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bearishgurl
Participant[quote=SD Squatter][quote=sbridge2013]Right now one property was listed at 935k to 975k. Is it worth buying property with pole views and substation view at that price?[/quote]
100k profit just for living in the house for half a year. I don’t see any upgrades. Nice…[/quote]
SD Squatter, you missed the substation “upgrades”
[img_assist|nid=17284|title=Electrical Substation “Upgrades”|desc=|link=node|align=left|width=100|height=56]
Along with the fried lizard and snakes on both sides of the rear fence line, these upgrades can only add to the expansive rear-yard view!
Who needs a BBQ?
Certainly, the property is now “worth” $100K more … right??
ParticipantMy comments below regarding reccos for buying investment properties are directed to the current SD County market, NOT the market of 2009-2011.
Participant[quote=spdrun](1) Yep, NJ is judicial. Process takes 3-4 years on average vs 1-2 years in CA, which why it’s where CA was two years ago.
(2) Some of the houses/condos are in decent school districts, others are not. Upset (aka reserve) prices run the gamut from decent to crappy. 90% of the stuff went back to the bank to become REOs.
(3) Older isn’t necessarily considered bad on this coast.
(4) The irony of the thing is that I’m actually seeing BETTER deals on rental property in the “good” towns in NJ. Yeah, you’ll pay at least $300k for a duplex, but you can rent it at 8% cap to decent tenants, and no rent control in the wealthier towns either. I’m not even talking about foreclosures, just people who buy and sell organically at what they consider to be a fair price.[/quote]For an investor, it sounds like you have a better market to shop in on the east coast than we do out west, spdrun. Of course, that is assuming that there is a bottomless pit of potential tenants in NJ/NY who are both qualified to rent and have the desire to rent. In some areas of SD County, a LL or PM Co no doubt gets up to a dozen applications to choose from for ONE rental listing. In other areas of the county, it takes much longer to find a qualified tenant.
If the opening bid at auction is too high and the defaulted property reverts to the lender, it is actually better for a buyer looking for a principal residence (in most cases) to buy an REO, IMO. This is because Frannie lenders have been spending several thousands (in [indirect] taxpayer funds?) to ready a property for sale (which a buyer of a principal residence usually doesn’t have $$ set aside for after closing). After receiving their trustees deed, the REO lenders are then in a position to write off the delinquent excess (over market-value) which was present at the time of auction and then list the property in the range of what it would actually sell for on the open market.
For the buy-to-let investor, it is actually better to buy at the foreclosure auction, unless the opening bid is too high. But, if there is even 20% equity built in and the property is only a cosmetic fixer but otherwise in a solid rental area, it is probably worth it to bid it up to 80% of market value at auction, and, if the successful bidder, either execute a new rental agreement with the current occupants or serve them a 30-day notice to pay or quit after receiving their trustees deed, IMO.
Participant[quote=spdrun]”The NAR was the main lobby behind the ouster of DeMarco. With so many “would-be sellers” living “free” while waiting months for a (dicey) SS approval or to be foreclosed upon (with both possibly occurring simultaneously or in-tandem), they’re not listing because they are underwater …. hundreds of thousands of them grossly so.”
Even if a loan gets modified, they’d still be underwater. As far as I know, even after a mod, people can’t sell at the new loan amount — they need to basically do a short sale. This would just make more people sit tight, not less.
In other news, I was at the Morris County (NJ) sheriff’s auction this week. 25 homes went under the hammer with few bidders; a few months ago it was maybe four or five per week. *BANG* *BANG* Going once … SOLD! Should be some interesting grist for the mill as the REOs get offered through the fall and winter of 2013.
