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bearishgurl
Participant[quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.
Participant[quote=UCGal]To make matters worse – original purchase money loans (first and seconds trust deeds gotten at time of purchase) are NON RECOURSE in CA. Only refi’s and HELOCS that occur after the purchase are recourse.[/quote]
For the life of me (I wasn’t working in RE when this practice became common), I HAVE NO IDEA WHY ANY LENDER (either the one holding the 1st TD or a diff. one) would subordinate themselves to themselves or to the 1st TD holder at the time of purchase and make a 2nd “purchase money” loan (for a dn. pymt. perhaps?) and obtain a 2nd TD (purchase $$ NON RECOURSE paper) from the “buyer” in their “favor.” How risky is that??? It’s effectively 100%(+) financing and makes absolutely no sense at all to me.
These lenders must have been two jokers short of a full deck.
Participantscaredy and others,
I’m sure you’re all aware that in CA, a buyer of property getting a loan signs a “promissory note” on behalf of the beneficiary lender and then the lender’s “trust deed” on that note. This “trust deed” is recorded with the County Recorder and is the only security instrument the lender has to collect the note. This instrument entitles the lender to a timely right of non-judicial foreclosure.
On recourse paper, the lender is entitled to sue the trustor for any deficiencies it suffered after foreclosure and reselling the property. The vast majority don’t, because they don’t feel they can collect a judgment, so they write the debt off and issue an IRS Form 1099 showing the deficiency amount as “phantom income” to the defaulting trustors.
There is no “morality” or “promise” involved here. The transaction is purely business. The trustor DID sign a “Promissory” Note but that note is protected by the security instrument they also signed. If the lender decides not to avail themselves of this protection, as is their right, one way or the other, then they ran up their own deficiency damages.
This may be one reason why the IRS and FTC are temporarily suspending counting the 1099’s issued by the REO lenders as “phantom income” toward the defaulting taxpayer. I don’t work in RE at present. I have done two short sales, one in ’90 and one in ’92. Both of these sellers got 1099’s and had to claim the “phantom” income on their tax returns.
It is the lenders who are allowing the trustors to indefinitely “squat” and run up their own deficiencies as a consequence. We are all paying them to do this with the government bailout $$. That’s what’s so wrong about this situation.
Morality has nothing to do with it. If you give people cash, they will take it. If you give people free housing, they will take it. Esp. if they are broke and have nowhere to move their families.
Participantscaredy and others,
I’m sure you’re all aware that in CA, a buyer of property getting a loan signs a “promissory note” on behalf of the beneficiary lender and then the lender’s “trust deed” on that note. This “trust deed” is recorded with the County Recorder and is the only security instrument the lender has to collect the note. This instrument entitles the lender to a timely right of non-judicial foreclosure.
On recourse paper, the lender is entitled to sue the trustor for any deficiencies it suffered after foreclosure and reselling the property. The vast majority don’t, because they don’t feel they can collect a judgment, so they write the debt off and issue an IRS Form 1099 showing the deficiency amount as “phantom income” to the defaulting trustors.
There is no “morality” or “promise” involved here. The transaction is purely business. The trustor DID sign a “Promissory” Note but that note is protected by the security instrument they also signed. If the lender decides not to avail themselves of this protection, as is their right, one way or the other, then they ran up their own deficiency damages.
This may be one reason why the IRS and FTC are temporarily suspending counting the 1099’s issued by the REO lenders as “phantom income” toward the defaulting taxpayer. I don’t work in RE at present. I have done two short sales, one in ’90 and one in ’92. Both of these sellers got 1099’s and had to claim the “phantom” income on their tax returns.
It is the lenders who are allowing the trustors to indefinitely “squat” and run up their own deficiencies as a consequence. We are all paying them to do this with the government bailout $$. That’s what’s so wrong about this situation.
Morality has nothing to do with it. If you give people cash, they will take it. If you give people free housing, they will take it. Esp. if they are broke and have nowhere to move their families.
Participantscaredy and others,
I’m sure you’re all aware that in CA, a buyer of property getting a loan signs a “promissory note” on behalf of the beneficiary lender and then the lender’s “trust deed” on that note. This “trust deed” is recorded with the County Recorder and is the only security instrument the lender has to collect the note. This instrument entitles the lender to a timely right of non-judicial foreclosure.
On recourse paper, the lender is entitled to sue the trustor for any deficiencies it suffered after foreclosure and reselling the property. The vast majority don’t, because they don’t feel they can collect a judgment, so they write the debt off and issue an IRS Form 1099 showing the deficiency amount as “phantom income” to the defaulting trustors.
There is no “morality” or “promise” involved here. The transaction is purely business. The trustor DID sign a “Promissory” Note but that note is protected by the security instrument they also signed. If the lender decides not to avail themselves of this protection, as is their right, one way or the other, then they ran up their own deficiency damages.
