Flipped Off Flipper: UPDATE

The status was "Active" and changed to "Contingent"

I don't buy it. This apartment has been rotting on the MLS at $299,500 since November, and now it suddenly goes contingent after a measly 3% price reduction? I smell horseshit.

Anyhow, the current list price of $289,500 is just $27,000 more than what this flipper paid for it in June of 2009 -- a far cry from the $62,500 premium he tried to get last summer. Factor in about $17,000 in commissions and we're looking at a razor-thin profit margin.

Oh, but don't forget about the 13 months of carrying costs, including $5,460 in HOA fees, for this unoccupied unit. I think it's safe to say this flipper will absorb a loss in the tens of thousands for his delusional attempt to make real estate riches by "buying at the bottom" of '09.

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Address: 5200 East ATHERTON St #125, 90815
Asking Price: $299,500
Beds: 2
Baths: 1.75
Sq. Ft.: 1,241
$/Sq. Ft.: $241
Year Built: 1965
MLS#: S581393
On Redfin: 222 days
HOA: $420
Down Payment: $60,000 (20% down)/$12,000 (FHA)
Income Requirement: $86,000
Monthly Nut: $2,000 (20% down)/$2,200 (FHA)
Description: This SPOTLESS and HUGE 1300 sqft 2 bedroom - 2 bathroom 'C' Model has been scrubbed, painted, hardwood floors refinished, ceiling acoustic removed with new skip-trowel finish, new baseboards installed, recessed lighting in kitchen & bath, kitchen cabinets refinished, new faucets, new mirrored closet doors, vertical blinds, stainless steel appliances including cooktop, built in oven, over-cooktop microwave, dishwasher AND new dual-pane windows throughout plus slider door. It even has central air and heat!!! This is one of the nicest, cleanest, most dialed-in properties I have seen! HOA fee includes TONS of STUFF like CABLE-WATER-TRASH-PEST CONTROL-MASTER FIRE INSURANCE-PLUMBING-ELECTRICAL-ON SITE MAINTENANCE PERSON and MORE!!! GARAGE directly UNDER unit & NOBODY BELOW!!! Come and make it yours!!!

Look, I'm fine with rounding up square footage just to make it easier, but this idiot is taking it to new heights. The listing information clearly states it's 1,241 square feet, meaning you can reasonably round up to 1,250. This jackhole for some reason decided rounding up to "1300" was appropriate.

Yes, it's not exactly the height of dishonesty, but it gives you an idea of the type of realtor we're dealing with.

This apartment in the Los Altos area would make a fantastic rental for college students. In fact, when I went to CSULB I lived right down the street and really enjoyed it.

However, the area is lousy with drunk college kids, so I doubt an owner-occupier would be interested in living here.

And although the $420 HOA fine seems outrageous, keep in mind cable, water, trash, and insurance are included. Best of all, on-site maintenance (much like living in a rental apartment) is included. That means this truly is approaching the "hassle-free" living all HOAs promise but never quite live up to.

Plus, given the 1965 build date, that maintenance accessibility might come in handy.

Anyhow, I guess the question is whether $2,000 a month is a reasonable monthly nut for this unit. This flipper sure hopes so.

You see, according to Redfin, Flippy McDumbstain purchased "at the bottom" in June 2009 for $262,500--a massive $117,400 discount off the original 9/2008 asking price. Given that, he probably thought he got a smoking deal.

Nov 02, 2009 - Price Changed $299,500
Oct 01, 2009 - Price Changed $309,500
Oct 01, 2009 - Relisted
Sep 18, 2009 - Delisted
Jul 14, 2009 - Price Changed $324,950
Jul 14, 2009 - Relisted
Jul 10, 2009 - Listed $325,000
Jun 30, 2009 - Sold $262,500
Mar 14, 2009 - Price Changed $325,000
Dec 16, 2008 - Price Changed $350,000
Sep 27, 2008 - Listed $379,900

And so after holding it for a whopping 10 days and calling a cleaning lady, he quickly slapped it on the market for $325,000, hoping to make a nice chunk o' change.

The buying public's response?

Not surprisingly, nobody was interested in paying a $62,500 premium over what he paid just a week and a half earlier. And now, 222 days and $26,000 in price reductions later, he's coming awfully close to just breaking even on his "investment."

It appears he has come to two harsh realizations:

1.) In 2009 the bottom most certainly wasn't in, and
2.) Destitute college students can't afford $2,000 a month in rent

Oops.

In fact, the most expensive rent I've seen in this area is under $1,600 and that's in Marbrisa (i.e. gym, pools, in-unit washer and dryer). That $400 - $600 monthly deficit means that even at $262,500 (which, on paper, seems like an okay deal for a two-bedroom), he grossly overpaid.

Worse yet, in November a nearly identical comp in the same complex sold for $282,500. You really think real estate values have shot up 10% in just four months?

Uh, okay.

As I've said before, flipping in this economic environment is A Man's Sport. It takes real stones.

In the coming months we'll see if this flipper has the minerals to keep his wishing price steady as the market continues to fall, or if he finally capitulates, drops the price, eats a financial loss, and retreats to lick his wounds and reconsider whether he's really cut out for the flipping business.

It's going to be an interesting year.

YNGFR: CAPITULATION

The price was "$219,900" and changed to "$199,900"

$220 per square foot for an apartment just 1,000 feet from the sand. This is officially cheaper to own than rent -- even before the tax write-off.

