OT: Foreclosures and Banks

[pokernut9999]

OT: Foreclosures and Banks

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Anyone here got any inside scoop or experience dealing with this subject. I looked at a house yesterday that is for sell. It has a lot of land and house needs lots of work. The asking price is 145k and when asking my agent if she thought a bid of 125k would be good she said no way. She said too many people bid on these to fix up and flip. I would not think people would bid anywhere close to asking price on a foreclosed home.

Anyone have an idea what the average is for winning bids versus asking price on foreclosed homes . Thanks for any advice.
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[Willie Bee]

First off, never trust a real estate agent to tell you the truth.

The prices vary, nut. Some places the initial list price is just the opening bid, and other places it's 10%, 20% 30% or more too high for what the market will bear.

There are also a lot of amateurs getting into this flip business and losing their asses.

[pokernut9999]

We are looking at it to live in. Has 7 acres and the little lady wants horses. It is hard to get an estimate on property around here.

thanks

[Willie Bee]

Nothing like having a few extra acres out in the country. Why just this morning I tripped over a possum going out the back door and then fed a breakfast bar to a fox before tossing corn and crunchy chow to the half dozen lawn mowers, er, deer that were gathered for breakfast.

You should be able to go down to your county tax off and find out what homes and property have been selling for recently in the area you're looking.

[Seattle Slew]

Correct. A lower bid from you takes away commission funds for the final sale price for the agent if the lower amount is accepted. Good luck.

Make sure you give the house a thorough lookover, like windows, driveway, garage. Repairs on that stuff could be significant and many people don't check that stuff on initital inspections.

[QUOTE=Willie Bee;403445]First off, never trust a real estate agent to tell you the truth.

[pokernut9999]

We figure it could take around 40 to 50k to fix up. It is not in the best of shape and has some strange things that would cost a little to find out everything.

[Willie Bee]

Lots of things to check on, nut. Make sure and find out if you can have horses/livestock on the property and, if so, what restrictions there might be. If it's a foreclosure, you really need to call the bank or mortgage company that has control of the property and at least find out if there are any back taxes owed for which the new owner could be held liable. Find out things about flood planes, what insurance will run (how close are you to a fire hydrant or firehouse?), and exactly what your mortgage company will lend you for the purchase.

And then if you're serious, pay the few hundred dollars to have an inspector -- do NOT use the inspector the real estate agent recommends -- check the place out and stick to that inspector like white on rice during their inspection.

[ShamsWoof10]

First off, never trust a real estate agent to tell you the truth.
The prices vary, nut. Some places the initial list price is just the opening bid, and other places it's 10%, 20% 30% or more too high for what the market will bear.

There are also a lot of amateurs getting into this flip business and losing their asses.

The world is going to end!!!

I agree completely with Willie Bee... The flippers are the ones involved in these bad loans... People looked at me like I was from Mars in 02' when I would tell them about what's to come in housing... You have no idea how many people believe you just can't lose in housing...

Bid whatever you want... You can always bid higher but not lower.. Then put the money into fixing it up nice... Don't be cheap about fixing it up if you are going to live in it because materials will go much higher...

By the way good thread!

[pokernut9999]

Thanks for all the imput guys. Got someone that is going to look at it for us Saturday to get a realistic price to fix everything.

[BrentCrude]

You can blame allot of the bad loan crisis on women and the government!!!!Not everyone lives in San Francisco,L.A or Chicago where land is scarce,taxes are high and buying a dumpy old fixxer upper costs an absolute fortune.

So even if you aren't the handy Bob Villa sort,a person can buy a lot in the country,a township or small town for a pretty decent price.Of course when you live in a rural area it's up to you to drill a well and put in a septic tank.Instead of blowing 150-250K on some old fixxer upper in a not so nice area of town you can get a lot,have someone build you a modest small house or modified garage package all for about 25-35K.I'm talking a nice setting and not a dump.Then you have ultra low taxes and low heating bills and probably no mortgage because most people spend 25K on a down payment for a dump.