Good thing is that:
(a) the stooge may not be confirmed, and this will take a few months
(b) changing FNMA’s charter will take time as well
(c) hopefully I’ll have enough rental property not to give a fuck by the time the bums get a free pass.[/quote]spdrun, perhaps it is because NJ is a judicial foreclosure state. The lenders there obviously had to go through a LOT in recent years just to get the right to take properties which they have long had the right to take were in not for the parade of bogus MERS robo-signing lawsuits and other assorted time-consuming legal challenges to foreclosure, which, in the end, were meritless.
Perhaps there are fewer bidders at a foreclosure auction there because the opening bids are higher (relative to actual market value) due to high cost of foreclosure? Also, perhaps the stock of housing in that area is quite old and/or in school districts that are not the best. I don’t know. It seems the average flipper who would send someone to a foreclosure auction to bid on properties would be targeting homes with a wide appeal which would sell fast for top dollar to a captive audience (read young Gen X and Gen Y with families).
And thanks for pointing out that FNMA’s Charter will have to be changed to provide for mass cramdown. This will take an act of our (dysfunctional, at-odds-with-themselves) Congress :=D
The vast majority of those “bums” who have permanent modifications on their principal residence no doubt have mods which allow the stiffed lender to get back most or all of their “forgiven” debt upon sale unless the modified trustor hangs onto the property for a given length of time (5-10 yrs?) and pays them religiously and on time every month according to the modified terms. This keeps the poor slobs in their houses until such time as they get to keep some of the equity upon sale, whether they want to stay … or not.
I personally feel that the families who signed up for this foolishness did so ONLY because their credit was shot or nearly shot (they HAD to default in order to get their application for modification accepted) and they are now enjoying ultra-low house payments in an area they couldn’t otherwise afford to buy or rent in. They did it expressly to buy enough time to get their kid(s) through HS graduation (in their school attendance area of choice) and then they will address the degree that they are actually upside down (IF they still are at that time) and the degree that they will have to share equity upon sale with the lender(s) they stiffed in the past.
It’s just kicking the can down the road. Maybe 365 more bright sunny days will lift them out of their hole and maybe not. But they don’t care right now. They just want to continue living in an area they will never be able to afford to get into again until they don’t need to be there anymore.
It’s that simple.
Note: In CA, it is not mandatory for a “Modify Trust Deed” to be recorded if the same lender who held the TD to be modified (or their purchaser) is the same lender who modified the loan.
So, unfortunately, the public isn’t able to review the exact terms of 99% of mortgage modifications a trustor/borrower worked out with their lender(s).
ParticipantThe NAR was the main lobby behind the ouster of DeMarco. With so many “would-be sellers” living “free” while waiting months for a (dicey) SS approval or to be foreclosed upon (with both possibly occurring simultaneously or in-tandem), they’re not listing because they are underwater …. hundreds of thousands of them grossly so. The NAR has made it plain over the last few years that they favor debt forgiveness (even in cases of “cash out” used for anything and everything but the mortgage and property improvements) over foreclosure. There has not been enough “churning” going on in the residential RE market and thousands of their members are starving while fighting over a dearth of potential listings. The NAR and its children’s (ex: CAR) position is that these poor-slob underwater owners should be able to list and also buy again ASAP.
The financial overextension of Joe6p (who did it to himself, btw) during the millenium boom is taking too long to sort itself out for the NAR’s taste …. of course, all due to gubment interference with the bogus HARP and HAMP programs, etc, its carrot-and-stick incentive offerings for the Big Banks to “play ball” and its continued manipulation of the financial markets in recent years.
This is JMHO, gleaned from my realty subscriptions along with what I’ve seen on the street, etc.
Participant[quote=SK in CV]Concur. Flexibility is a GREAT reason to have a mortgage even if a retiree has the wherewithal to pay it off, recognizing that it does come with a price. In some cases it’s well worth it.
My friend is almost 63, and he is better off than most. He bought right, saved a lot (despite making almost nothing on his investments), doesn’t live beyond his means, and always borrowed appropriately. Now he’s just looking for hobbies.[/quote]
Oh, I “assumed” he was over 65 because you said he was collecting SS. If he is 62, he either took a partial SS early or will wait until age 66 to take it.