But the bank has no intention of letting the property go for this bargain basement price. Because that would mean recognizing a horrific loss on the books.

So I expect this charade to go on and on and on...with a few price increases thrown in along the way to restart the process. It's been two-and-a-half years so far...I wouldn't be surprised to see this go on until 2012. As long as there are acronym-filled horseshit government programs left to exploit, this could go on indefinitely.

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The price was "$250,000" and changed to "$225,000"

In case anyone is operating under the misguided belief that the banking system has stabilized and housing is poised for a big comeback, I want you to consider that this shitty apartment is still booked at full value on the lender's books -- despite the current asking price being $114,000 less than the 2004 appraised value.

As long as that bullshit is allowed by the government (and in fact actively encouraged by way of mark-to-fantasy FASB policies and various extend-and-pretend programs like HAMP, HAFA, etc.), it will take YEARS for this inventory to actually hit the market. Meaning, returning to true values (based on actual incomes and sizable down payments) will take ages.

I'm tired of waiting -- exhausted, really -- but I'm also no fool. If I could use Other People's Money, this would be a no-brainer. Buy now and walk away if things go south. But I have my own cold, hard cash on the line and as long as countless properties like this are still rotting on the MLS, the buy signal is a long way off.

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The price was "$289,000" and changed to "$250,000"

Well that's one way to get buyers' attention! I guess now the question is whether the bank will actually let it go for nearly $100,000 shy of the original loan amount. I somehow doubt it. But maybe in light of the first-time homebuyer tax credit expiring, they're getting out while there's still some demand left. We'll see.

Sorry for the sporadic posts...I've been on the road all week.

Every time I travel I can't help but observe the local real estate situation. The last time I was in Miami was the summer of 2006, and as I drove around I remember marveling at the incredible number of construction cranes piercing the horizon. At the time I said to myself, "Who are these being built for? Is there that much demand for new housing or even rentals? How does all of this construction make sense?" From what I could tell, the completed towers seemed empty--why build more?

Anyhow, today the cranes are pretty much extinct but at night many of these new buildings were dark, reminiscent of the North Korea Towers in Irvine. Pretty crazy.

South Beach was still fun--it hasn't lost any of its swagger in this downturn.

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Address: 1318 East 2ND St #9, 90802
Asking Price: $289,000
Purchase Price (2004): $329,000
Beds: 2
Baths: 1.75
Sq. Ft.: 909
$/Sq. Ft.: $318
Year Built: 1964
MLS#: P701097
On Redfin: 131 days
HOA: $156
Down Payment: $10,000 (FHA)
Income Requirement (4x income): $72,000
Monthly Nut: $1,700 (FHA)
Description: Sunny & bright, this lovely condo has tons of storage space, a spacious dining room and living room, a separate master bathroom AND A PRIVATE GARAGE with storage that is big enough for an SUV! The home has large rooms that make the entire condo bright and roomy. Located just 2 blocks from the beach, this is perfect as a second home, vacation property or a retreat to enjoy every day!

"perfect as a second home, vacation property or a retreat to enjoy every day"? Looks like this bathroom took a vacation to the 1960s:

HORF!

And when was the last time you saw a white refrigerator?

Maybe I've just become accustomed to stainless fridges, but for some reason that outdated clunker is really jarring!

Pssst! Wanna see the secret to selling a tiny, dumpy apartment with original bathrooms in a shaky economy? Here you go:

December 30: The price was "$239,000" and changed to "$289,000"

Genius!

This short selling grifter has been priced below $270,000 for the last 75 days (50 of which were spent begging for $239,000) with no luck, but for some insane reason decided what this listing really needed was a price jack to $289,000. Because there's nothing buyers love more than a good ol' fashioned cornholing.

Dec 30, 2009 - Price INCREASED $289,000
Dec 30, 2009 - Relisted
Dec 03, 2009 - Delisted
Nov 12, 2009 - Price Reduced
Oct 30, 2009 - Relisted
Sep 23, 2009 - Delisted
Sep 18, 2009 - Price Reduced $249,000
Sep 14, 2009 - Price Reduced $270,000
Aug 28, 2009 - Listed $319,900
Aug 01, 2008 - Delisted
May 06, 2008 - Listed
May 06, 2008 - Delisted
Mar 30, 2008 - Listed
Mar 29, 2008 - Delisted
Feb 29, 2008 - Listed
May 25, 2004 - Sold $329,000 ($270,000 puts it firmly in 2002 pricing--the true market value, judging by the failure to sell for $249,000 is likely 2000/2001)

What kind of sales strategy is that? To paraphrase a line from Tropic Thunder, When trying to sell a house, "everyone knows you never go full retard."

Because that's the only explanation for the current price. All the loanowner has to do is click on their own Redfin link to see that nearby properties are selling for nowhere near this amount:

Downtown: $243,000; $271 psft
Alamitos Beach: $225,000; $262 psft
90802: $249,000; $276 psft
Long Beach: $229,900; $256 psft

And here she is, demanding $311 per square! Based on what, honey?

Anyhow, the point of this post isn't about greed or stupidity, or the living hell of two shared walls, or the difficulties involved with short sales, or the insanity of sellers having negative equity after FIVE FUCKING YEARS OF OWNERSHIP yet simultaneously driving $45,000 luxury SUVs...

