 40 different sites. They just dumped 350 of them in my building. Anyone with a loan with the bank will be going through the process of the 3 things i mentioned with one person. I'd expect short sale city. Loan mods, i have no idea how those will work. I'll have to go chat it up with these new folks and get the scoop on those. I think foreclosure is the last thing the banks want to do. It will just cost them more in the long run. Although if you are that delinquent, id think they'll kick you to the curb and quickly. Once they clean up this mess, which they should have done a couple years ago imo, we'll start to see some kind of stabalization in those housing markets still on a freefall. 2014 i think we'll start seeing people entering back into the housing market. All the folks who foreclosed, short sold, etc will be able to score FHA loans and id imagine that the banks will start loaning money again after tightening down the straps the last couple of years. Once that happens, some of us will start seeing some equity in our houses, not much, but enough that if we sold we could go out and buy a new place for 50-100K more with a 20% down payment from our sale. just my .02. I think we are turning the corner...At least in the heavily populated areas. Rents are more expensive than owning. Once peeps are able to qualify for loans again, they'll buy. The ones house squatting and trying to get loan mods are the ones that will ultimately be waiting the longest. They should have realized they made a bad decision, short sold their shit and get back in the game 3 years down the road.

[Chainsaw_Willie]

I'm amazed at how much prices have dropped around here in the last 3 years. House one block from me, in nicer shape than the dump I live in, larger and with a tiny bit of a view just sold for $150K. It had been on the market for about 18 mos, originally at $240. Last I saw a couple months ago they were asking $190 and I thought that was a good deal. To see a decent house inside the city limits in a not-so-bad neighborhood sell for $150 has me wondering just how much farther things will go down? It was 2001-2002 the last time you could buy anything in this area for that.

My plan was to wait 'til the end of this year then start looking at foreclosures and short sales but now I'm out of work so that's not going to happen.

[Moeghoul]

What's the best way to circumvent realtors and get direct access to short sales and REO's? Contact the lenders directly? I've checked out the web for this kinda info, but it seems all these sites are "pay to play" for listings, they don't list addresses and the whole thing smacks of bullshit and potential for abuse. I've seen several homes were interested in thru ordinary realtor channels. What's the rule of thumb for making an offer. For example, if the asking price is 250,000, I'm thinking offer 220,000. I know there's other things to consider, like recent comps in the area, how motivated/desperate the seller is , etc.

How much would you pay for this place?

http://www.hickokandboardman.com/rea...tml?searchID=0

[Benny Profane]

What's the best way to circumvent realtors and get direct access to short sales and REO's? Contact the lenders directly? I've checked out the web for this kinda info, but it seems all these sites are "pay to play" for listings, they don't list addresses and the whole thing smacks of bullshit and potential for abuse. I've seen several homes were interested in thru ordinary realtor channels. What's the rule of thumb for making an offer. For example, if the asking price is 250,000, I'm thinking offer 220,000. I know there's other things to consider, like recent comps in the area, how motivated/desperate the seller is , etc.

How much would you pay for this place?

http://www.hickokandboardman.com/rea...tml?searchID=0

Cash is King. Those are the people getting these REOs.

[liv2ski]

What's the best way to circumvent realtors and get direct access to short sales and REO's? Contact the lenders directly? I've checked out the web for this kinda info, but it seems all these sites are "pay to play" for listings, they don't list addresses and the whole thing smacks of bullshit and potential for abuse. I've seen several homes were interested in thru ordinary realtor channels. What's the rule of thumb for making an offer. For example, if the asking price is 250,000, I'm thinking offer 220,000. I know there's other things to consider, like recent comps in the area, how motivated/desperate the seller is , etc.

How much would you pay for this place?

http://www.hickokandboardman.com/rea...tml?searchID=0

Moeghoul,

I haven't looked into your first question, but I am sure you can get a list of homes that recently had NOD's filed on them from a County Clerk. To buy those on the Court steps, you will need the cash, no loans. Access to Short Sales can be found on most any RE website if you search for "short sales". You will want a good agt to help you through a short sale. Even if it is the listing agt.

As far as how much is that home worth? I tried to look at the last time it sold info on Zillow and got nothing, which was odd. Do your research and get a feel for what year level (2002) homes are selling at in the area you like. Frankly, you know I think prices will continue to go down, so I wouldn't be in a big hurry to buy before 2012.