So here is where the problem lies.It's with your anal retentive old lady who has delusions that everyone should live in some Martha Stewart,make believe world yuppie mansion.If you are just a couple or have one or two kids,why do you need 14 rooms?Who needs a guest room,craft room,computer room etc?I could live in a cabin the size of a Motel 6 motel room for God's sake.

We more or less have the mortgage problems because women make their husbands get in over their heads with high mortgage payments.Then the demand on even ugly fixxer uppers was so high because the government HUD,Fanny Mae,FHA etc.encouraged idiot young naive couples to want more than they actually needed or could afford.The government has to do this manipulation so it keeps the economy moving upward.It's like how the government turned everyone into hypochondriacs so the medical industry flourishes gobbling up entitlement tax dollars.

Just keep printing more teeny weenie dollars and lowering interest rates.Maybe start throwing money from helicopters flying over towns.

[picantel]

When we looked at homes we checked the property taxes and other information. you can find out what price the owner paid and when they did it. If they are desperate move from there. I see alot of idiots in foreclosure who are trying to make a 50k or more profit still. They can kiss my ass and lose their home for all I care. Greed has to be tempered with common sense.

[Vietbet]

Buying

Wild West out there, no bid is too low. Here is a great guide on buying in the current market.

http://www.irvinehousingblog.com/2007/09/24/a-buyers-market/

http://phoenixflippers.blogspot.com/

[Cheryl]

First off, never trust a real estate agent to tell you the truth.

The prices vary, nut. Some places the initial list price is just the opening bid, and other places it's 10%, 20% 30% or more too high for what the market will bear.

There are also a lot of amateurs getting into this flip business and losing their asses.

I'll wager we all know at least one person (family/friends) who thought they could flip houses. Makes you want to slap 'em for being so stupid.

[Justin7]

I'm not a housing expert, but the housing market is in the crapper. Any house under 200k will probably be worth less next year.

Put in a low-ball offer. She might accept, or make a counter-offer in the range. She's losing money though if she needs to sell.

[stump]

Every foreclosure is different. Depending on how much is owed, the condition of the banks loan portfolio, the condition of the collateral (house), etc .

Figure out what you think it is worth and make an offer. If the realtor gives you a hard time with your offer, find another realtor.

[louis]

The value of the land is probably a lot more important here than the value of this fixer upper. In fact I would consider tearing down the house and just building a new one from scratch. What is the value of the other houses nearby? How about the nearby land? Fixing up a house in the country is hard. If you want to do it, for a foreclosure bid low, you can always raise your bid.

[ShamsWoof10]

I thought this was a good read...even though it's commercial..

The Next Shoe to Drop in the Credit Meltdown: Commercial Real Estate and Its Massive Forthcoming Losses
Nouriel Roubini | Nov 14, 2007
While everyone’s attention is concentrated on subprime and other residential mortgages, as first reported by this blogger this past July the next shoe to drop - in the mortgage and credit crunch saga - will be commercial real estate (CRE); indeed investors’ worries and panic are now shifting towards CRE and its related securitized products (CMBS and CMBX).