Or, perhaps I understood wrong and you meant “projected SS.”
Yes, there are a LOT of boomers like him who have always lived modestly within their means. It doesn’t matter if they own their residence in MH or ChulaV. What their houses are “worth” today has no bearing on what they actually paid for them.
Participant[quote=SK in CV][quote=CA renter]
I would argue that they are taking out a mortgage in order to preserve cash because they think they can earn more on that money than what they are paying in interest.Contrary to the realtor rhetoric about the “benefits” of MID, it never makes sense to spend a dollar in order to save 30-40 cents (and that’s if you’re earning a pretty significant income) on taxes.[/quote]
I agree entirely. The argument that an interest deduction is “needed” for taxes is stupid. It was stupid back when the top tax rate was 70%. Using the leverage to increase overall return might make sense for some people.[/quote]
I also agree, SK, but when retirees are just starting out and haven’t yet signed up for MC, they’re not yet sure exactly how much it will cost them to live every month. Many feel is better to have more cash cushion until they figure out the lay of the land, including how much their monthly health premium is going to cost going forward and how many hours they may still need to work.
After the dust settles (MC, SS and possibly other pensions kick in) and the retiree knows if they are going to move to or stay in a particular locale, it is easier to make decisions regarding refinancing or mortgage payoff.
IOW, taking out or keeping a small mortgage keeps the retiree’s options open.
Your “friend” is already 65 or older and is a bit more “well-heeled” than the average retiree (asset-wise). In addition, those behind him won’t get to collect their full SS until age 66-67.
Participant[quote=jpinpb]I guess the main difference now is there is more skin in the game. http://www.latimes.com/business/realestate/la-fi-subprime-mortgage-20130427,0,6498564.story. People will be losing what they put down.[/quote]
…Today’s high-risk lenders differ from those during the housing boom in key ways. These lenders say the new subprime mortgages are actually old school — the kind of loans made in the 1980s and 1990s. In other words, a borrower’s collateral matters, down payments matter, income and ability to pay matter.
Subprime lenders care because they are holding the loans on their books rather than selling them to investors. They hope a private securities market for subprime loans, also destroyed in the meltdown, will reemerge soon.
For now, the subprime and alt-A business remains small, maybe $8 billion total, estimated Inside Mortgage Finance Editor Guy D. Cecala. That’s less than half of 1% of the $1.8 trillion in U.S. home loans last year.
Among those hoping to reverse the trend is the Polands’ lender, Citadel Servicing Corp. of Orange County. Chief Executive Daniel L. Perl said he has tested the water by making a few dozen subprime loans since late 2011, mostly with his own money rather than investment capital…
Yes, jp, and also these loans are kept in the lender’s portfolio. These types of loans have always been around and used to be referred to as “C paper.” They are nothing but short-term fixes for people that need them for purchase money, whether to enable a bidder to present a cashier’s check on the courthouse steps, or, as these buyers did, buy a personal residence with leverage while having bad credit, clean it up and improve it a little and have it re-appraised a few months down the road, where, hopefully, as they are rebuilding their credit, they will be able to obtain a mortgage on better terms (with Citadel, they had to put 35% down [borrowed from their IRA’s] and are paying a 10.9% interest rate).
Since there is no GSE involved, the gubment won’t be bailing out this mortgage bank if there is a default … in this case, Citadel of Orange County.
Back in the eighties, there were SEVERAL small lenders in town that specialized in C/D paper and each had a passel of investors who were only too happy to invest with them for 15%++ dividends. Some of these lenders no doubt ended up with properties, but in that era, they were happy about it, since the lender’s principal was ALWAYS a licensed RE broker who had numerous contacts in the trade and thus was able to foreclose upon and market the properties they took back himself in a timely manner.