This may be one reason why the IRS and FTC are temporarily suspending counting the 1099’s issued by the REO lenders as “phantom income” toward the defaulting taxpayer. I don’t work in RE at present. I have done two short sales, one in ’90 and one in ’92. Both of these sellers got 1099’s and had to claim the “phantom” income on their tax returns.
It is the lenders who are allowing the trustors to indefinitely “squat” and run up their own deficiencies as a consequence. We are all paying them to do this with the government bailout $$. That’s what’s so wrong about this situation.
Morality has nothing to do with it. If you give people cash, they will take it. If you give people free housing, they will take it. Esp. if they are broke and have nowhere to move their families.
Participantscaredy and others,
I’m sure you’re all aware that in CA, a buyer of property getting a loan signs a “promissory note” on behalf of the beneficiary lender and then the lender’s “trust deed” on that note. This “trust deed” is recorded with the County Recorder and is the only security instrument the lender has to collect the note. This instrument entitles the lender to a timely right of non-judicial foreclosure.
On recourse paper, the lender is entitled to sue the trustor for any deficiencies it suffered after foreclosure and reselling the property. The vast majority don’t, because they don’t feel they can collect a judgment, so they write the debt off and issue an IRS Form 1099 showing the deficiency amount as “phantom income” to the defaulting trustors.
There is no “morality” or “promise” involved here. The transaction is purely business. The trustor DID sign a “Promissory” Note but that note is protected by the security instrument they also signed. If the lender decides not to avail themselves of this protection, as is their right, one way or the other, then they ran up their own deficiency damages.
This may be one reason why the IRS and FTC are temporarily suspending counting the 1099’s issued by the REO lenders as “phantom income” toward the defaulting taxpayer. I don’t work in RE at present. I have done two short sales, one in ’90 and one in ’92. Both of these sellers got 1099’s and had to claim the “phantom” income on their tax returns.
It is the lenders who are allowing the trustors to indefinitely “squat” and run up their own deficiencies as a consequence. We are all paying them to do this with the government bailout $$. That’s what’s so wrong about this situation.
Morality has nothing to do with it. If you give people cash, they will take it. If you give people free housing, they will take it. Esp. if they are broke and have nowhere to move their families.
Participantscaredy and others,
I’m sure you’re all aware that in CA, a buyer of property getting a loan signs a “promissory note” on behalf of the beneficiary lender and then the lender’s “trust deed” on that note. This “trust deed” is recorded with the County Recorder and is the only security instrument the lender has to collect the note. This instrument entitles the lender to a timely right of non-judicial foreclosure.
On recourse paper, the lender is entitled to sue the trustor for any deficiencies it suffered after foreclosure and reselling the property. The vast majority don’t, because they don’t feel they can collect a judgment, so they write the debt off and issue an IRS Form 1099 showing the deficiency amount as “phantom income” to the defaulting trustors.
There is no “morality” or “promise” involved here. The transaction is purely business. The trustor DID sign a “Promissory” Note but that note is protected by the security instrument they also signed. If the lender decides not to avail themselves of this protection, as is their right, one way or the other, then they ran up their own deficiency damages.
This may be one reason why the IRS and FTC are temporarily suspending counting the 1099’s issued by the REO lenders as “phantom income” toward the defaulting taxpayer. I don’t work in RE at present. I have done two short sales, one in ’90 and one in ’92. Both of these sellers got 1099’s and had to claim the “phantom” income on their tax returns.
It is the lenders who are allowing the trustors to indefinitely “squat” and run up their own deficiencies as a consequence. We are all paying them to do this with the government bailout $$. That’s what’s so wrong about this situation.
Morality has nothing to do with it. If you give people cash, they will take it. If you give people free housing, they will take it. Esp. if they are broke and have nowhere to move their families.
Participant[quote=SD Realtor] . . . One thing though, we may be actually talking about the same thing. You mentioned in your posts contractors and spec guys. I am talking about large organizations who flip homes. In the end though there is very little difference if no difference at all is there? The people I am talking about work for syndications that have many investors and they look to flip homes. Some homes they have to perform alot of rehab and some homes they do not. You are implying that a majority of the regulars are licensed contractors or work for licensed contractors. I do not believe that at all, the regulars we see there work for the larger organizations who do the same thing the contractors do, but on a larger scale. I am sure there are some contractors there though. Why wouldn’t there be?[/quote]
[quote=kelly]Thanks for the thoughts, you guys. Here’s my story: http://bit.ly/aHvxZj. Kb[/quote]Excerpts from Kelly’s article, below:
“. . . But it’s lucrative. Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. And to reap a profit. . . A lot of them are buying with OPM, Gafner said — other people’s money.”
