As predicted, Fannie is beginning to sell blocks of assets in bulk to REITs

[SD Realtor]

As a small time guy who used to purchase at auctions this kind of stinks. To me it is simply a case of the rich getting richer. I would have been much happier if these homes would have taken the “normal path” through trustee sale. That way the public would have gotten the same shot at the homes as the large REITs. As far as the argument that getting the homes on the market fast can now happen, well, I don’t buy it. Investors that flip have crews and can actually get a flip done quicker then a large REIT depending on efficiency and focus.

[spdrun]

There will still be flips. Not all foreclosures are offered via the GSEs, and the GSEs aren’t selling everything via bulk sale. (HomePath has 1318 listings in CA under $150k as of this morning.)

This is also REO inventory, not a bulk trustee sale, so trustee auctions will still occur.

Come to the Northeast — there are more shorts and REOs coming online than you’ll be able to handle right now 🙂

[SD Realtor]

I didn’t say there will not still be flips. My comments were made to target the experiences of purchasing homes at trustee sale in San Diego, and making money on them. My group did it and it went well. We are just regular people. There are many other small operators who are regular people just like us.

Trustee sale flips don’t involve real estate commissions, home path, other agents or any of that bs.

Programs like this take away opportunity from people like us and give it to large wall street firms.

Plain

and

Simple

I prefer San Diego over the northeast. You can have it.

[spdrun]

AFAIK, this has nothing to do with trustee sales — trustee sales will still happen. This will only affect REOs that were bought back at trustee sale by Fannie Mae. Unknown if this will be happening on a significant level in the SD area anyway.

[bearishgurl]

An avg of $111K each seems like a LOT of money to pay for FL properties in this day and age. HOWEVER, we must be mindful that for every $40K run-of-the-mill FL condo situated in well-known hurricane paths in Pacifica’s portfolio for which they paid an “avg” of $111K, there is also likely a $275K ++ penthouse or SFR in a “better” complex or hood. Generally, a buyer in recent years could get a lot of “bang for the buck” in nearly ALL areas of FL in recent years.

Pacifica took a pkg deal which likely included dozens of duds along with cream-puff-type properties that just needed cleaning up.

[spdrun]

Assuming the ratio of the two is even 1:1 (doubt it, probably more average and duds than cream-puffs), the average value is something like $158k. They’re buying AT MOST at a 30% discount, which is pretty normal for foreclosures. If there are only a few cream-puffs, this ratio goes waaay down.

[bearishgurl]

[quote=spdrun]Assuming the ratio of the two is even 1:1 (doubt it, probably more average and duds than cream-puffs), the average value is something like $158k. They’re buying AT MOST at a 30% discount, which is pretty normal for foreclosures. If there are only a few cream-puffs, this ratio goes waaay down.[/quote]

Agree to all. HOWEVER, “30% off” is not very doable, even at trustees sales, in more desirable areas of the US (such as coastal CA). In the more desirable areas, the vast majority of underwater trustors or recent years have bled every dime of equity (and then some) they could squeeze out of “their” property before accepting $3K or so from frannie to walk (after having lived in it an additional 24-40 mos for “free”). In addition, there are often jr. liens of income tax and child support and outstanding back property taxes appurtenant to the parcel on auction (avail for bid).

In most lower-cost areas of the country (incl most areas of FL), trustors weren’t allowed to borrow to the degree that they did in CA (and other higher-value mkts) as their collateral didn’t have as much “perceived value.”

It’s no wonder this deal looked attractive to a CA REIT, ESP if they are sharing future profit/loss with Fannie, mitigating some of the risk.

Obviously, many thousands of short sales sold for MORE than “30% off.” This form of “debt relief” to the undeserving is what has artificially caused the rest of the RE values in the surrounding areas of the closed SS’s to plummet. In these cases, the lenders just waited way too long fvcking around with deadbeat homedebtors and then threw in the towel (after 2.5+ yrs), taking it in the shorts.