Many of the same excesses that were observed in subprime – poor underwriting standards, loose and excessive lending to marginal projects – are also observed in CRE. For example, as reported by Fitch, since 2005 there has been a very sharp increase in interest rate only mortgages and mortgages with high loan to value ratios. Loans increased to 118 per cent of the value of commercial properties in the last quarter, as reported by Moody’s, suggesting widespread use of reckless negative ammortization mortgages. And while real investment in commercial real estate has been strong in recent months (growing at a SAAR rate above 10% while residential was collapsing at a negative 20% rate) there is now evidence that commercial real estate is also at a tipping point. Actually the bubble in CRE construction – like the bubble in residential construction – will soon turn into a painful bust.
The reasons for this coming bust are clear. Commercial real estate – or more generally non-residential investment in structures - includes two main elements: office buildings, shopping centers/malls; and construction of structures for the manufacturing sectors (i.e. new factories). Both components are now under stress. The reason why we will observe a sharp slowdown in construction of new offices and shopping centers is that, with a lag, commercial real estate follows residential real estate. Indeed, as the SF president Janet Yellen put it last year there are plenty of new residential ghost towns in the West in places like Nevada, California, Arizona, etc. So why would anyone want to build new shopping strips/malls, hotels and offices in such ghost towns. If the towns are empty the stores and malls and offices will be empty too? Thus, as suggested by formal research – such as that by McGraw Hill Construction – with a leg of a few quarters non-residential construction follows residential construction. Thus, you can expect in the next two quarters commercial real estate to follow the slump of housing and its rate of growth to fall from double digits close to zero.

The other main component of non-residential investment in structures is manufacturing structures (i.e. new factories). But with manufacturing slumping and real investment in equipment and software slumping too (capex spending by the corporate sector) the demand for new manufacturing structures is slumping too. If you don’t invest in new machinery you do not need new structures where such machinery produces goods. And capex spending is under severe pressure given the credit crunch, the uncertainty about the economy, the widening of credit spreads for corporate firms (junk bond yield are now up 300bps higher than before the summer crunch and heading above 500bps over US Treasuries) and the slowdown in the economy.

Once this slowdown in CRE investment does occur of three components of fixed investment (residential, non-residential structures, and software and equipment) could experience negative growth.
And indeed the boom in CRE investment – with excessive construction of commercial real estate is leading – like in the case of housing – to a glut of unsold or empty properties that is leading to a fall in prices. As reported by the FT: “Moody’s index of commercial real estate prices is expected to show that prices flattened or fell in September, after rising nearly 14 per cent in the 12 months to August. RBS Greenwich Capital predicts that US commercial property prices will fall 10-15 per cent next year.”
The coming meltdown of commercial real estate is also evident by the sharp widening in credit spreads for CRE mortgages and commercial mortgage backed securities (CMBS). One of the most clear signals of this extreme stressed in the non residential MBS (CMBS) market is given by the CMBX index that is reported by Markit. The data are scary: for BB tranches the spread is now over 1500bps; for BBB- the spread is 1,100; for BBB is 965; even for A is 540; and 326 for AA tranches. All these spreads have sharply widened compared to their spring 2007 levels. At these spreads the ability to finance any new CRE investment – apart from those already committed and financed – is practically null. After the pipeline of already financed projects is finished the market for financing and securitizing CRE – apart from the highest rates projects – is practically frozen. Indeed, the issuance of CMBS fell to $6.3 billion in October, down 84% from a record $38.5 billion in March that finance about half of commercial property purchases. So the CRE market now behaves similarly to the sub-prime market; it is totally frozen.

Indeed delinquency rates on CRE projects – while still modest – are sharply rising. According to the WSJ the current default rate is 7.88% for CMBS issued in the last 10 years and is set to significantly rise. And now lending standards are being tightened as the risks of CRE are emerging and the credit crunch in this market is escalating: the typical loan to value ratio is now down to 70% from 80% and higher loan margins are imposed on investors.

And since the total value of the stock of securitised commercial property loans was $804bn (at the end of the first quarter of 2007) the coming bust of CRE will lead to another round of massive losses for the banks who made these loans and the investors who bought these toxic mortgages. So expect another saga of collapsing construction, falling prices, rising default and deliquencies and massive losses for the mortgages and mortgage backed securities related to CRE. If CRE prices will fall – as expected by some – by at least 15%, the losses from CRE investments could easily be above $100 billion, possibly as high as $150 billion. Add those CRE related losses to the losses in the $300 to $500 billion range now estimated by RBS and Deutsche Bank for subprime and other residential mortgages. The financial markets massacre is just starting and a generalized liquidity and credit crunch will become full blown in the next few months.