[quote=bearishgurl]You just confirmed my suspicion that a lot of these trust deeds were being purchased by licensed general contractors or their affiliates :)[/quote]
Yes, SDR, I do believe the majority of “regulars” at the trustees sales are the general contractors or managers of REIT’s. I am acquainted with several lawyers who formed them and signed up their colleagues as investors in mostly commercial and multifamily projects, primarily to fund their retirements. However, well located one-story SFR’s with views and large, usable lots are EXTREMELY DESIRABLE as flippers if they can be had for a song. I’ve seen a few in “beater” shape as you call it recently go for $275K to $425K. It’s shocking, really, even given the poor condition of the properties. But no small investor really has the cash, equipment, material discounts, clout with the permit desks or the manpower to rehab them in a cost efficient and professional manner. I noticed one foreclosed property on a half-acre “park-like” lot where the corner of the garage was hit by a tractor (long story). It was jacked up and fixed right after purchase and was sold to a policeman late last year – absolutely gorgeous now with stamped concrete front and back. Another 20,000 SF lot with a cosmetic fixer flipped for $200K more in 3 months, selling in March.
Participant[quote=SD Realtor] . . . One thing though, we may be actually talking about the same thing. You mentioned in your posts contractors and spec guys. I am talking about large organizations who flip homes. In the end though there is very little difference if no difference at all is there? The people I am talking about work for syndications that have many investors and they look to flip homes. Some homes they have to perform alot of rehab and some homes they do not. You are implying that a majority of the regulars are licensed contractors or work for licensed contractors. I do not believe that at all, the regulars we see there work for the larger organizations who do the same thing the contractors do, but on a larger scale. I am sure there are some contractors there though. Why wouldn’t there be?[/quote]
[quote=kelly]Thanks for the thoughts, you guys. Here’s my story: http://bit.ly/aHvxZj. Kb[/quote]Excerpts from Kelly’s article, below:
“. . . But it’s lucrative. Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. And to reap a profit. . . A lot of them are buying with OPM, Gafner said — other people’s money.”
[quote=bearishgurl]You just confirmed my suspicion that a lot of these trust deeds were being purchased by licensed general contractors or their affiliates :)[/quote]
Yes, SDR, I do believe the majority of “regulars” at the trustees sales are the general contractors or managers of REIT’s. I am acquainted with several lawyers who formed them and signed up their colleagues as investors in mostly commercial and multifamily projects, primarily to fund their retirements. However, well located one-story SFR’s with views and large, usable lots are EXTREMELY DESIRABLE as flippers if they can be had for a song. I’ve seen a few in “beater” shape as you call it recently go for $275K to $425K. It’s shocking, really, even given the poor condition of the properties. But no small investor really has the cash, equipment, material discounts, clout with the permit desks or the manpower to rehab them in a cost efficient and professional manner. I noticed one foreclosed property on a half-acre “park-like” lot where the corner of the garage was hit by a tractor (long story). It was jacked up and fixed right after purchase and was sold to a policeman late last year – absolutely gorgeous now with stamped concrete front and back. Another 20,000 SF lot with a cosmetic fixer flipped for $200K more in 3 months, selling in March.
Participant[quote=SD Realtor] . . . One thing though, we may be actually talking about the same thing. You mentioned in your posts contractors and spec guys. I am talking about large organizations who flip homes. In the end though there is very little difference if no difference at all is there? The people I am talking about work for syndications that have many investors and they look to flip homes. Some homes they have to perform alot of rehab and some homes they do not. You are implying that a majority of the regulars are licensed contractors or work for licensed contractors. I do not believe that at all, the regulars we see there work for the larger organizations who do the same thing the contractors do, but on a larger scale. I am sure there are some contractors there though. Why wouldn’t there be?[/quote]
[quote=kelly]Thanks for the thoughts, you guys. Here’s my story: http://bit.ly/aHvxZj. Kb[/quote]Excerpts from Kelly’s article, below:
“. . . But it’s lucrative. Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. And to reap a profit. . . A lot of them are buying with OPM, Gafner said — other people’s money.”
[quote=bearishgurl]You just confirmed my suspicion that a lot of these trust deeds were being purchased by licensed general contractors or their affiliates :)[/quote]
Yes, SDR, I do believe the majority of “regulars” at the trustees sales are the general contractors or managers of REIT’s. I am acquainted with several lawyers who formed them and signed up their colleagues as investors in mostly commercial and multifamily projects, primarily to fund their retirements. However, well located one-story SFR’s with views and large, usable lots are EXTREMELY DESIRABLE as flippers if they can be had for a song. I’ve seen a few in “beater” shape as you call it recently go for $275K to $425K. It’s shocking, really, even given the poor condition of the properties. But no small investor really has the cash, equipment, material discounts, clout with the permit desks or the manpower to rehab them in a cost efficient and professional manner. I noticed one foreclosed property on a half-acre “park-like” lot where the corner of the garage was hit by a tractor (long story). It was jacked up and fixed right after purchase and was sold to a policeman late last year – absolutely gorgeous now with stamped concrete front and back. Another 20,000 SF lot with a cosmetic fixer flipped for $200K more in 3 months, selling in March.