No. Although all are at play here, this post is really about pent-up foreclosures.

You see, this property is just two months shy of its two year (!) anniversary on the MLS. It's technically not "shadow inventory" because its been out in the open on the MLS, right? But given the lender's failure to approve a sale in 22 months, it has never actually been "for sale." Meaning it's a bank-owned property in denial.

A monster loss is guaranteed, it just hasn't been booked yet.

And after it inevitably goes back to the bank, it will come back on the market at a greatly reduced price (it seems that most times, once the loss has been realized banks just try to unload). However, REOs dumped on the market crush values, putting everyone else in the area (further) underwater and perpetuating the cycle. It makes perfect sense why lenders are intent on keeping these phantoms in real estate limbo for as long as they can.

And without a mechanism to force lenders to actually approve short sales and process foreclosures (read: recognize losses) instead of extending and pretending for eternity, the market will be absolutely surrounded by these phantom properties for years and years, with no opportunity to actually buy them.

If this seller were smart (ha!) she would have stopped paying ages ago and lived rent-free this entire time. If her lender isn't interested in selling short after two years, they certainly aren't keen on foreclosing.

Well, It Was Worth a Shot: UPDATE II

The price was "$279,000" and changed to "$269,000"

I've been seeing $10,000 price reductions ALL OVER THE PLACE since the Federal tax-credit expired, and all it really tells us is that the free government ponies make housing that much more expensive.

I'll remind you, this flopped flip first arrived on the market in March with a wishing price of $339,000. And since then he's been gingerly chasing the market down, perpetually 10 steps behind the curve. Thus far his lackadaisical pricing strategy has resulted in being forced to cut 60 Grand from the original ask -- all to no avail.

And now that the tax credits are history, you have to wonder how much more cold, hard cash his ridiculous strategy will cost him.

Factoring in commissions, he is looking at a profit of $28,000 for this exercise in futility. A pittance compared to what he could have walked away with, but at least it's not a loss, right?

Oh, but we forgot to factor in the ~$10,000 spent sprucing it up and the last eight months of carrying costs. If this fliptard doesn't get real -- and real soon -- it's gonna get real ugly.

The end of The Super Summer Selling Season(tm) is coming up quicker than you think, pal...

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On March 30th I said, "Hey, Flippy, Price Reduction's on line #2. Says it's urgent."

Well, the capitulation has begun in earnest:

May 10, 2010 - Price Changed $309,000
Apr 28, 2010 - Price Changed $319,000
Apr 12, 2010 - Price Changed $325,000
Mar 27, 2010 - Listed $339,000

Those dreams of stacking flipper cash are quickly disappearing like a parakeet fart in Tornado Alley.

And check out this updated description:

Agents Owner Financing available with 20% down 8% rate for 30 or 40 years due in 5. Easy qualifying on credit and income. No appraisal needed or tax returns fast approval no hassles or time delays. Corner-front Condo unit with city views and cool ocean breeze. Two bedroom and two baths newly remodeled. Convenient location close to beach, parks, public transportation, Belmont Shores [SIC] and Shoreline Village. On site laundry facility with 1 car underground parking. Granite, new appliances, carpet and building security with plenty of storage space in unit. Private balcony off of living room. No pets allowed unless buyer has doctor instructions for medical reasons.

First of all, can someone translate those first two sentences for me? You can get financing through the flipper's agent? And despite 20% down you still have to pay an 8% interest rate? And the principal is due in five years? The way it's worded is a complete mess.

And the whole "No appraisal needed or tax returns fast approval" thing makes it sound shady as hell. The only people who care about that stuff are deadbeats with suspicious money issues. And the fact that this flipper is catering to those types makes you wonder about this neighborhood.

And who the fuck wants to buy a place in a declining market WITH NO APPRAISAL?!

That last line is a head-scratcher too. What "medical reason," other than blindness, could someone have that would require them to have a pet? And what about the fellow residents who may have medical reasons to NOT want pets around? So weird.

Whatever. This flipper is in deep shit if he doesn't get his act together soon. I can't wait to see how much he slashes the price next month! Stay tuned.

P.S. If you were stupid enough to buy in March, you would already be $30,000 underwater on your purchase. Good thing you read this blog!

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Not sure if you remember this dump from October 2009, but it turns out just a month after my post a flipper swooped it up from the bank for $225,000 (the lender ate a $200,000 loss on that one).

As crusty as it was, $225,000 was a pretty good deal (in October I said I thought $250,000 penciled out). And like most sales so close to downtown, it represents a 2002 price.

Anyhow, this flipper, instead of taking a shitty property, sprucing it up, and extracting a reasonable profit, has turned out to be just another gluttonous pig with his greedy, money-grubbing snout buried deep in the quick-money trough.

After slapping on some paint, pergo floors, and cheap carpeting, he dumped it on the market with a $114,000 built-in profit.

$114,000!

What a jackass.

Let's see...community laundry, only one parking spot, and located all the way the hell down on Esperanza? For $339,000?!

The average price per square foot in this neighborhood is $274 and he's asking $355?

What the fuck for? Fake wood floors and repainted cabinets (oh, you didn't think we'd notice that)?



And he might have just painted over the pink tiles!

Other than money spots on Ocean, nearby properties don't even come close to asking this kind of money. What a dolt.

