0% down GF in Irvine

[Diego Mamani]

These anecdotes are fun to read, at the very least. Here’s one:

xx Calabria. Irvine CA 92620-2512.
Built in 1982, Lot 2310 sf, House 1549 sf. 3 bd/2.5 ba, two-level SFR.

Prior purchase in 1994 at $223K, with a $176K ARM mtge. (Note the down pmt of just over 20%).

GF purchase on 7/7/2005 (recorded 8/8/2005) at $659K. 1st mtge $461,300 with 5.5% ARM. 2nd mtge $197,700 with (unknown) fixed rate. That is, 0% down!! NOD filed 10/6/2006.

I used to work in Irvine, and it’s nice, but $659K for a 25-yr old 1549 sf house on a postage stamp-sized lot? What are these people smoking? And they buy with zero down…! Here the lender will take a well-deserved loss. Examples like these (and there are many) I’m saving to show to young people next time the market gets out of control.

[Diego Mamani]

Sales history for the same property. The first purchase was from the Irvine Company (builder).

03/1983 $152,500
06/1984 $150,500 (loss!)
10/1988 $255,000 (bubblelicious gain!)
12/1994 $223,000 (loss after 6 years!)
08/2005 $659,000 (ridiculously high bubble price)
10/2006 NOD filed

Lesson: Don’t be a GF like those who bought in 1988 and 2005 above (the latter put $0 down). Does this history suggest that we should buy in the next year that ends in “4”? (just kidding).

[TheBreeze]

I’m not up with the lingo. What is a GF? A gargantuanly-effed borrower?

[RottedOak]

GF = Greater Fool, someone foolish enough to purchase an already-overpriced property.

See http://www.investopedia.com/terms/g/greaterfooltheory.asp

[Diego Mamani]

The GF is a key concept in Ponzi games (such as the recent speculative run-up in RE prices in So. Cal.) Sometimes the game participant is fully aware that the price he’s paying is ridiculously inflated, but he goes ahead hoping that he’ll be able to unload the property to a GF before the bubble bursts. It’s a gamble of course, as it is always impossible to predict when these things will end.

Most of the time, however, late entrants to the game are completely oblivious to what is going on and are motivated by greed, or fear of “being priced out”.

[no_such_reality]

Must be a flipper that bellied up. It’s the only way I account for a NOD going at 13 months. Fraud typically rolls in with a NOD at 6 to 9 months for a 1st payment default.

I was reading the real estate ads today. The pyschology is completely shifting. “Foreclosure pending” “Motivated Seller” etc.

[Author]

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