In this article, I wonder why the Poland’s chose Temecula on the basis of appreciation needed to get out of their bridge loan within the year, since there are undoubtedly areas in SD, LA and Orange Counties which will appraise faster and higher than Temecula in the coming year. (This foreclosed-upon couple took this loan out strictly on the basis of believing what they buy would appreciate fast and they could get out their “subprime mtg” within the year).
The only reason I can think of why they would choose Temecula on the basis of appreciation is the lower price point and thus the lower amount of downpayment required (since they had to put 35% down).
Participant[quote=SK in CV]BG, I just helped a friend get his retirement stuff in shape, which included refinancing his house. He’s retired, he was self-employed until December. (It would have been only mildly easier if he had done this before he retired.
His house in Mission Hills is worth around $1M.
He owes $300K on it, and just wants to refinance to a lower rate.
He has about $14K a year in SS benefits.
He has about $1M in cash/marketable securities.
He has an IRA with $450K in it that he doesn’t plan on touching until he has to.
We moved most of his cash/marketable securities into blue chip stocks yielding an average of 2.75%/yr, (which was NOT hard to do) so total income of $27,500. Just provided his monthly broker statement that showed the annual income, and they accepted it, irrespective of what his interest and dividends were in the prior year.
Total verifiable income of about $41K.
He got a 30 yr, fixed rate loan with payments of about $875 a month. Closed the loan in less than 30 days beginning to end with Quicken Loans.[/quote]
That’s awesome to hear, SK. You’re a good “friend.” Luckily, for him, your friend was only seeking a 30% LTV mtg in a prime area of SD. Do you think he still would have “qualified” for the $875 (P&I only?) mtg had he been seeking a >=40% LTV mortgage in a 400-500K area?
I think there are many more in this group who don’t own homes worth $1M and still owe 40% or more of their home’s current appraised value. Hopefully, values will go even higher in the coming months to help these folks refinance or sell and recover all of their investment (purchase price plus cost of improvements).
Participant[quote=jpinpb]BG – I am into some of the mid-century design. The interior of this home had no character worth preserving. The floor plan sucked, too.
The investors were planning on tearing down the place. I don’t think they were planning on a multi-family, as it is not zoned for that.
The 9700 sf lot is SLOPING in back. Unless you’re putting the house on stilts, much is not us able. You could maybe terrace a garden.
Whatever the investors build, it’s not going to be cheap. I said 400k to be conservative, but I can see them easily spent half a million to build something, on top of the 662 they spent and then sell higher to make a profit.
As I said, it will be interesting to see how it goes down.[/quote]
jp, apparently these “investors” (or whoever is buying the property) believe that it is “worth” $662K in its current condition. Even if the lot is 1/3 sloping, the slope STILL affords privacy. And you can’t take away the sit-down view. Views like this were worth ~$100K in the nineties but seem to be “worth” much more now. This property is by no means a “typical Clairemont house” nor does it have a “typical” lot. It’s particular location is atypical and therefore “special” to a subset of buyers.
Here is a similar property with a sloped (corner) lot (with alley access) in a slightly better location than your Bay Ho listing which we discussed here back on 1/28/13:
http://piggington.com/perfectly_preserved_early_70s_high_end_interior
http://www.sdlookup.com/Pictures-120050000
The above link is not ’70’s (as the OP stated) but actually ’50’s era (“mid-century”). It appears to be currently off the market but has not yet closed. Here is a current (downhill but updated) closed comp on the same side of the street with a 7600 sf flat lot which sold in 11/12 for $829K ($441 sf):
http://www.sdlookup.com/MLS-120032457-1214_Moana_Dr_San_Diego_CA_92107
Yes, it will be interesting to see how much your Bay Ho listing eventually sells for if it is actually knocked down, a spec home is built there and it is subsequently flipped.