Look, I'm cool with flippers improving rough properties (and, in some cases, improving the neighborhood as a result) and making a little dough. Hell, in this environment you gotta have a set of dangling bowling balls to try your hand at flipping, and you should be rewarded for the risk you're taking. As far as I'm concerned, party on Wayne.

But what I can't get over is the utter contempt some of these flippers have for potential buyers. I mean, he truly believes you and I are complete rubes and that he deserves $100,000+ for doing little more than putting lipstick on a warthog.

Hey, Flippy, Price Reduction's on line #2. Says it's urgent.

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I'm back from Chicago, and let me tell you, there aren't many better cities to celebrate your birthday. And speaking of cities with a condo problem:

1329 E 1st St #18, 90802
Price: $250,000
Beds: 2
Baths: 2
Sq. Ft.: 954
$/Sq. Ft.: $262
Year Built: 1959
MLS#: T09106531
On Redfin: 5 days
HOA: $150
Down Payment: $50,000
Income Requirement: $71,000
Monthly Nut: $1,500
Description: 2 bedroom, 2 bathroom front, corner unit condo in the Startdust Condo Building with city lights view from private balcony and master bedroom and view of the ocean from the rooftop deck. Located in gated community with underground parking and only 1 block from the beach. Unit has a lot of closet and storage space. Conveniet location. Close to park, shopping, public transportation, downtown Long Beach, Belmont Shore, Shoreline Village and the Pike Center.

"Conveniet"?

It appears the bank took this puppy back in February of 2008 for $375,000. The play seemed to be, "Bubble pricing will be back in no time...let's just wait this out. It can't possibly go any lower!"

Well, they successfully kept it off the market for ONE AND A HALF YEARS (Anybody still believe shadow inventory doesn't exist? Really?) before throwing it on the MLS for--take a wild guess!--$375,000.

I guess it was worth a shot, eh?

Because yesterday (just four days after relisting at that hilarious wishing price) the price was dropped a mind-blowing -$125,000. Ploy to garner a bidding war? Typo? Or the result of actually looking at comps and accepting reality?

Who knows, but that is one hell of a price cut. Check this out this history:

Oct 06, 2009 - Price Changed $250,000
Oct 02, 2009 - Listed $375,000
Feb 22, 2008 - Sold $375,000
Nov 04, 2007 - Delisted
Sep 30, 2007 - Listed
Mar 09, 2006 - Sold $418,000
Sep 27, 2002 - Sold $227,500
May 08, 1990 - Sold $132,500
Apr 19, 1989 - Sold $120,000

Yep, this is a 2002 price! And it's still no guarantee of selling in this market. Because regardless of that aggressive pricing, there is no escaping how dumptastic this place is:



Good grief, Charlie Brown, what a crap shack.

BUT, it's approaching rental parity, so this might be a decent buy.

Think about it: Get an FHA loan, use the (coming) $15,000 homebuyer tax credit for your down payment, and when you fall deep underwater, stop paying and live rent-free for a while, and just walk away with a wad of saved cash and a dinged credit score when they finally kick you out. If anybody gives you static about your FICO, just tell them, "Hey man, it was 2010."

Believe me, everyone will understand.

Mortgage Interest Deduction: Myth or Freaking Awesome?

Mike in LBC wrote in with a great question. In case you don't read the comments (come on, join the discussion!), here is what he asked:

El Bee, could you school me on a blog when you have a few?

This article will probably interest you regardless:

http://finance.yahoo.com/news/5-Home-Ownership-Myths-to-usnews-3874381652.html?x=0

But I was particularly interested in the "myth" that you don't save in tax deductions from the purchase of a home.

I'm really scratching my head about THAT one.

Here is what that section said:

"I'll get a tax deduction." While the government provides a tax deduction for mortgage interest as well as other tax credits related to energy-efficient appliances and other green technologies, these benefits do not outweigh the expenses. Many homeowners find that even with the availability of a mortgage interest tax deduction, their tax return isn't affected because they are better off taking the standard deduction.

Below is my response.

Mike,

I don't own, so I can't relate any personal experience. But I have heard from some people that the mortgage interest deduction isn't all that great. The primary reason is that there are so many other ancillary costs associated with homeownership. Lawn care, repairs, upgrades, pool maintenance, special assessments, busted appliances, leaky roofs, insurance, [edit: HOA fees,] etc. etc. It makes it pretty much a wash.

When you are a renter, you don't have to worry about any of that shit except for some utilities (homeowners have to worry about ALL utilities). And homeowners have to fret about special assessments, future increases in parcel and property taxes, increased utility rates, etc. You don't find that stuff on a bank's mortgage calculator.

And the article doesn't mention any of that! Meaning buyers aren't thinking about it either. The one I consistently hear from my homeowner friends and family is: "You have no idea how many, and how quickly, little expenses add up when you own."

That is why I personally calculate the pre-tax payment as a better comparison for rent vs. buy. That's more "real-world" and provides some cushion for unanticipated costs. That way, any tax write-off not offset by ancillary costs is pure gravy.

You can calculate the after-tax payment, but you can't COUNT ON IT, know what I mean? Like the article said, some people find out (after they've purchased, mind you!) that there is NO BENEFIT to itemizing and taking the interest write-off -- they're better off just taking the standard deduction! Could you imagine?!

As we're seeing in this current economic bust, too many people lived on the edge. And they are one unemployment spell or pay cut or busted water heater away from losing their house. Always always always plan for the unexpected.

