Foreclosure

[an]

I’ve been using ZipRealty for awhile now to keep an eye on areas I will by in the future. Today is the first day I see a house that say it’s in foreclosure. It’s on Village Ridge Rd.,92131. It’s listing on ZipRealty for $559k. After looking it up on Zillow, it shows the owner bought the house in 2004 for $625k.

My question is, how will this house affect the area? It seems like if it sell for this price, it’s bellow its 2004 price. What do you think?

[Bugs]

One isolated sale shouldn’t have any impact on buyer expectations. Now when buyers start seeing several of them they get to thinking that these might come up often enough to present a reasonable alternative to paying full price. If/when that happens the entire pricing structure for the neighborhood will be in decline and those listings will be leading the race for the bottom.

[Beach Rat]

The property is listed about fair market value. Subject = $358/sqft if it sells at list. Property is similar to 10976 Ivy hill dr. in SqFt and bedrooms which went for $557,000 and $355/Sq. Ft (02/21/06). I’m not an appraiser, but it doesn’t seem that far off from the other values.
On the more interesting side, it would appear this property is down about 9% from 2004, at list. This is a single data point and in no way reflects a 10% market drop. Maybe the people who purchased were taken advantage of by predators, or just made a purchase thinking that prices always go up. One way to tell if they got hosed on the purchase price would be to run comps from 2004. (any bored appraisers?)
Also this property was purchased with a 100% CLTV, $500K first and $125K second. New Century Mtg Corp holds the first, not sure about the second. It’ll be interesting to see what this sells for. Just knowing that the second lender is on the hook for 60K at list price, may promote low ball offers. Yes this is only one, but I smell blood in the water!!! (100% CLTV and motivated lenders!)
Side tracking, say the first lender holding the 500K note forecloses; do they have any legal responsibility to prevent them from dumping at 500K versus 550K to move it quickly? Effectively hosing the people holding the second?

[an]

Here are the comps I see on that street with that model:
11336 Village Ridge Rd Sep 03 $485,000
11410 Village Ridge Rd Sep 04 $625,000
11404 Village Ridge Rd May 05 $625,000
11432 Village Ridge Rd Jul 05 $621,000
11438 Village Ridge Rd Dec 05 $610,000
11414 Village Ridge Rd Jan 06 $599,000

So it seems like this model on this street peaked @ $625k between Sep 04 and May 05. I guess $559k is a 6.6% drop from the last comp and 10.56% from the last sold price. The list price doesn’t look like an extreme bargain but definitely price to sell.

[powayseller]

sdrealtor asked me where I saw 10% price drops. Well, here’s one to point to.

Where does that put the “flat housing prices until 2011” group? At what point will they admit that prices are falling? Falling by 10% in San Diego?

Just because the median is up, doesn’t mean prices are up.

I’m wondering how useful economists really are. Who can count on their forecasts when they are blatantly ignoring reality? How can anyone say prices will be flat until 2011 when they are already down 10% in some neighborhoods?

I guess I’m wondering what it means to say that prices will be flat.

Was that a forecast of actual conditions, or just a numbers game, where you say they are flat because higher end sales change the mix of sales and make the median go up while prices are falling.

[rankandfile]

Although this is just one instance that we actually know about, I’ll bet you all a beer that there are more like it, and many more to come. The interesting thing is that I’ll bet you all another beer, a nice 22oz. pale ale, that this home will not even sell at it’s “priced to sell” price.

[john67elco]

If zillows comps are correct (518k) then this is 15% less. Are those comps right? Cant be. Pool home, Culda sac street, stamped drive way and cant sell with reduced from 450k to 439k?
MLS”
Zillow”

“You say housing market will keep rising? Then your stupid for not buying as many homes as you can right now!!!!!!!!!”

[mycroft]

Side tracking, say the first lender holding the 500K note forecloses; do they have any legal responsibility to prevent them from dumping at 500K versus 550K to move it quickly? Effectively hosing the people holding the second?

As far as Beach Rat’s question goes, if the 1st lender forecloses, there is nothing to prevent them from selling at $500K or less. The holder of the 2nd loan would have to protect their investment by being at the foreclosure sale and bidding it up to create surplus funds. They are entitled to receive surplus funds from the sale up to the amount they are owed. If there is no surplus funds, they lose it all. The buyer at the sale, whether it be a third party or the foreclosing lender has no obligation to any junior lender.

[Lickitysplit]

The village drive house wasn’t just flipped once… it was flipped twice.

09/29/2004: $625,000
08/01/2003: $461,000
01/31/2002: $344,500

Listed @: $559,000

[4plexowner]

john67elco

Please change the “your” in your tag line to “you’re”.

It’s a cute line but you look less than intelligent when your tag line has a mis-spelling (and you’re calling the reader stupid!).

I’ve ignored it for about a week now and I know at least one other person has suggested that you make the correction.

Don’t give us housing bears a bad name!!!

OK, so I’m anal-retentive about spelling.

[john67elco]

ull get use to it.. sig is the truth

“You say housing market will keep rising? Then your stupid for not buying as many homes as you can right now!!!!!!!!!”

[powayseller]

John, also include “the”. You say the housing market…

Here’s an important point that none of us have addresed before, and is worthy of its own thread.

With the prevalence of 100% CLTV in 2 loans, there is NO PMI. No more insurance to protect the lender.

Under traditional financing, the owner put down 20%, or paid the PMI company to insure 20% of the equity. This protected the first lender from housing drops of 20%.

What insurance does the second lender have? None.

What is the effect of no more mortgage insurance premium?

[Jim Brubaker]

There is one effect that can’t be seen. Second trust deed holders could be discounting their notes to unload them. A 60,000 at 8% might be discounted to make it a 10% note. That would make it a $48,000 note at 10%.

Sadly some of the elderly looking for more interest income might bite on this one.

[carlislematthew]

What insurance does the second lender have? None.

Commonly, an increased interest rate that reflects that additional risk of the loan. The insurance is built in. Whether enough “insurance” is built in or not is another question, but it *does* exist…

[powayseller]

Ok, that makes sense.

But how does a higher interest rate provide insurance against default? In my view, it raises the risk of default.

If they default, the 2nd deedholder takes the loss. With prices already down 10% in San Diego, the 2nd deedholders have only approximately a 10% equity cushion.

But the second deed is not hedged/insured as the PMI deed would be.

[Author]

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