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bearishgurl
ParticipantI saw these two articles recently in my “First Tuesday” subscription which both suggest that far-flung suburbs and exurbs will be the “last choice” of the biggest immediate-future homebuyer-group (Gen Y).
http://firsttuesdayjournal.com/suburban-demographics-refute-city-growth/
http://firsttuesdayjournal.com/poverty-hits-home-with-suburban-poor/
The first article touches on and the second one discusses in depth the premise that these suburbs/exurbs are sought after by the poor due to lower prices to rent/buy in. In this case, affordability trumps desirability….
Participant[quote=svelte]…And yes get the Alcratraz tix at LEAST a week in advance. And don’t miss going on the Alcatraz tour…get the headphones and listen as you walk…nothing like it. I thought it would be cheesy when we went, but I walked away just thrilled. Would go again in a heartbeat….[/quote]
I did the walking tour with headphones a few years ago and would agree that it is a very unusual and interesting experience. Last year, I toured around Alcatraz (up close and personal) on the Blue and Gold Fleet’s longer tour … also thrilling!
Participant[quote=FormerSanDiegan]…If you completely ignore shadow inventory and simply look at prices, inventory and fundamentals I think you are better off.[/quote]
I think we’re all trying to do this, FSD, but the drag of “shadow inventory” (that shouldn’t even be there at this late date) is insidiously artificially undervaluing many markets by trickling out below market short-sale closings. It is THESE closings that are ruining the comps for those homeowners who “played by the rules.”
I just went to dinner with “boomers” in their sixties last night who have had their beautifully remodeled SFR (bought early ’90’s) listed in one of SD’s finest urban ‘hoods for less than six months. They haven’t gotten any good offers and lowered their price by about $40K. That’s as far as they’re going. When I asked, they said, “we’re not giving it away. We have all the time in the world.” One of them still lives in the property and they’ve been divorced about 12 years!
Don’t ever underestimate the “holding-on” power of sellers (ESP a 59.5+ yo boomer) who can easily rent for a positive cash-flow (monthly income) into oblivion.
Perhaps two years ago, a buyer could have gotten a good deal on a thrashed REO but in recent months, the vast majority (taken back by Fannie) are marketed at a competitive price with “traditional sales” after which they have had an avg of $5,700 each spent on them on in rehab.
It is NOT generally the REOs that are cratering property values today (creating “sold comps” below 2002 values). It is the short sales.
There is no reason for this in a non-judicial foreclosure state such as CA. I blame the lenders for accepting these deep discounts and letting these homedebtors escape scot-free with their mattress cash and newer vehicles, etc (extracted from their “home equity”).
Again, lender malaise is the culprit here. Hopefully, in 2013, when the Mortgage Forgiveness Debt Relief Act of 2007 is over, homedebtors will think twice before strategically defaulting, since they will be again be paying income taxes on their forgiven “phantom income” (as it should be).
ParticipantJust curious about something, Essbee. Since you have now closed on your new property, do you think it was worth it to “move up” whilst losing $75K on your old property?
http://piggington.com/man_cave_ideas_testamonials
Why didn’t you want to wait a few years to sell and get out “clean” (w/o losing any equity)?
Participant[quote=Essbee]But shouldn’t the fact that the loan/lien is paid off be noted in public records as well?
If not, it seems like this method would WAY overestimate the number of people who are “underwater”.[/quote]
Yes, but there is a 2-week to 3-month “lag time” between paying off a mtg and the lender filing a reconveyance. If the borrower took out a HELOC, there is no reconveyance filed if the loan is paid off unless the borrower (or lender) close the (zero-balance) account.
Don’t know if REALIST shows the actual documents filed. If it is similar to WestLaw, it will show the loan amount, lender, and date and recorder filing number of transaction but NOT the terms of the loan. Your realtor friends would then have no way of knowing whether your 2nd TD was paid off if it was a HELOC or if you had just paid it off within a couple of months of calling them for a listing appt.
ParticipantIn other words, if a longtime owner in their sixties wants to sell their suburban homestead now, they are not as interested in recovering their investment of a pool they installed in ’86 that their five kids (all grown now) had weekly pool parties in. It’s old and used now and sellers realize that many buyers with young children don’t want pools.
OTOH, if these same owners installed $14K of “Low E” vinyl windows just three years ago, they will want to recoup that investment on sale.