The lenders who accepted deep SS prices in recent years (screwing us all) wouldn’t have had to sustain losses of this magnitude had they foreclosed timely in the first place.

[spdrun]

Those “deep SS prices” you speak of tend to represent a pro-forma cap rate range of 7 to 8.5% in good coastal areas of CA. Meaning that buying is cheaper than renting, and landlords can make a profit under prevailing mortgage rates (they are, after all, providing a professional service in maintaining and managing the property). In other words, IMHO they were fair prices.

The only people who possible got unjustly fvcked were the people who bought during the bubble. And they should have known better. Investing several hundred grand is NOT to be taken lightly nor emotionally, despite the Pollyanna propaganda that the Nat’l Assoc of Realtors chooses to push on us all.

[bearishgurl]

[quote=spdrun]Those “deep SS prices” you speak of tend to represent a pro-forma cap rate range of 7 to 8.5% in good coastal areas of CA. Meaning that buying is cheaper than renting, and landlords can make a profit under prevailing mortgage rates (they are, after all, providing a professional service in maintaining and managing the property). In other words, IMHO they were fair prices.

The only people who possible got unjustly fvcked were the people who bought during the bubble. And they should have known better. Investing several hundred grand is NOT to be taken lightly nor emotionally, despite the Pollyanna propaganda that the Nat’l Assoc of Realtors chooses to push on us all.[/quote]

Those “unjustly fvcked” people should include persons who bought all the way back to 12 years ago, even if they NEVER removed any equity (I’m in this category). There have only been a couple of REOs but it is the surrounding SS’s have decimated the value of my property. Those properties should have instead been foreclosed upon in a timely manner and then immediately released to mkt as an REO and sold, forthwith.

However, there is light at the end of the tunnel. A “sold comp” (SS or otherwise) only lasts six months in appraisal-speak. As long as there aren’t too many more “strategic defaulters” who are allowed to get away with SS, we’ll all be able to recover from this debacle :=0

[bearishgurl]

As a potential seller in the next 18-24 mos, I really have no problem with “bulk sales” by REITs. If any of them are able to make a similar deal in SD Co (even for 50 properties at a time, instead of 699) this takes distressed properties off the lenders who might otherwise list them as REOs.

I’m wondering if these “bulk” purchases are even reported as individual “sold comps” by the assessor. I would guess no. Obviously, the assessor’s Change of Ownership form filed by Fannie and/or the REIT’s escrow officer is going to indicate “bulk sale” on each and every parcel affected.

Practically speaking, if it is reported this way, these (discounted) properties’ sold prices will not affect their surrounding “sold comps” for appraisal purposes. And they will also have the effect of taking shadow inventory off the market, likely permanently. And it might spur more lenders to foreclose in order to stockpile properties for bulk sales, which are a faster way of getting them “off their books.”

This is all good for current homeowners.

[spdrun]

Why bother in SD Co? REOs and shorts are getting multiple offers within 2-3 days if they’re reasonably priced. Let the market decide what the value is, as opposed to backroom deals!

As to people (including yourself — sorry, you seem like a decent sort otherwise) who bought at inflated prices, boo hoo hoo. Cry. Me. A. River. An investment shouldn’t always be expected to appreciate, which is why it’s called an investment. Not a “sure thing.”

As far as you buying 12 years ago, if you bought at an inflated price, you took your chances and played the game. Not much sympathy from this end.

[bearishgurl]

[quote=spdrun]Why bother in SD Co? REOs and shorts are getting multiple offers within 2-3 days if they’re reasonably priced. Let the market decide what the value is, as opposed to backroom deals!

As to people (including yourself — sorry, you seem like a decent sort otherwise) who bought at inflated prices, boo hoo hoo. Cry. Me. A. River. An investment shouldn’t always be expected to appreciate, which is why it’s called an investment. Not a “sure thing.”

