Foreclosure in Santa Luz

[gn]

Does anybody know the story on this property:

7968 Entrada Lazanja, SD, 92127
MLS #: 076011354

According to ZipRealty, it is a foreclosure.
According to Zillow, it was purchased on 12/26/2006 for $1,268,357.

Foreclosure after 2 months ?

Thanks.

[no_such_reality]

I think Zillow ends up showing the Repo price. If you look at sales history, would it make sense that the bank took it back for a $1.26M balance in Dec and is just getting it back on the market?

It looks like tax assessment is just over $1M, judging by the other homes near, it’s possible someone refi-ed themselves into foreclosure, or maybe Neg-Am’d the loan and neutroned themselves out of the house.

[gn]

no_such_reality,

I should have used http://www.sdlookup.com instead of Zillow.

You are right. It was purchased in July 2004 for about $1M.
Looks like someone refinanced.

[PerryChase]

What’s the loan history on this house?

Under conventional purchase, these people would have put $200k down on the $1M purchase. That still leaves them with $500k equity. I thought that $1M+ buyers were the savvy executive types.

[Anonymous]

I know of $200K plus exec who bought a $1MM+ home at the top of the market with a 1 year interest rate buydown from the developer. I’m pretty sure that he does not have a deep savings account to help him weather the higher payments come later next year and beyond.

I warned him. But, you can’t save people from themselves.

[Steve Beebo]

This property sold new from Davidson 7-04 for $999,500.

The owners re-fi’d in May 2005, with a first mortgage of $1,169,000 and a 2nd of $331,000 – the total loan balance was around $1,500,000. So the lender (Countrywide), must have had an appraisal for at least that much.

The transfer 12-06 was indeed a foreclosure, and the house was just listed for sale at $1,349,000.

[no_such_reality]

That’s almost unbelievable.

Who actually approved loan docs and an appraisal for a 50% gain and $500,000 increase in 10 months?

[Cow_tipping]

I dont believe in this saving the house crap.
If the house is worth less than what you paid for … its not worth being called an “Investment” …
Cool.
Cow_tipping.

[Bugs]

As it happens, I reviewed an appraisal on that street (same side, even) that was dated in late May of 2005. This home was a smaller model (in the 3,900 SqFt range) and also had an original purchase price of just under $1MM in mid 2004. The appraisal I reviewed came in just under $1,400,000, and based on my review of it I came to the opinion that value nominally was within reason. My review expressed a value opinion as a range for the property involved at $1.3MM – $1.4MM, and this appraisal came in at the upper end of that range.

Considering the property we’re talking about is 700 SqFt larger (which probably includes the casita) than the one I was reviewing, it is quite possible that most appraisers would have developed an opinion of value in mid-2005 for this property in the $1.4 – $1.5MM ranges. That’s what the sales in that project were doing at the time. Besides the sales data that were listed in the appraisal report I reviewed, I remember finding a significant number of other sales data during that time period (late 2004 – early 2005) that demonstrated the same value trends.

You would want to bear in mind that new construction sale prices during that period of time were commonly being negotiated 6-9 months or even in excess of a year prior to completion of the home and close of escrow. the Semi-p[ro flippers were camping out at the sales offices on the eves of the release dates for these phases and snatching up the available listings on the day of release, hoping to sell the units off in a double escrow on the date of completion.

Unlike a lot of other areas, that area was still increasing in pricing up through the end of 2005. So the disparity between a pre-construction contract price of $1MM and a value opinion of $1.5MM 24 months later and near peak pricing is not completely crazy to think about. Especially when considering all the other stupid moves these agressive investor/flipper types were doing at the time.

[gn]

Bugs is right. At the close of escrow, that house was probably worth $1.2M.

What is “double escrow” ? Is it when the house is sold
twice on the same day ? How does it work ?

[PerryChase]

Bugs, it sounds like only the pros semi-pros were able to buy at that time. This owner probably had to line up to get his “deal.”

He probably was waiting 2 years for tax free capital gains. Unforfortunately the market tanked before he could cash out. Just throwing some possibilities out there for consideration.

[Bugs]

Agreed. It would have been a good plan if the upswing had kept on going like NAR and Alan Nevin said it would. Just think, had they sold in 2005 instead of refinancing, they would have cleared a lot of money even after taxes.

Regardless, the reality on this one is that the lender for the 2nd is going to get scalped on this by the time the holding costs and costs of sale are factored in. They’re facing a loss of at least $200k right now, and that’s if the house sells at the list price.

Even though the loan was probably sold off in the secondary market, there would probably be a buy-back clause in it for an NOD within this 2-year window. That means the lender may very well be on the hook for the entire loss. You gotta wonder how many losses like this any lender can take.

[gn]

Is “2-year” the typical window for buy-back clauses ?

I heard that there is also a window during which the buyer of the loan can “force a buy-back” unconditionally.

Is this true ? If so, what is the window for that ?

[PerryChase]

Where are the Real Estate investigative reporters? We need more revealing stories like the piece on OCrenter’s blog.
http://bubbletracking.blogspot.com/2007/02/fraudera-ranch-its-family-affair.html

What did this person do with the cash out? Did he invest in other properties hoping that they would go up also? If so, was it one bad investment that caused this whole highly leveraged scheme to unravel?

[ocrenter]

Bugs, thank you for that analysis, the point about the pre-construction pricing made a lot of sense.

Since PC brought up the Fraudera Ranch case, let me ask your opinion on that. Say you have a condo in a complex you are appraising. you know that 5 condos in that complex were involved in fraud, ie, the prices were due to sales to straw buyers. would you just toss the 5 sales out on your appraisal of that condo?

what about a situation where the 5 condos are now REO’s. does that factor into your analysis?

thanks

[Author]

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