Participant[quote=AN]. . . Home owner don’t care about real prices. They care about nominal prices.[/quote]
Correct, AN. Longtime owners with equity care about getting back their initial investment (downpayment) and as much of their own money as possible that they sunk into permits and labor/materials in their property over the years (depending on how long ago those improvements were made and what they were).
It has nothing to do with wanting a “millenium-boom bubble price.”
Participant[quote=Jazzman][quote=bearishgurl on March 25, 2012 – 12:14pm]Username, if you think you will be able to purchase “equity” from a “distressed” home-debtor (whether in foreclosure or not), think again. Even if the home-debtor DOES have equity, there are many pitfalls to this type of transaction, namely a few pesky “legalities,” including the ability of the home-debtor to claim YOU took advantage of him/her and legally recover title to their property.
You would do well to study these types of transactions carefully before “knocking on doors” and attempting to “jump in with both feet.”
Since you are asking these questions here in the manner you are asking them in, it is apparent that you have a lot of “studying” to do. Instead of listening to fast-talkers on infomercials selling books and CDs, I would suggest you begin your “studies” by taking RE Principles and then RE Law at your local community college.[/quote]
This is a huge assumption! What happened to innocent until proven guilty? A guy comes along and asks a perfectly legitimate question and is jumped upon. Maybe he’s doing some research for a paper, or is just curious. And so what if he’s looking for opportunities. Good for him/her. Why is the free market great when it serves it’s masters and evil when it doesn’t. To use your own expression, you can’t have it both ways. Anyway, it looks like he’s been chased out of town. Pity so many threads end up this way. :([/quote]
Actually, Jazzman, I wasn’t the first Pigg on this thread who (negatively?) commented on the “advice” the OP is seeking here.
[quote=sdrealtor on March 25, 2012 – 10:55am]
Guys like this typically think they are smarter than everyone else. The beleive they can just walk onto a very competitive landscape and take what they want. He/she has quite a bit to learn about the way things really operate out there.[/quote]From the text of the OP, it appears he/she is seeking to find owners with “equity” in distress to make them an offer before any agents get involved or their properties are foreclosed upon (and hopefully take title to their property).
This “minefield” falls straight into the abyss of CA Civil Code section 1695 et seq., where the “wheel was invented” long ago:
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1695-1695.17
I simply told him/her to tread very, very carefully – don’t trip over yourself and dot all your i’s and cross all your t’s, so to speak.
There is a lot of buried ordinance in that landscape that could blow up on him/her when he/she least expects it.
Here’s a good example:
http://piggington.com/question_on_an_apparent_foreclosure
Do any Piggs know if the above property actually went to trustee’s sale? If so, WHO was actually foreclosed upon??
/End of lesson learned.
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As (brian?) suggested, why not just keep making offers on SS’s which are priced at ’98-’02 prices (for the sole purpose of causing their surrounding area to be grossly “undervalued”)? Rinse and repeat until you get an “lender-approved” offer! This is probably easier (and safer) than attempting an “equity purchase,” ESP in the current litigious climate of homedebtor “victim mentality” :=[
I never tried to run Username off. All those “infomercials” made “equity purchasing” (in states OTHER than CA, of course) look like a no-brainer . . . lol! I say, GO FOR IT, watch your step and PLEASE report back here in a few months as to how you’re doing on your “wealth-building activities.” I’m all ears :=]
Participant[quote=Jazzman]Bearishgirl, everyone has their own definition. Here’s one courtesy of Investopedia:
A term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying putting on the market until prices improve. Shadow inventory can create uncertainty about the best time to sell (for owners) and when a local market can expect full recovery. Also, shadow inventory typically causes reported data on housing inventory to understate the actual number of inventory in the market.
Corelogic defines it as homes seriously delinquent, in foreclosure and owned by lenders.
Standard and Poor claims it is all delinquent homes, not just REOs.
This obviously doesn’t help with determining any kind of precision in numbers, and it probably follows the more complex the definition, the more wild the variances in guesstimates.
The OP may be better served with defining his/her own goal in conducting the research, and then zeroing in on data that is most relevant to it.[/quote]
Jazzman, as to the Investopedia definition of “shadow inventory,” I don’t agree with it. Property owners with “equity,” especially those who have substantial equity or own free and clear have MANY CHOICES of how OR whether to dispose of their property. They are NOT lurking in the “shadows.” They can move on (even out of state/country) and put their properties into rental service and hire a property mgr and STILL be far “above water” and able to financially “manage” vacancies. There are thousands of these owners out there!