Participant[quote=SD Realtor] . . . One thing though, we may be actually talking about the same thing. You mentioned in your posts contractors and spec guys. I am talking about large organizations who flip homes. In the end though there is very little difference if no difference at all is there? The people I am talking about work for syndications that have many investors and they look to flip homes. Some homes they have to perform alot of rehab and some homes they do not. You are implying that a majority of the regulars are licensed contractors or work for licensed contractors. I do not believe that at all, the regulars we see there work for the larger organizations who do the same thing the contractors do, but on a larger scale. I am sure there are some contractors there though. Why wouldn’t there be?[/quote]
[quote=kelly]Thanks for the thoughts, you guys. Here’s my story: http://bit.ly/aHvxZj. Kb[/quote]Excerpts from Kelly’s article, below:
“. . . But it’s lucrative. Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. And to reap a profit. . . A lot of them are buying with OPM, Gafner said — other people’s money.”
[quote=bearishgurl]You just confirmed my suspicion that a lot of these trust deeds were being purchased by licensed general contractors or their affiliates :)[/quote]
Yes, SDR, I do believe the majority of “regulars” at the trustees sales are the general contractors or managers of REIT’s. I am acquainted with several lawyers who formed them and signed up their colleagues as investors in mostly commercial and multifamily projects, primarily to fund their retirements. However, well located one-story SFR’s with views and large, usable lots are EXTREMELY DESIRABLE as flippers if they can be had for a song. I’ve seen a few in “beater” shape as you call it recently go for $275K to $425K. It’s shocking, really, even given the poor condition of the properties. But no small investor really has the cash, equipment, material discounts, clout with the permit desks or the manpower to rehab them in a cost efficient and professional manner. I noticed one foreclosed property on a half-acre “park-like” lot where the corner of the garage was hit by a tractor (long story). It was jacked up and fixed right after purchase and was sold to a policeman late last year – absolutely gorgeous now with stamped concrete front and back. Another 20,000 SF lot with a cosmetic fixer flipped for $200K more in 3 months, selling in March.
Participant[quote=SD Realtor] . . . One thing though, we may be actually talking about the same thing. You mentioned in your posts contractors and spec guys. I am talking about large organizations who flip homes. In the end though there is very little difference if no difference at all is there? The people I am talking about work for syndications that have many investors and they look to flip homes. Some homes they have to perform alot of rehab and some homes they do not. You are implying that a majority of the regulars are licensed contractors or work for licensed contractors. I do not believe that at all, the regulars we see there work for the larger organizations who do the same thing the contractors do, but on a larger scale. I am sure there are some contractors there though. Why wouldn’t there be?[/quote]
[quote=kelly]Thanks for the thoughts, you guys. Here’s my story: http://bit.ly/aHvxZj. Kb[/quote]Excerpts from Kelly’s article, below:
“. . . But it’s lucrative. Home prices are rising in the county, especially in some lower-priced pockets like Lemon Grove or parts of Chula Vista. Prices there are going up, making them especially attractive on the courthouse steps. Many investors are buying with the intent to rehab and sell the homes on the regular retail market as soon as possible. And to reap a profit. . . A lot of them are buying with OPM, Gafner said — other people’s money.”
[quote=bearishgurl]You just confirmed my suspicion that a lot of these trust deeds were being purchased by licensed general contractors or their affiliates :)[/quote]
Yes, SDR, I do believe the majority of “regulars” at the trustees sales are the general contractors or managers of REIT’s. I am acquainted with several lawyers who formed them and signed up their colleagues as investors in mostly commercial and multifamily projects, primarily to fund their retirements. However, well located one-story SFR’s with views and large, usable lots are EXTREMELY DESIRABLE as flippers if they can be had for a song. I’ve seen a few in “beater” shape as you call it recently go for $275K to $425K. It’s shocking, really, even given the poor condition of the properties. But no small investor really has the cash, equipment, material discounts, clout with the permit desks or the manpower to rehab them in a cost efficient and professional manner. I noticed one foreclosed property on a half-acre “park-like” lot where the corner of the garage was hit by a tractor (long story). It was jacked up and fixed right after purchase and was sold to a policeman late last year – absolutely gorgeous now with stamped concrete front and back. Another 20,000 SF lot with a cosmetic fixer flipped for $200K more in 3 months, selling in March.
ParticipantLOL – didn’t realize this was an old thread until now!! Still good topic, nonetheless 🙂
ParticipantLOL – didn’t realize this was an old thread until now!! Still good topic, nonetheless 🙂
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