[bucbanzai]

Don't take this the wrong way, but if you don't know the answers to the questions that you are asking you have no business 'trying to circumvent realtors'. Banks list all their properties with realtors because there is a mountain of regulatory paperwork that must be completed and they pay the Realtor to deal with that shit. The banks do not have enough people to deal with all the properties individually. As liv2ski mentioned, you can search the public records for Notices of Default, Lis Pendens and such but it sounds like you do not know enough about those things to do that. Try homepath.com , all Fannie Mae and Freddie Mac foreclosures are listed there. Good info about financing there too.

My suggestion is instead of trying to circumvent the realtor (who are pretty good at not letting that happen), use them to do all your research for you. Let them find all the comps, talk to many and get a better idea what properties are going for. If you are a serious, qualified buyer you will get all the attention you can handle. The best money you can spend sometimes is to take an appraiser to lunch. They have all the info and are usually pretty good about sharing. FYI too, short sales can be a giant PITA. You may wait months for an answer and then the answer is no with no explanation or counteroffer. In the meantime, you have missed other possible deals. Foreclosures where the Lender has actually taken the property back are much cleaner deals although by the time you get to that point, the properties themselves are much rougher.

Good Luck.

[Moeghoul]

Thank for all the insight, guys. As it turns out, the properties I'm looking at are all listed. I never used realtors for the properties I purchased, not that I was intentionally avoiding them, it just turned out that way. I need to get my ass up to VT in the next month or two and meet up with brokers/agents and walk thru some of these places.

[yonskion]

Large institution REO's are now sent out to 3rd parties for listing. In the nearer future they will be released and will go directly to approved listing agents........... long story short get in line

[cramer]

Don't take this the wrong way, but if you don't know the answers to the questions that you are asking you have no business 'trying to circumvent realtors'

If you are trying to buy or sell a short sale, your realter is your best friend. find one that has experience and a track record of doing it. My bro in law short sold his house back in 09, there is nobody to thank but his realtor. Period. There is no arguement here, get a good experienced short sale agent.

[liv2ski]

If you have cash to work with and feel pretty financially solid, looking into Investment Property may be a smart option for you in the coming 12 months.

http://finance.yahoo.com/banking-bud...&asset=&ccode=
As home prices fall and rents rise, some investors are plunking their money into real estate, chasing the cash flow that comes along with becoming a landlord.

"For the first time in a long time, you can buy that home and can get a cash-on-cash return immediately," said William King, director of valuation services for Veros Real Estate Solutions, a supplier of housing data to the country's largest banks, as well as government organizations. "There are a lot of places in the country where an investor can buy a single-family home, rent it, and get a positive cash flow."

In fact, investors bought 20% of all the homes sold in April, according to the National Association of Realtors. Some of them are buying with cash.

But even if they do finance part of the purchase, they're able to turn around a profit much quicker than they would have been able to in the past, King said. And the return on rentals can be much better than returns on other investments these days, he added.

In the past, investors would subsidize their monthly payments on a property with the rent they were able to collect, and the big payoff was the price appreciation he or she would accumulate, he said. Now, investors can come in with a 25% or 30% down payment, finance the rest, and the rent they collect often can cover the mortgage payment, taxes and insurance — with additional cash left over, he said.

Best Markets

Many investors sink their money into properties not far from where they live. Those are likely the communities they're most familiar with, and from a management perspective, you're never far from the tenants you're dealing with.

But some markets are better than others to invest in right now.

A recent report from Inman News, an online real-estate industry publication, named the 10 best markets for home investors. These are markets with traits including high affordability, low prices, high share of foreclosure sales, high population growth, improving unemployment rate, and high return on investment in the next 10 years.

The following are their top 10 markets:

1. Indianapolis-Carmel, Ind.

2. Winchester, Va.-W.Va.

3. Gainesville, Fla.

4. Tucson, Ariz.

5. Tallahassee, Fla.

6. Hagerstown-Martinsburg, Md.-W.Va.

7. Salt Lake City

8. Richmond, Va.

9. Gainesville, Ga.

10. Winston-Salem, N.C.

[Benny Profane]

First, you say.....

If you have cash

But, the article implies......

But even if they do finance part of the purchase, they're able to turn around a profit much quicker than they would have been able to in the past, King said. And the return on rentals can be much better than returns on other investments these days, he added.

In the past, investors would subsidize their monthly payments on a property with the rent they were able to collect, and the big payoff was the price appreciation he or she would accumulate, he said. Now, investors can come in with a 25% or 30% down payment, finance the rest, and the rent they collect often can cover the mortgage payment, taxes and insurance — with additional cash left over, he said.