I predicted here that this (inventory shortage) would become dire just a few short months ago. At that time, I could see it already happening …
http://piggington.com/people_who_can039t_afford_their_house_but_get_to_keep_it
I know MANY local property owners with substantial equity or who are “free and clear.” These types of property owners have always had the same mindset from day one. They WILL choose to wait for a better day to sell simply because they (or their heirs) CAN!
The vast bulk of the listings today are “desperately-need-to-sell” properties!
Buyers out there today are making offers which attempt to “cram down” neighborhood values to comport with the recent (85% “distressed”) sold prices of properties that have closed at a price below (or far below) market (ESP the SS’s up to and including the “corrupt SS’s” [which were sold to relatives/friends of the listing agent]). This is causing well-kept “equity” properties to be “artificially” undervalued (in appraiser-speak). I don’t have to tell you that EVERY single equity owner knows this (yes, even the 80+ year olds)!
Today’s local buyers are frustrated (and rightly so) because there is little, if any “quality inventory” on the market. Well, bargain-seeking buyers can’t have it both ways. “Distressed” homedebtor-sellers, much more often than not, have NOT had the ability and/or motivation to maintain their properties in recent years. Most of these SS listings and newly-acquired REO’s (before lender rehab) are dirty and in poor physical shape and some are actually stripped.
That is your inventory.
The SS homedebtor-sellers are likely behind in everything from PITI/HOA to child support and income taxes and could also have possible judgment liens against them. All of this (indirectly) becomes the potential SS buyer’s problem when their offer is accepted and it is insufficient and/or needs more $$ kicked into the transaction to “make it all work.”
It’s the conundrum of the buyer wanting the lowest of the low price (to “protect” them against “overpaying”) but ALSO with that low price desiring location, lot and condition.
Again, you can’t have it both ways.
Participant[quote=SD Realtor]…So you can spin your wheels for hours, days, or weeks. I am not saying it is not interesting or useful. I am just saying that you need to ask yourself how much is your time worth?[/quote]
Good post in its entirety, SDR.
Participant[quote=Jazzman]Username, you have asked the million dollar question. There is no clear definition of the shadow inventory, which might partly explain why it has been labeled a myth. I think your best bet would be to research current listings, and go back over several years. Estimates of the shadow inventory are wildly different …anything from 3-10 million, and it really will depend on what you include in that number. I like to think of it as any home that would ordinarily be on the market, but is not due to the housing bubble and the ensuing economic downturn. If you just include those homes which lenders are said to be hording, you are on a hiding to nothing. While their number may be large, the important thing is how many appear as listings at any given moment. Any home that has received a Notice of Default can potentially add to the number, and you can check that at http://www.foreclosureradar.com/ However, how many sellers have decided to forestall putting their homes on the market is unknown. One thing that is certain, is that inventory levels are low which a source of frustration for everyone. Some argue this will affect prices upwardly, but I think that is wishful thinking on behalf of the industry. Just as likely, is a flat to declining market due to buyers disgruntled with lack of quality homes to choose from.[/quote]
Jazzman, my understanding of “shadow inventory” is that is it comprised of those properties which have been defaulted upon (the “trustors” stopped making mortgage payments [1st TD, 2nd TD, 3rd TD or HELOC].) These properties do NOT necessarily have a Notice of Default filed against them.
This is why, in the absence of an NOD and a recent active or expired RE listing, one cannot really tell if a property is “distressed” and thus is potential “shadow inventory” just by looking at the amt and terms of its mtg at the recorder’s office.
Just because a home-debtor might be “underwater” does NOT mean they have defaulted or would default (whether by choice or necessity).
“Shadow inventory” does NOT include those “potential sellers” with equity who can wait for a better day to sell. Why? Because selling, for them, is NOT mandatory. It is a future wish, pipe dream or future need. They only become a serious seller when they put their property on the market and price it at or near what it would fetch today and reduce its price, if necessary, in order to get it sold. If they list it at a particular price to “test the market” and don’t get any offers they would accept and subsequently withdraw their listing, that property is STILL not “shadow inventory.”
And even if a homedebtor DOES default, they may live in “their” property “free” for MANY months (24+) before a NOD is even filed on them! During this time, someone looking at their trust deed(s) in the recorders office would have NO IDEA they were behind in their payments and how much they were behind.