I welcome any input from readers (especially those who enjoy the interest deduction every year) regarding your experiences/perspectives.

A Collection of Animals in Real Estate Listings: Part II

Mira Malo: FINAL UPDATE

Special thanks to JK for keeping us informed about this property.

Sold on 7/8/2010 - $325,000

Purchased 11/23/2005 - $465,000

Loss - $160,000

And this was not a short sale, meaning that massive hit was taken directly in the pocketbook, in cash. Brutal.

The bright side: At least their FICO score is intact.

So after eight months on the market, how did it finally sell? Well, the nearly 20% in price reductions surely helped. Not to mention it appears they finally put some effort into making it presentable.

BEFORE:


AFTER:

Yeah, not a radical improvement, but it's something. That bamboo wallpaper was nauseating.

You know what's funny? I never even noticed how freaking awesome that big window is until the "flair" was removed.

Anyhow, by waiting way too long to get realistic about the price for this average apartment, I'm convinced the seller left serious money on the table. I was sure it would nab a sale for around $360,000 in December given the comps ($360 per square foot was the going rate back then) so they conceivably cost themselves another $35,000 by pinning their hopes on the wonders of the Super Summer Selling Season(tm).

Yeah, how'd that work out for you?

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March 31, 2010 - Price Changed $349,500

Including commissions, we're now looking at a $137,000 loss. That's a 30% drop from the peak. And this is still not a short sale, meaning this potato chip enthusiast will eat that loss IN CASH.

The good news is, I think he's finally (mercifully) competitive at this price. Especially given the small window for buyers to double-dip on the state and federal tax credits, a sale at this price (although still too high as far as I'm concerned) wouldn't surprise me.

Then again, this Spring could see an increase in the number of recently thawed hibernators coming out of their caves and also throwing their apartments on the market to take advantage of the "Spring Bounce."

That means tougher competition.

And with a kitchen this hideous, he better prepare to slash the price even further to get ahead of those soon-to-be sellers vying for the same shallow pool of qualified buyers.


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Mar 13, 2010 - Price Changed $369,500

10 Grand here, 10 Grand there...pretty soon we're talkin' real money!

$465,000 purchase price, $395,000 original list , $25,500 in price reductions, and still not a short sale.

Given that this is still a standard sale, I have to assume the seller put down 20%, or $93,000. That means with this newest price reduction, they are officially in the hole.

Add $22,000 in commissions, 114 fruitless days on market, and the expiration of the first time homebuyer giveaway next month, and this seller is staring down the barrel of a really bad day.

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Feb 28, 2010 - Price Changed $379,500
Jan 12, 2010 - Price Changed $389,500

In December I said due to the awesome location, I wouldn't be surprised by a sale at around $360,000. Our seller is fast approaching that figure, but I wonder if it's fast enough.

I'll remind you that despite a $465,000 purchase price, at $379,500 this is still not a short sale.

Effing brutal.

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235 MIRA MAR Ave #4, 90803
Beds: 2
Baths: 1.5
Asking Price: $395,000
Sq. Ft.: 1,018
$/Sq. Ft.: $388
Year Built: 1958
HOA: $203
MLS#: P711997
Source: SoCalMLS
On Redfin: 11 days
Down Payment: $79,000
Income Requirement: $99,000
Monthly Nut: $2,300
Description: Bright top floor unit in very quaint neighborhood. Open living room with unique light fixtures. Gas stove, microwave, hardwood floor in kitchen. Large master with custom mirrored closet. Plenty of closet space & cabinets. Only 1 common wall. Private single car garage with storage and room for an add'l. car in front of garage. Walk to beach & enjoy the sunsets. Close to shopping and entertainment.

You know your apartment sucks when you mention a "mirrored closet" as a selling point.

And speaking of selling points, why not mention those sweet custom-painted kitchen cabinets?

BLECCCCCCCCCCHHHH!

Good lord. And the old-ass tiles just make it worse. At least finish the job like this idiot and put some granite on there!

Our featured seller is in deep, deep shit. He bought in the right location, but he got blatantly ripped off when he did so.

In November 2005, near the peak of the housing bubble, he decided to get into the real estate game and plunked down $465,000 (yes, you read that correctly) for this 2-bedroom/1.5-bath WITH NO LAUNDRY FACILITIES ON THE PREMISES.

I bet when he agreed to pay $465,000 he took a look at the 2001 sales price of $182,000 (assuming he even did that much research) and instead of thinking, "Hmm. That 22% annual appreciation during the last four years doesn't seem right," he imagined also holding it for four years then more than doubling his investment. Piece of cake, right?

Well, four years and one day after purchasing, he put it on the market for $395,000. So much for doubling your money. In fact, after commissions he's staring down the barrel of a $90,000 loss. And that's before negotiations even start.

But a quick look at the sold comps and it's clear that he's more underwater than he realizes. The average price per square foot of condos sold during the last six months is $369. Translation? This apartment at $369 per square should be priced at $375,886--20 Grand below his current wishing price.

Good thing he's got a life boat:

And you thought it was just a super classy coffee table.

Speaking of questionable decorating choices:

Disney's Jungle Cruise right in your own living room! There is plenty of weirdness to go around, but the giant Lay's bag on the wall takes the cake. He must REALLY be into potato chips.