Sorry, but this is just such simplistic NAR hype, echoes of earlier in the decade, when no to little money down real estate was a great investment. Sorry, welcome to 2011. Cash is cash, it isn't financing. You better be a fucking prince with a pristine credit score and history before anybody private will lend you a substantial amount of money when you want to change careers to be a landlord. It ain't that easy. Certainly not as easy as trading paper for low commission on your smartphone. Ask Meatdrink. It isn't a game for amateurs, especially if you're some over 60 guy looking for 8% instead of 2% on your money. Which is really what all this is about, right? Chasing yield? ...........

And the return on rentals can be much better than returns on other investments these days, he added.

Good luck with those tenants when things go crazy. Your mutual fund doesn't call you up at 4 in the morning with plumbing issues.....

[liv2ski]

Good luck with those tenants when things go crazy. Your mutual fund doesn't call you up at 4 in the morning saying "can't pay the rent, I lost my job".....

I will admit, that is a primary concern of mine in the future, as I mentioned to Meatdrink pages ago when discussing the merits of Rental RE. As far as Mutual funds are concerned, I would personally be very cautious about being in a stock type fund at this point. Investing in more rental RE, is something I may pursue in the next 12 months, if the shit doesn't hit the fan and Congress makes meaningful budget cuts to balance the budget. The reason to pursue rental properties Benny, is in many cases, I am sure you can get a 10% yield/ROI if bought for cash. That doesn't include any appreciation you may get over years of ownership. I have plan B in case Congress drops the ball.
I do N/O loans for customers all day long. I am well versed in the underwriting guidelines and getting a loan isn't as tough as your above post would make it sound. However, per my original comments, buying N/O property is for solid individuals who feel pretty good about their future prospects. Even with a 40% decline in values, the rentals we bought years ago will be great long term investments IMO. Just wanted to put some food for thought out there.

[Benny Profane]

if the shit doesn't hit the fan and Congress makes meaningful budget cuts to balance the budget.

Now, you're really talking crazy.

[skiballs]

What do ya know, L2s is trying to cheer benny up.
I know you had it in you.
I know benny will love this, rent to military and government employees, rent comes strait out of their paycheck to the landlord.

[Benny Profane]

rent to military and government employees, rent comes strait out of their paycheck to the landlord.

Both industries downsizing at the moment. Smart.

And, all rent pretty much comes straight out of paychecks. Mine certainly does.

[skiballs]

Both industries downsizing at the moment. Smart.

And, all rent pretty much comes straight out of paychecks. Mine certainly does.

Brac is adding 60k of military jobs in Baltimore/Washington corridor, i'll take my chances.
You work for a private company, that sends a check directly to your landlord?

[meatdrink9]

I'm continuing to see rentals go crazy. We listed our place in Denver on Craigslist and had over 24 responses in 24 hours. We deleted the ad before it was even up 24 hours. We had 10 showings scheduled within those responses and had multiple people fighting for it after just the first day of showings. It went to 3 guys all with credit scores close to 800. Each could have qualified to buy the home (military officers). Pretty crazy.

I think besides the fact that less people can qualify for loans to homes even more people now have a distaste for owning after being burned by this whole mess. Renting does make sense for a lot of people. Also, I think our society is continually moving away from obligations... Less people getting married, 30 is the new 20, 40 is the new 30 etc... People want freedom and flexibility and renting is certainly far more free than owning. I think it's a very good time to be a landlord and a good time to acquire more places.

I'm looking to package my existing 10 mortgages and get one large commercial loan to cover them all so I'm back 0 mortgages and can go grab another 10 places. Right now paying with cash I can only do a couple of places per year.

[liv2ski]

I'm looking to package my existing 10 mortgages and get one large commercial loan to cover them all so I'm back 0 mortgages and can go grab another 10 places. Right now paying with cash I can only do a couple of places per year.

Meatdrink, look into the smaller Community Banks, as they are the most open to this kind of cross colateralization of properties under one loan. Wells Fargo, BofA, not so much.

[Hutch]

I'm looking to package my existing 10 mortgages and get one large commercial loan to cover them all so I'm back 0 mortgages and can go grab another 10 places. Right now paying with cash I can only do a couple of places per year.

I bet you would have no trouble getting a private refinance for your portfolio but that would potentially eliminate your ability to strategically default on one property in the future if for some reason it was worth shedding.