As far as you buying 12 years ago, if you bought at an inflated price, you took your chances and played the game. Not much sympathy from this end.[/quote]

Of late, the “market” that has been “deciding” here has consisted of “bottom fishers.” However, decreasing inventory is helping to bring prices back up to 2003 levels. FWIW, I didn’t “buy at an inflated price.” I actually got a lot of bang for the buck at the time AND managed to receive cash back in escrow from the seller!

spdrun, you may not be familiar with what happened to many areas of CA which had heavy distress. The short sales, in particular, in those areas have had the effect of causing the RE market to (artificially) over-correct.

There were never any fundamentals in place for the market to correct back to ’99-00 prices as the “loose lending” didn’t come into practice until mid-2003. Owners who bought before then did so with “normal” credit standards and qualification ratios and the sales which took place during this window were nearly all “organic, traditional sales.” And the prevailing interest rate in ’00 to’01 for a FRM was 7-8%!

It was actually the short sales of recent years which sold for less than half their “boom” prices (and well under a “rebuild” price) which caused all surrounding owners’ values to suffer. The lenders decided to accept these ridiculously low (SS) offers because they waited too long and let their FB’s screw them whilst being subsidized to do so by the PTB.

This debacle is all due to a heavily “manipulated” market.

I for one am ecstatic that inventory is currently low (even if “manipulated”) and hope it stays that way for years to come. What’s good for the goose is good for the gander.

[spdrun]

If prevailing interest was 7-8% in 2001, with rents being significantly lower than now, the market was overpriced even then. A correctly priced market allows people to buy for a lower monthly payment than renting, with 20% or so down. In my opinion, the Bubble was in the works and housing prices were becoming unrealistic long before 2003.

I for one am ecstatic that prices in SD *are* at 2003 levels, combined with low interest rates. And that distressed inventory on the NJ side of NYC and in the boroughs is quite high at the moment. Again!

I already own two properties that have gained maybe 5-10% in value since I bought them. And I’m planning to buy more, to buy, hold, and rent. As long as rents stay higher than my payment, I truly don’t give a rodent’s gluteus what happens to sale prices. We’re talking about dividend-producing assets here, not speculative ones.

Lastly, low inventory isn’t a sign of a healthy market. It’s a sign that no one wants to sell because they’re underwater, and CA law allows them to squat for quite a long time without paying. A “healthy” market by your definition would have both higher prices and inventory.

[bearishgurl]

[quote=spdrun] ~
Lastly, low inventory isn’t a sign of a healthy market. It’s a sign that no one wants to sell because they’re underwater, and CA law allows them to squat for quite a long time without paying. A “healthy” market by your definition would have both higher prices and inventory.[/quote]

Actually, spdrun, chronic “low inventory” is a sign that no one wants to sell because they have carefully maintained their properties over the course of decades and perhaps put $50-$100K (or more) of their own money into capital improvements. Plus, they possibly put years of “sweat equity” into them as well and so aren’t going to “give them away” to “bottom fishers.”

Those “underwater” owners you speak of (termed “FB’s” on this site) have been washed out of the equation. They’ve always been at the helm of this debacle and are finally running out of options.

Yay for them!

Where one sits on this issue is where they stand. There are no doubt a lot of folks out there standing in the very same place I’m sitting right now . . . thus the chronic “low inventory” problems you’re seeing out there.

You can’t have it both ways.

[livinincali]

The market right now is one where there is low inventory and lower sales. Sales were good in the summer but they are weakening with the lower inventory. You have buyers that aren’t willing to pay significantly higher prices and you have sellers that won’t sell for current market prices. It’s a standoff and it could be this way for awhile.

I don’t buy the over corrected due to short sales and other arguments, the fact is there wasn’t a buyer at the higher prices whether you think there should be or not. There’s either a buyer that will pay you your price or there isn’t. If your neighbor found a buyer at a higher price you have to find your own buyer at a higher price. You only need to find and convince one to pay your price. In essence find your own sucker if you want to sell above market.

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