What bothers me is the monthly $203 HOA fee. Curious about the wonderful perks you'll get to enjoy if you buy in this building? Well, here you go:

Amenities: Barbecue

Oh.


With no on-site laundry, just what the hell is your HOA money going toward? Landscaping?

With a 51-year-old building, I would perform some serious due diligence regarding the HOA's finances before considering a purchase.

Overall, because the neighborhood is excellent a 10% discount will probably be enough to garner a sale. I'm not saying that it won't decline further in value, but with interest rates at record lows (again), a sale at around $360,000 wouldn't shock me.

But that's something like a $120,000 loss. Given that this is not (yet) a short sale, we have to assume he had a monster down payment in 2005.

Key word: had.

A Pitiless Promenade Pulverizing

133 The Promenade #103, Long Beach, CA 90802


Purchased 3/2007 - $800,000 ($509 psft)

Sold on 7/9/2010 - $330,000 ($210 psft)

Loss - $490,000

Oh how the mighty have fallen. After nearly two years spent chasing the market down, ostensibly hoping for "things to get back to normal," pinning hopes on "green shoots" and the elusive arrival of "the bottom," the bank finally accepted the truth. I think $330,000 is a good price for 1,500 square feet of brand new construction, but I have a feeling the bank views that massive, absolutely mind-boggling 60% loss a bit differently.

What an utter disaster.

REOdiculous: FINAL UPDATE

Sold on 7/8/10 - $315,000 ($6,000 above asking price)

As I said in May:

Who knows...maybe the bank has it priced correctly for today's low-inventory, low-interest-rate environment. I think $309,000 is straight up Jocelyn Wildenstein crazy for this shite neighborhood, but given all the manipulation and interference in the market, it's tough to determine the true "value" of anything these days.

...so I'm not terribly surprised by the sales price (especially given the bevy of Fed and State tax incentives that essentially reduced the sales price by $20,000). But I still think the new owner overpaid (dude, burglar bars). Congratulations on purchasing the most expensive house in a one-mile radius!

The good news for the bank is that it recouped some of its money, but the bad news is overall they are still in the hole about $180,000.

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705 East 8TH St, Long Beach, CA 90813
Asking Price: $309,900
Beds: 2
Baths: 1.5
Sq. Ft.: 1,310
$/Sq. Ft.: $237
Lot Size: 5,000 Sq. Ft.
Year Built: 1918
MLS#: P733349
On Redfin: 2 days
Down Payment: $62,000/$13,000 FHA
Income Requirement: $70,000 (mortgage amount/3.5 = income requirement)
Monthly Nut: $1,700/2,000
Description: CHARMING CRAFTSMAN HOME BLENDS THE NEW WITH THE OLD. ORIGINAL BUILT INS AND WOOD FLOOR PLUS A NEWER BEAUTIFUL REMODELED KITCHEN AND SOME NEWER WINDOWS. THE FRONT PORCH HAS BEEN ENCLOSED FOR A LITTLE EXTRA SQUARE FOOTAGE. THERE IS A LAUNDRY ROOM WITH A DRPO DOWN IRONING BOARD AND 1/2 BATH OFF OF THE KITCHEN. IT SHOWS VERY LIGHT AND BRIGHT. LARGE BACKYARD COMPLETELY FENCED AND ON A CORNER LOT.

What the fuck is a "DRPO"?

About six weeks ago the bank took back this property for $238,169 and is now attempting to gouge buyers--ERRR...earn a substantial profit.

About $70,000 before commissions to be exact.

How does a bank convince itself that despite the fact nobody was willing to pay a paltry $238k ($182 per square foot!) on the courthouse steps, the market will somehow deem a $70,000 markup as a "deal" once it hits the MLS? I'll never understand that one.

Who knows...maybe the bank has it priced correctly for today's low-inventory, low-interest-rate environment. I think $309,000 is straight up Jocelyn Wildenstein crazy for this shite neighborhood, but given all the manipulation and interference in the market, it's tough to determine the true "value" of anything these days.

But let's give it a shot anyway.

Setting aside the obvious implication of the market already determining the value of this property at $238,169, let's look at the pricing history for clues:

May 03, 2010 - Listed $309,900
Mar 15, 2010 - Sold $238,169 (-14.0%/yr)
Sep 15, 2005 - Sold $470,000 (40.9%/yr)
Mar 03, 2005 - Sold $391,000 (10.9%/yr)
Feb 24, 1994 - Sold $125,000

Holy crap! This place once sold for nearly half-a-million dollars?! A year before the peak?!

Wow.

For some perspective, this testament to the idiocy of the Great Housing Bubble sold for a mere $125,000 near the last housing bottom. Now, given, it likely didn't have the upgraded kitchen and look as polished, but this place ain't that nice either (they couldn't even be bothered to upgrade all the windows. But, at least they have burglar bars on them! Bonus!) and it's fair to say it didn't nearly triple in value during the last 16 years.

If we remove the bubble and the crash and extrapolate a generous 4% appreciation rate (which, in this crime-riddled 'hood, is beyond generous) since 1994, today's value would be $234,123.

Hmm...that's weird. That's almost exactly what it sold for at auction -- aka the "value" determined by the market.

How about rent vs. own calculations? I defy you to find a comparable house in this area renting for $1,700 (or $2,000 if the buyer goes FHA, which, let's be honest, is exactly what's going to happen in this neighborhood). Hell, fully restored bungalows near Belmont Heights can barely get $1,700!

