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no_such_reality
ParticipantHmmm, $1800 is half of take home per month. That means take home (net income) is $3600/month or $43,200 a year.
Figure effective fed rate of 15% and 7.7% fica and she has an annual gross of $56K. Is that what a math teacher in Florida makes?
ouch though, here PITI is running 38.5% of gross.
ParticipantThat’s right VCJIM, NOD buying only works if the NODder has equity, substantial equity. Hypothetically, say at $630K house at current (real, sellable) market price with a loan balance (all combined) of $500K in NOD and knowing their really heading to foreclosure.
The sharks buy it at $525K if they’re kind (and it’s immaculate, less if not. Let the buyer walk away debt free or small change in pocket if they haven’t listed, do quick window dressing, pop the house on the market 5% below market (below the real selling market) at $600K and walk away from a sale with $50K or so in their pocket.
That’s were the problems start. If you don’t have significant equity at a quick sale amount and not needing significant repairs, a foreclosure flipper can’t get you out. There’s no money in it for them.
A non-pro, is approaching it like a real home and you’re really just doing a distressed sale. A big part is educating the seller, that the distress, is really distress and the train is rapidly leaving the building on the ability to get them out.
ParticipantHow liquid is a foreclosed house?
Once the default goes to foreclosure, it becomes REO, then goes to trustee sale right? Can the REO and Trustee sit with it on the books vacant instead of taking the loss?
ParticipantYou haven’t been to the midwest recently. In the bigger cities, those $100-$200K homes were $400, $500, and $600K.
Same bubble dynamics as here.
Participant$300,000 Looks about right.
1**7 Elm Ridge Drive, Vista, CA 92081
Price Reduced: 07/28/06 — $525,000 to $495,000
Price Reduced: 08/07/06 — $495,000 to $450,000Zillow sez:
Zestimate: $530,989
03/12/2002: $275,000
12/23/1997: $179,500
also gives comparables:
1918 Elm Ridge Dr $499,000 05/19/2006ParticipantSoCalARM, I think you’re more sell side too. Don’t sneeze at $300K, remember, a big chunk of that will be down payment, it isn’t really gone, just locked up once you rebuy. And I truely do think we’re going back to the old days of needing 10%-20% to get a decent rate on a loan.
The biggy for me is you’re indicating this really isn’t a long range home for you. Not only not long range, but also that near term ARM riding through the down turn will adversely affect your business plans. That’s bad. Very bad. The first two points on my original post are actually no and no. And to top it off, the third is owning likely will be more stress than not.
ParticipantArgh, mental note, don’t fix typos after posting if it catches your eye. It moves the posting to new.
Anyway, I’m surprised too at how much risk “investors” would take. I laughed at many tri-plex/4plex sales that my agent sent me.
Literally, you couldn’t cover even cover the interest on a 1-year ARM with great teaser rate, let alone allow any vacancy loss, property taxes, maintenance or management fees.
Maybe I’m old school, but if my monthly rents won’t cover my PITI, maintenance and fees, it’s a no go. The profit comes from rents > costs being “tax free” since depreciation wipes the “profit” out.
ParticipantHe rolled the dice.
Frankly, I know how my landlord did it, he just took a fairly big calculated risked to do it.
I’m assuming he had an ARM with a low teaser when I moved in. I know he just refi-d about 3 months ago. Not sure if he did long term or another ARM – teaser.
Originally when I moved in, I knew purchase price, HOA and property tax (ah, the joy of public records). With then current long term rates, he was upside down, breaking even on a TEASER and showing a slight positive cash flow from the tax benefit of claiming the depreciation loss.
At current rates, just crunching them now, if he long term locked @6.5% he’s upside down after taking the loss and depreciation tax benefits, but only by $1000 or so a year.
If he was smart, he long term locked, pulled $100,000 of equity out and is sitting on a yearly negative cash flow of $4000. Which gives him 25 years to ride it out.
ParticipantSocalarm, depends on what you want to maximize, profit on the house, your family cashflow, family happiness, family wealth, they may not all stem from the same thing.
Here’s my thoughts, you could make a chunk of change selling, and maybe, maybe pay it back in transaction costs.
In the end, it really depends on four things:
1. Is this a home you’re happy to live in for the foreseeable future?
2. Can you afford to live in it?
3. How much hassle and uncertainty in living situation do you and your family want?
4. How much money is one way going to save over another?I assumed the answer to 1 is yes. You answered 2 as yes. The answer 3 typical is who cares if you’re single and very little if married with school children.
So, that leaves you with an expected value question #4. That boils down to assumptions and you pretty much make the result come out any way you you.
