[Eugene]

Amy, Zillow does not show a sale for that property (though maybe it’s not in the system yet), and it estimates that the house is worth $1,260k.

http://www.zillow.com/HomeDetails.htm?zprop=69018416

In Del Sur, houses of this size/caliber went for 500-600k in early 2000’s.

I wouldn’t assume that the house was really sold. Even if it was, I’d make a note of it and follow up in a year. Chances are it will be REO.

[Eugene]

What do you make of this?
http://www.zillow.com/HomeDetails.htm?zprop=52513852
Did someone actually buy this condo for 365k a month ago and trying to flip it for profit? Did it get foreclosed upon? (Improbable – it was sold for 325k originally) Is Zillow nuts?

[Eugene]

“You just need to allow the market conditions to do the tenderizing for you. That way it’s not your fault they’re losing out. Once the sellers are softened up enough to cooperate they’ll sell.”

Making 2001 level low-ball offers is one way of tenderizing. Too many people are stuck in the first stage of grief (denial). They need to be helped through to acceptance.

Look up hopeless properties that have been listed for 6 months or more. Leave them a voice message or an email. Explain how much their house is worth based on fundamentals. Make them an offer based what their house was worth in 2000. (Ideally you should adjust for inflation, that’s 20% between 2000 and 2007, but i’m not sure if incomes grew that much around here)

I recommend to get a disposable cell phone and a new email address for that. You don’t want them to find out where you live.

[Eugene]

Hypothetically, if you gave someone a lowball offer at 2001 price level and they accepted … would you go ahead and buy??

Let’s take this home as an example

http://www.zillow.com/HomeDetails.htm?zprop=16813847

4br/2ba in SW Poway, 1695 sq ft, listed for $589,000 ($348/sq ft). Sold in 1998 for $235,000 ($139/sq ft), resold in 2001 for $358,000 ($211/sq ft). Has been listed on MLS since May.
Suppose you offer him 350k and he accepts.

On one hand, 350k for a 4br in Poway is a very good deal. On the other hand, it’s still no pocket change. 4br houses go for a lot less in Temecula or especially in Houston. Finally, no one knows where the bottom will be. Maybe what looks like a very good deal will turn out to be a waste of money. Maybe sellers will weather the storm and houses never drop to 2001 levels.

Thoughts?

[Eugene]

This recipe seems to be aimed squarely at subprime borrowers of 2005-2006. (They and flippers are the ones doing most foreclosing nowadays) Average subprime loan taken out in 2005-2006 was $199,000, 92% adjustable-rate (mostly 2-year), 91% owner-occupied.

First of all – can you get enough subprime borrowers into this program? Only 50% of subprime originations were full-doc in the last few years. Even those were often qualified at teaser rates.

Second of all – even if government manages to roll out this plan in time, it will not save the housing bubble. Here in South California, for example, subprime isn’t really a big problem. LA/SD houses are too expensive. That’s why we don’t see as many foreclosures as some other places. (as of ’06, 9.6% of all mortgages mortgages in SD were subprime. Compare with 18% in Vegas, 20% in Riverside and 23% in Miami) Prices are falling anyway.

[Eugene]

Timing of this whole thing is interesting.

Foreclosure auction was in July. They must have stopped making payments in January. Assuming that refi was a 2/28 loan, it must have taken place around January ’05. (It’s rather hard to default when your monthly payment is $900!) They couldn’t have made more than 3 or 4 payments on their original loan before attempting to refinance.

[Eugene]

I got really puzzled with their second story. (The one about a couple that bought a 2-story house for $445k in National City in 2002) 445k sounded insanely high for 2002 in National City. Besides, if they bought in 445k, why couldn’t they sell or refinance? The house should be worth at least 600k now.

So I did some digging and I found this:

1018 D Ave, National City, CA 91950
3 beds, 1.0 baths, 1,395 sq ft
Built in 1935

In 2002, it was worth 200-250k. But it wasn’t bought in 2002. It was bought in September 2004. Right now it is supposedly worth around 450k. The house is listed on Yahoo Real Estate as a REO with asking price 351k.

So here’s what the story looks like. An elderly couple saves some money by “many years, sacrificing, working two and three jobs” and buys a 70-year-old 3br shack in a poor neighborhood for close to half a million dollars. With no money down. Judging by the monthly payment ($2045/month), financing is either 5.5% interest-only or ARM with “teaser” rate of around 3.7%. The former is more likely (or else how do you explain their shock about the rate increase?)

Soon it turns out that they can’t afford to pay even that. At this point their house is about $100k up in price. Do they sell it? No, instead there comes an absolutely incredible refinance story from which they emerge holding an ARM, with full realization that they won’t be able to pay once it resets. ARM resets, they go into default without even an attempt to sell the house.

I’d call it extreme financial cluelessness, but we’re told that the lady owns two restaurants? This is beyond bizarre, this is Twilight Zone material.

[Eugene]

Zillow may be overstating home values, but surely the house isn’t really worth 185k? When was the last time anyone saw a sub-200k detached house in Greater San Diego?L

[Author]

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