Sunday, May 3, 2009

The Housing ATM is Out of Order

Address: 1140 E Ocean Blvd #312, 90802
Asking Price: $274,880
Year Built: 1973
Size: 1 beds, 1 baths, 720 sq. ft.
$/Sq. Ft.: $382
HOA: $323.85
Purchase price: $180,000
Purchase date: 8/2001
MLS#: S561106
On Redfin: 99 days
Down Payment: $55,000
Monthly Payment: $1,700
Income Requirement: $79,000
Description: Ocean front property, steps to beach..View! View! View! Incredible ocean view from Long Beach to Newport!! Large balcony perfect for entertaining! Textured walls and ceiling, recessed lighting. Walk-in closet in the bedroom. Clubhouse has direct access to beach.

Pro-Tip: If your property has been listed at $249,880 for a month and has not garnered any interst, lower the price.

What did this idiot do?

He jacked up the price by 10% and is shocked--shocked, I tell you--that nobody is kicking down his door trying to put in an offer.

Our hopeful short seller purchased this apartment for $180,000 in 2001. Assuming he put 10% down and financed the remaining $162,000 at 6%, after eight years of ownership he should have close to $100,000 in equity. Hell, a few more years and he would own this beach-front shoebox outright.

But something mysterious happened along the way.

You see this property, asking $274,880, is a short sale.


I don't have the loan information, but it's pretty obvious he refinanced the holy hell out of this apartment and took out his down payment money and $100,000 in equity to spend on God-knows-what.

Home Equity Line of Credit Panty Party!


That's the only way to explain how this thing ended up a short sale.

It's amazing to me that our economy since about 2002 has been based on phantom money. We have been living in a fake economy. Car purchases, vacations, remodels (and actual models, probably), investment properties, nice dinners...all provided by equity extraction and HELOC abuse. Considering paying all of that money back was solely dependent upon real estate always going up in value, it was all a farce. A scam. A false, sleight-of-hand economy.

Sorry, but major auto manufacturers and retailers don't suddenly go out of business because of a few lousy quarterly earnings reports. I mean, people still have to live and are still purchasing. It's just that when an entire economic system is founded upon fake, unearned, easy money, and businesses expand based upon an expectation that the housing ATM will continue to provide ad infinitum, when those mountainous stacks of monopoly money disappear it causes utter chaos.

What a mess.

Back to the property: I wouldn't be surprised if this thing rolls back past its 2001 price of $180,000. First, the building is obviously ocean-facing, but this unit is most likely not (we have no photos to verify). The realtor's description is very careful to avoid actually saying the unit has an ocean view. Second, we have no idea what the interior looks like. Third, any bank stupid enough to raise the price with a Notice of Default Tsunami casting a long, ominous shadow over Southern California is too dumb to accept a reasonable offer and get it off their books.

Translation: By they time the bank finishes dancing the Notice of Default/Notice of Trustee Sale/Foreclosure/Back to Market mambo and finally takes the property back, the market will have long since passed them by.

For a glimpse into this bank's future, look no further than the larger apartment two buildings over (no pool, but the HOA is $100 less):


Sep 01, 2005 - Sold $359,000
Sep 19, 2008 - Listed $309,000
Sep 22, 2008 - Price Changed $289,000
Oct 01, 2008 - Price Changed $279,000
Oct 08, 2008 - Price Changed $269,000
Oct 22, 2008 - Price Changed $259,000
Nov 07, 2008 - Price Changed $249,000
Nov 10, 2008 - Price Changed $179,000 (no price cuts since November!)

[By the way, 24 3rd Place was featured in a pretty funny post last September. Notice in the 223 days since that skewering, they have still not corrected their ridiculous "quotation mark" problem.]

Ouch! That's some serious market-chasing! So, just to be clear, the neighbor is begging for $242 per square foot and still getting no offers. Our bailout bandit at 1140 E Ocean is taking an awfully big gamble that people will find his place "special" enough to pay $382 per square.

LOL! Best of luck with that, slick.

BUT, the good news is that while the bank is dicking around trying to get a wishing price for this place, the occupant gets to live 100% rent-free.

Sure, his credit will take a temporary hit once the foreclosure goes through, but just think: With all that HELOC and cash-out refi money, during the last few years he got to buy an AMG Mercedes, party in Ibiza, score a sun-dial-sized Breitling, eat at 5-Star restaurants, get bottle service in Vegas...and now he gets about nine months of free rent while living on the beach.

The best part? When the party is finally over, he gets to stick us taxpayers with the tab.

What a country.


  1. "Sure, his credit will take a temporary hit once the foreclosure goes through, but just think: With all that HELOC and cash-out refi money, during the last few years he got to buy an AMG Mercedes..."

    And it's almost funny, that money is tax free! I'm not really crazy about taxing people, but I'll smile when the IRS send them a nice, fat tax bill. Same thing about stated income: pick one, tax fraud or mortgage fraud.


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