[Missing Sock]

I'm continuing to see rentals go crazy. We listed our place in Denver on Craigslist and had over 24 responses in 24 hours. We deleted the ad before it was even up 24 hours. We had 10 showings scheduled within those responses and had multiple people fighting for it after just the first day of showings. It went to 3 guys all with credit scores close to 800. Each could have qualified to buy the home (military officers). Pretty crazy.

Having a very similar experience in Denver. Wife and I have a 2 bedroom condo in Lodo that we are moving out of and were absolutely bombarded with emails when we put our add up on a price that would have come in about $200 above monthly mortgage and HOA dues. Our move ended up being pushed back to late August/September so we ended up pulling the ad down and will likely re-list in mid July at a price a couple hundred bucks higher. A lot of new inventory coming into the Denver market though in 2012-2013 with multiple downtown projects with 200+ units currently under construction.

Agree with liv2ski on community banks. We got our mortgage in October 2008 through First Bank of Colorado who didn't blink at a 90% LTV loan on a new construction condo (over 4 stories so it was also a highrise?) while the Wells Fargos and Bank of Americas wouldn't go near it.

[liv2ski]

I bet you would have no trouble getting a private refinance for your portfolio but that would potentially eliminate your ability to strategically default on one property in the future if for some reason it was worth shedding.

Hutch makes a good point. It is my understanding that a purchase deed of trust has no deficiency judgement in CA (not sure about other states) if you mail the keys into the bank for some reason. Once you refinance the loan, it is my understanding you lose that right, so technically a lender could get a judgement against you if you default on the loan. Presently Federal law has waived Uncle Sam taxing you on the forgiven (deficient payoff amount) debt, but I believe that expires in the fall. Obviously, any mag underwater on a home loan needs to talk to a lawyer to find out what they are dealing with before doing a short sale or mailing the keys back in.

[meatdrink9]

Missing Sock, my friend helping me rent the place out there said if the none of the 10 showings panned out in a lease to re-list it higher. It was a feeding frenzy. The property cash flows close to $900 a month as is and I get another $800 a month in principal paid down (only 7 years left on the mortgage) so I already felt like I was getting a good deal.

Liv2Ski, Bank of Utah is going to be my target. I've had a few discussions with them recently about loan ideas, but not this exact idea yet. My last idea was that if I make a very large deposit in their bank (which gives them the ability to lend 10X or more on my deposit) that they simply lend that 10X created by my deposit back to me. Unfortunately, they never really found a loan department or person to really investigate that concept much (foreign/new idea). This other idea seems more plausible/normal.

Hutch, that makes sense. I really don't see myself defaulting on anything. I have a few dogs in the portfolio that I wouldn't mind selling and buying other properties with, but all of the properties cash flow and all of them have a decent amount of equity.

[cramer]

Wow some of you did it right. You guys with the rental properties, sounds like you hit it earlyi and didnt buy anything after 2003 or 2004? I guess my question is, is it a bad time to invest in property ive been seeing sit at the same value it has been since 08-09? give or take 15K? Right now its back to the give 15K not taking.

[liv2ski]

^^^ Cramer, every area is different as far as what value the properties have fallen to. Some are selling at 2002 levels, others the late 1990's. You can look at Zillo.com to see what other comparable homes have been selling for. You should talk to a few agents and ask them for closed comps and their opinion on the value trend. In CA, it is down, that is why I suggested people interested in rentals may want to start doing their homework and look at areas over the next 12 months, so a rational (not spur of the moment) decision is reached.
If an area is down 60% off it's 2006 highs, and has stayed stable since 2009, your likely close to a bottom. But if it is only down 30%, I would wait to see what happens. Also look at the cost per sq ft. Once you get below replacement cost, ($100 a sq ft?) it is hard to imagine it will tank a bunch more, but you need to do your homework.

[meatdrink9]

Good advice above. You need to know your specific market to know whether or not investing is a good idea. I really like the space I'm playing in. I'd also say that roughly 90% of my portfolio was purchased after 2003-2004. But I'm incredibly conservative financially. I've always bought fixer uppers/REOs well below market value. During the boom many other investors were buying 300 to 400K spec homes using the logic: "If it goes up 25% per year the more expensive the home the more money I make." Most all of those guys went bankrupt. Don't speculate. My motto is if it doesn't make sense (money) today it's not going to in the future. I can't be feeding projects. I need them to feed me. I think I played even more conservative due to this thread and had a better national perspective than a lot of other local players had. We were usually about a year behind the rest of the US.