ParticipantI wanted to add that I think the portfolio lenders have it right for this group. Many borrowers nearing retirement or who have taken early or deferred retirement can VERY EASILY pay PITI equal to 50% of their monthly income into oblivion. This group just doesn’t have the level of monthly expenses as do parents who are raising minor children. In addition, save for home maintenance and repairs, the majority of this group doesn’t really need anything. They already have everything they need and aren’t going to upgrade to all the latest gadgets/appliancess/vehicles, etc because they don’t care about such things. So they SHOULD be held to a different standard for mortgage – qualification purposes, especially if their credit is excellent.
Participant[quote=SK in CV]So it actually has nothing at all to do with being able to use $4K to $7K in mortgage interest, only the amount of the mortgage they’re comfortable with?
If they’re seriously “cash rich” and collecting SS, then they would have no problem qualifying for a $200K mortgage. They’d need income of less than $35K a year.[/quote]
You might be surprised, SK. Mortgage lenders today are REALLY hung up on “monthly income” for qualification purposes. It’s not that easy to get a “prime” mortgage when one’s “monthly income” is unverifiable or they are primarily living off passive income … ESPECIALLY if they haven’t yet taken their pension or all of the pensions they are or will be entitled to take.
Lenders don’t seem to care about available assets as much as W-2 income because a borrower is free to deploy those assets as he wishes during his mortgage term. He/she could essentially take out a high-ratio mortgage with a very low documentable income (~$35K, as you stated) and then immediately thereafter “spend down” his/her assets for any number of reasons.
On an ARM or 30-due-in-5 (or 7) loan, yes, a portfolio lender will consider assets in lieu of monthly income. But “Frannie” lenders will not nor will VA/FHA lenders.
For instance, I know a few veterans nearing retirement who have not yet used their VA funding entitlement. They could feasibly use it to buy a retirement home but would need to do so while they can still qualify for it conventionally (through W-2 income). A LOT of the over-50 crowd falls in the category of having assets but insufficient income to qualify for a mortgage today.
In answer to your first question, it has to do with exactly how much MID they will need to shield income in retirement (for a set amount of time … usually 3-7 yrs). After that period, the borrower plans to retire their mortgage entirely.
Participant[quote=SK in CV]BG, what would be the circumstances where someone still employed could only use $4K to $7K or mortgage interest? Are you saying it’s in addition to their other home in their previous locale, and the total debt would otherwise exceed $1.1M?[/quote]
The homebuyer is leaving their job soon but hasn’t yet applied for “retirement” so his/her employer doesn’t know their plans. But they want to qualify for a mtg for their “retirement home” while still employed. In recent years, it has been too hard for a borrower to qualify for a prime mtg on excellent terms while “cash-rich” but not able to document enough income to qualify for even for a ~$200K mtg. Thus, it is better to attempt to qualify while *still employed* but just take out enough mortgage to generate a MID to shield taxable retirement income and investment income (usually lower than income while still working).
Native San Diegans residing in other counties/states who wanted to return to SD weren’t and aren’t stupid. When they saw and heard of properties in their “home turf” being listed at prices often at or below the land value, many jumped in with offers, all the while knowing they had to be “all cash” in order to “win” the bidding wars. They figured they could “refi” to a mtg they were comfortable with in “retirement” AFTER COE and successfully did so.
Participant[quote=all]A friend of mine just bought a house in north county, primary residence, all cash. He plans to refinance with 50-60% LTV loan.[/quote]
I’ve seen this a couple of times as well, craptcha. In these cases, they were native San Diegans (imminent retirees) intending on returning to their “home turf” to “retire.” They used all cash to purchase in order to get their offers accepted and then took out 30-50% mortgages after COE (while still *employed* in another locale and purporting to refi an “investment property” in SD) in order to have a small MID for a few years until SS kicks in. At that time, they intend to retire the mortgage.
Buyers in this category only want as much MID that they can use on their tax returns to shield income and not a penny more. If that number is $4K or $7K per year in interest, so be it.
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