Just because you see terms on a TD at the recorder’s office that YOU wouldn’t sign up for doesn’t mean that those terms are not agreeable to the parties that signed the TD. In the absence of an NOD and “distressed” listing, you would have no way of knowing if that “trustor” was making partial payments or had made a lump sum payment and was catching up with their lender or was in the middle of qualifying for a modification. There is no requirement in CA for mortgage modifications to be recorded.
For example, even after a NOD is filed, the trustors in question could be paying $1800 PI month by agreement with their lender when their TD on file with the public that they should be paying $2700 PI per month and you would have no way of knowing that by viewing the terms of their TD. These trustors may be on a trial or permanent mod program.
I would venture that, in recent years, more than half the NOD’s filed are never acted upon by their beneficiaries. That is, the “redemption period” never ends and there is never a posted trustee’s sale date.
And checking the recorder’s office does NOT reveal whether a property owner has been paying their property taxes on time. Even if they are making their PI pymnts, if their homeowner’s insurance premium is not impounded, they may not be paying that either. They could also be behind on homeowner’s dues and a potential buyer would not know this unless there is a lien filed by the HOA on that property. Even if there IS a lien filed, it doesn’t mean that arrears have not accrued SINCE a lien was filed or that the dues are in the process of being caught up or paid and the lien has not yet been released.
IMO, the only REAL “shadow inventory” that can be tracked is that which has an NOD filed. However, these properties could get very likely get stuck at this stage and never go to sale.
So, in sum, absent a HUD-1 for a closed “distressed” property or an official opening bid amount posted (for a TS to take place within 3 weeks), a buyer or potential buyer would have no way of knowing exactly how much behind (PI and fees) a delinquent trustor really is/was on their principle and interest payments. Further research would have to be conducted as to the status of unpaid taxes, HOA dues and insurance premiums. You, as a “shadow inventory researcher” from the public are not entitled to receive information as to the status of HOA dues and insurance premiums.
I would think the most efficient way to track it today is to follow the trustee’s sale notices, NOD’s that become SS listings or SS listings that become NOD’s. However, that is only a fraction of the true “shadow inventory.”
The $64M questions are “how MUCH behind in PI” and “how MUCH will defaulted-upon lender(s) settle for” (in relation to the property’s actual mkt value). The answers to these questions are unknown by everyone, including listing agents, until a NOS is filed or a SS is finally “approved.”
Participant[quote=flu]Ask Robert Kiyosaki, or read his book. Rich Dad/Poor Dad.[/quote]
LOL 🙂
ParticipantUsername, if you think you will be able to purchase “equity” from a “distressed” home-debtor (whether in foreclosure or not), think again. Even if the home-debtor DOES have equity, there are many pitfalls to this type of transaction, namely a few pesky “legalities,” including the ability of the home-debtor to claim YOU took advantage of him/her and legally recover title to their property.
You would do well to study these types of transactions carefully before “knocking on doors” and attempting to “jump in with both feet.”
Since you are asking these questions here in the manner you are asking them in, it is apparent that you have a lot of “studying” to do. Instead of listening to fast-talkers on infomercials selling books and CDs, I would suggest you begin your “studies” by taking RE Principles and then RE Law at your local community college.
Participant[quote=bobby]Thanks again. We are leery about getting into a bidding war against another buyer but I guess it doesn’t hurt to look. We’ll keep on looking.[/quote]
bobby, I’m getting the feeling here that you’re worried about “game-playing” by RE agents and rightly so.
All you can do is put your best offer in with the most attractive terms you can offer at the outset. If someone else comes in higher, the seller counters your offer and you don’t feel comfortable besting what you already offered, then let the (supposed) higher bidder have it!
One reason why your offer would be countered (for price) in the first place in a multiple-offer situation is that another buyer offered more than you’re comfortable offering but is not as qualified as you. In this case, if the seller DOES accept a higher offer than yours from a less-qualified buyer who ends up having to cancel, don’t be surprised if your agent gets a call in a few days/weeks to see if you are still interested in purchasing the property!
Under no circumstances should you even consider besting your offer (price or terms) without a bona-fide counter-offer signed by the seller, IMO. Some listing agents may try to (verbally) fish for a higher price from a current offeror when there really isn’t any competition to them at all. These “agents” deserve to have their bluff called as they are NOT working in their client’s best interest.
If at all possible, have your agent present your offers to the seller(s) him/herself. And make sure any offers you place give the seller(s) a limited time to accept, reject or counter them.
Note: The above guidelines only apply to “traditional” or “equity sales.”
Again, Good Luck, bobby! Based on your posts, I think you will eventually be able to find something that you will be happy with!
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