Listed comps? This is one of the most expensive listings in the area.

Local incomes? Try $27,375, about a third of what's required to stretch into this mortgage.

My point is, it doesn't take a whole lot of research to figure out this thing is overpriced.

And I realize some people prefer corner lots, but this location looks particularly miserable. This gets the worst of both worlds: A set of stop signs intersecting with a busy, stopless thoroughfare. You get the sounds of squealing brakes and post-stop launches combined with the sounds of cars and trucks hauling ass down 8th. Ugh.

Not to mention the inevitable T-bone accidents caused by the lack of a four-way stop. No thanks.

And click on the Street View and check out the dead grass on the sidewalk. If the city can't even bother to keep its grass alive, how reliable do you think the police patrols are in this 'hood?

Look, I don't blame the bank for trying to swing for the pricing fences. After all, they loaned out $470,000 (!) on this joint...why not try to alleviate the pain as much as possible?

But $309,000 seems woefully out of line with reality.

However, my brief house-hunting adventure this weekend proved it really is the Wild West out there. I stopped by a small fixer-upper on a tiny lot, in a decent neighborhood, which sold for about $360 per square foot in 2001. I wasn't that impressed, but other than the ridiculous asking price it had potential. Given the 185-day, stale-ass asking price, I was thinking about submitting a lowball offer.

Yeah, it just went under contract for $550 per square foot.

Did I mention it's a small fixer-upper on a tiny lot?

As the Shins once said, logic will break your heart. It's crazy out there. Choose wisely.

Arigato: FINAL UPDATE (finally)

Sold on 07/09/10 - $1,150,000



And all it took was a 65% price reduction. HAHAHAHAHAHAHA.

The weird thing is, the final sale price is $150,000 more than the March asking price. Although, that $999,000 asking price seemed a bit low to me and some readers (basically the double-lot land value) so I guess I'm not surprised it got bid up.

I'll remind you that this property was purchased in 2007 for $750,000 and was a short sale at $1,150,000--despite three-and-a-half years of principal payments. That must have been one hell of a party.

Anyhow, the long, delusional journey has come to an end. I hope she learned a valuable lesson about greed, denial, and the price of abject stubbornness. This idiotic empress left a hell of a lot of money on the table by dicking around with insane wishing prices for so long. But now someone gets to enjoy one of the absolute weirdest Long Beach homes for what I think is a pretty good deal.

Click here for the whole pathetic saga...

The Pinhead Premium: UPDATE

Sadly, much like that 4th of July parade in Iowa, someone's about to get trampled.

After chasing the market for ages, doling out piss-ant 4% price cuts, this tidy place with possible structural issues (thanks Olaj!) is asking $479,000...the same price from April!

It's time for the bank to get serious. The distressed asset manager (hyphen intentionally left out), who seems to think he'll be a hero if he can eek out a small profit for the lender after commissions (the bank took it back at auction for $424,000), failed to notice that the market had already spoken:

THERE IS A VERY GOOD REASON NOBODY OUTBID THE BANK, AND THAT REASON IS THE MARKET DOES NOT THINK IT'S WORTH A PENNY MORE THAN $424,000.

Until the bank at least gets below that price, I simply don't see how this nabs a sale. Then again, I noticed the transaction price from the bank taking it back is no longer on Redfin, so maybe buyers uninterested in performing due diligence will glady cough up this kind of dough.

By the way, when buying an REO (now characterized as a "standard sale" in the listing, which is technically true but a bit misleading), the bank is not responsible for any structural issues or repairs. As-is, baby. Good luck with those wonky door gaps:


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Asking Price: $499,000
640 ORIZABA Ave, Long Beach, CA 90814
Beds: 3
Baths: 1.75
Sq. Ft.: 1,564
$/Sq. Ft.: $319
Lot Size: 4,350 Sq. Ft.
Year Built: 1912
MLS#: 12136163
On Redfin: 19 days
Income Requirement: $114,000 (mortgage/3.5)
Down Payment: $100,000
Monthly Nut: $2,700
Description: STANDARD SALE. ABSOLUTE MOVE-IN CONDITION 3 BED. /2 BATH. THE PROPERTY FEATURES FIREPLACE IN LARGE LIVING ROOM, NEWER MAPLE KITCHEN AND GRANITE COUNTER TOPS, NEWER WINDOWS, NEW INTERIOR PAINT, TRAVERTINE FLOOR IN FOYER, AND HARDWOOD FLOOR THROUGHOUT LIVING, DINING AND BEDROOMS. INSIDE LAUNDRY AREA AND FAU/CENTRAL AIR.

PLEASE STOP YELLING AT ME!

This place was purchased in 2003 for $437,500, and the loanowner made it EXACTLY five years (hmmm...five-year Option ARM, anyone?) before trouble started. Knowing he couldn't afford the full payment anymore (or ever), he desperately tried to get out from under his obligation in February 2008.

After two years and 11 days of extend and pretend can-kicking and gaming the system (aka living rent-free while the bank dragged its heels), the bank finally took it back for $424,000 -- essentially the '04 price.

Just three weeks after taking it back, the lender slapped it on the MLS (it's funny how banks don't seem to be in any sort of hurry as long as a property stays off the books, but as soon as they take it back they suddenly snap into action)...with a $95,000 premium attached.