Probably the easiest thing to do is hunker-down and really guess at how much you’ll clear out and how much it’ll cost to get back in.
For getting out, are comps, bed for bed, sq ft for sq ft comps in the neighborhood really moving in the last 30 days at $1,000,000? Or are they priced at $1,000,000 already only geting $900K and looking at $850K to get it moved if you want out quick?
To be fair, if you can sell, and sell quickly for $1,000,000 pocketing $450K and getting it tax free if you’re married, that’s a hard one to say no to. However, you really need to get the $450K clear. If it isn’t that much, you may end up burning all the profit up in trading fees. The commission, closing costs, new fix up. Plus… if rates return towards 8% and lending tightens, you’ll be looking at reinvest a chunk of that profit as the down payment on the next house.
Hypothetically, let’s say you can get out, but only at $850K if you want to go quickly. After commissions, it’s $799K, basically $300K profit to you.
Now, homes correct, from peak, quicky, say 2-3 years. Say, 30% (40% inflation adjusted), your original peak value home of $1,000,000 is now $699,000, needing a bit of work. Maybe just cosmetic, maybe more substantial.
$140,000 of your $300,000 is down payment. Est. $7,000 or so may get eaten in closing costs etc. Figure $25,000 in fixing, some bathroom upgrades, not remodels just fixtures, new appliances, carpet etc. Minor stuff, just adds up quickly. With tighter lending rules and increased tax base (~$400K to $700K) You’re looking at a $15,000 a year increase in monthly costs. Plus, you have to survive in the LA rental market for 2-3 years and time your lease right… for ease, let’s assume rent is a wash on your current costs.
So basically, you may be doing all that hassle for $130K clear and future negative cashflow of $15,000/yr. for 30 years. Do you have plans to do something great with the money in the short term?
Of course, if we go back to 8% mortgages, people will freak. But I think 7.5% is very realistic and it only changes that cashflow about $1000/yr.
One thing to keep in mind on the historical down turn numbers, the price decreases aren’t necessarily nominal, a big portion is inflation adjustment.
ParticipantNothing is immune. It’s a real simple math formula in most communities. If the home is $620K, it’s a $500,000 loan at 6.5% interest and rising with a $120,000 down.
That’s a monthly PITA of ~$3800 not including mello roos/association. To get that down in the 40% of gross range, you need $120,000 a year income. The 30% range and it’s $150,000 in income.
Now, how many families make $120,000 a year or more and have $120,000 lying around?
It gets worse as the price goes up.
ParticipantIt’s the best buying opportunity in ten years!
August 8, 2006 at 2:29 PM in reply to: Are housing forums being infiltrated by “Black PR” aka covert public relations campaigns? #31297ParticipantBs, and Craigslist already removed it.
Of course, the poster didn’t really do anything did he. He can’t remove other poster’s comment. All he could do was identify them in his internal report.
ParticipantDon’t sell.
Really, I mean it .
Yeah, I know I’m on a limb here with that statement, but stop. You’re at 50% of current market already. Research it. It’ll be hardpressed to drop much below $500K if it is a well kept house, with a real yard, and functional living space.
Think about it. Are you going to go through two or more moves, a year or more of renting, to buy at what your current loan is at +/- 10% possibly at much higher rates not to mention future fixes/modernization?
If you sell, you’ll generate 6% or so in commissions, that’s on the inflated price. You then move and rent. Then go through the house hunt again, find a good place. Fix it up again. Hopefully all us wise people haven’t forgotten just what kind of condition the majority of homes we in during the mid-late 90s.
You look at homes today and it’s frequent to see new granite countertop kitchens, new sinks, new fixtures, new bathrooms, new carpet, new paint, new tile, etc. Not a chance of that after the downturn. It’ll be 5-6 years worn with 3 or more years of neglect on top of it. Remember looking at homes in the mid-90s? Or worse, window dressing paint, carpet cleaning etc.
If you’re really at 1/2 of were the market peaked for your zip code on comps, it may be cheaper staying put. Even after looking at the bulk of capital gains you may get if you try and sell now.
ParticipantI wish I knew.
The Pension Benefit Guaranty Corporation doesn’t do the government pensions, the PBGC bails out failed company’s pension plans.
The Government issue is one of largess. It’s like the OC firefighters negotiating full benefits and 100% pay in retirement starting at age 55. That’s the problem with government pension plans.
So I fear we have a rather nasty set of strikes coming up in the future when the unrealistic pension plans allowing retirement at 55 with 100% benefits and salary, need to get corrected.
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