WTF?

They've since lowered the price to $499,000, which isn't crazy compared to some of the garbage that's selling these days, but that's still a chunk of change.

With all of the recent happy talk about "V-shaped recoveries" and good times being here again, it's easy to forget we're still muddling through the disastrous results of the Great Housing Bubble. You know, the bubble? Remember?

Here's a refresher course:

May 29, 2003 - Sold (Public Records) $437,500 (22.3%/yr)
Mar 09, 2001 - Sold (Public Records) $280,000 (262.4%/yr!)
Sep 13, 2000 - Sold (Public Records) $150,000

Ponzi-tastic!

Anyhow, this house is pretty sweet. It's on a reasonably sized lot in an okay neighborhood (a little too close to 7th for my taste), has a back yard, and looks crisp and clean on the inside.




I'm just trying to figure out why the bank thinks it will get such a hefty premium over what they paid (and nobody else was willing to pay) at auction.

Oh, who the hell knows. It'll probably be in escrow by the time I publish this.

Didn't Even Last Two Years: FINAL UPDATE

Sold on 04/29/2010 - $432,000 ($292 per square foot)

In February I said:

But judging by the comps, and a price per square foot about to drop below the $300 mark, this seller might be able to find a greater fool for around $425,000. That still means a major loss, but at least he'll be free from his colossal error in judgment.

Damn, it feels good to be a gangster.

Congratulations seller on finding a slack-jawed dummy to take your ancient, overpriced digs off your hands. And buying at the "bottom" only cost you $79,000 in cold, hard cash.

Way to go!

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3101 East 2ND St Unit 4C, 90803
Asking Price: $447,000
Beds: 3
Baths: 1.75
Sq. Ft.: 1,481
$/Sq. Ft.: $302
Year Built: 1963
MLS#: P716383
On Redfin: 34 days
HOA: $175
Down Payment: $17,880 (FHA)
Income Requirement: $128,000
Monthly Nut: $2,900
Description: Spacious Bluff-Park-Condo in great location . .. This top floor light and bright unit features 3 bedrooms, private balcony with peek-a-boo ocean view, newer paint and carpet, attic access, storage areas, and stylish mid-century designer accents throughout. .. Walk to the beach, LB Art Museum, restaurants, and shops. .. Well maintained smaller complex. Must See!

Dang, this is a pretty sweet place. Three bedrooms, nearly 1,500 square feet, a balcony, cheap HOA fee, and in a killer neighborhood. The solo garage spot is a bummer, but hey, you can't have it all.

One thing I like is how the owner used those "stylish mid-century designer accents" to create an overall 50s/60s vibe. I mean, check out this door knob:

And the original stove knobs and old school overhead vent:

Yeah yeah, some might say that shit just looks old, not "designer" (and they'd be right) but you have to admit the seller did a good job incorporating those outdated elements into a cohesive design theme. In a day where pergraniteel is "standard," it's nice to see somebody work with what they have and pull it off reasonably well.

The only major drawback I can see (besides the price, duh) is the proximity to busy-ass, terribly noisy Broadway.

But the good news is you're right across the street from Taco Bell!

I love that particular T-Bell because it's the only one on the face of the planet without a freaking drive-thru.

In any event, this unit appears to be on the 2nd Street side so the traffic noise probably isn't that bad.

So now that we've covered what the seller did right, let's focus on what they did wrong and the reason this property is a topic of discussion.

The sales history reveals this seller mistakenly listened to the bottom callers of 2008 and took them at their word that "the worst is definitely over," and agreed to pay $475,000 for this bad boy. And now, just 22 months later, he or she is trying to sell for a substantial loss. Peep:

Jan 07, 2010 - Price Changed $447,000
Jan 06, 2010 - Listed $449,000
Mar 25, 2008 - Sold $475,000
Jan 11, 2008 - Price Changed $499,000
Oct 26, 2007 - Price Changed $529,000
Sep 14, 2007 - Price Changed $559,000
Jun 23, 2007 - Listed $579,000
Jun 18, 2007 - Delisted
Apr 04, 2007 - Price Changed
Jan 31, 2007 - Listed

The interesting thing is that the previous owner had it on the market for almost exactly a year before our dim-witted knife-catcher decided to step up and take on more than he could chew.

Which means during that year he watched as the price dropped $20,000, then $30,000, then another $30,000 before buying at yet another $25,000 discount AND SOMEHOW BELIEVED THE PROPERTY VALUE WOULD MAGICALLY STOP PLUMMETING.

WTF was he thinking?!

By stupidly jumping in long before the bottom and catching this rusty Ginsu, he just cost himself a minimum of $50,000. And that entry-level loss tragically depends on finding some burlap-head willing to part with nearly $450,000. Good luck with that!

I could understand if this throwback was fully updated, but for this kind of loot most buyers will be looking for detached homes or similarly sized condos on Ocean Blvd. with real ocean views.

But judging by the comps, and a price per square foot about to drop below the $300 mark, this seller might be able to find a greater fool for around $425,000. That still means a major loss, but at least he'll be free from his colossal error in judgment.

At any rate, I think this charming apartment, in a killer neighborhood, is quite desirable...just not $447,000 desirable. That seems woefully overpriced in this ever-competitive market.

Guess we'll just have to wait for Mr. Market to tell us who's right.