Watch@Patrick et. al.
Now I'm almost done with my real estate hoarding. It's time to help some of the buyers here. Say we raise some funds to buy properties at the steps. We give a fixed return to the investors plus whatever excess profit after expenses. We have to follow Reg. D in raising funds so we're not getting in trouble.
Once we acquired a property at the steps, we put it on the market and patnet to sell. Whoever are interested in the property can contact you directly and privately. Your readers will get a first shot at the property. We will give them a discount on the commission. Say we pay the broker 1% and we give your readers 4-5% off the commission. Regardless their final purchase price is 4-5% below their purchase price because of the commission discount.
Your readers will get to see all the offers and make their best offer based on what they see. We're not going to sell it to them if their offer is not the best. We are for profit, and we need to make a profit for the investors.
For those that come to us directly with their own cash, we will help them buy at the steps for a flat fee. Say $10k or 3% of the purchase price, whichever is greater.
Thoughts???
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As part of this type of situation, I would find it highly desirable that you "vet" the properties prior to offer/purchase.
Typically these purchases are "no-recourse". Meaning that the reason they are such good deals is that you don't really know if it's a meth house, or the foundation is crumbling when you make the purchase.
If you could quickly assess with a high degree of confidence that the property being purchased is no worse for wear than your typical fixer, than it would be a great deal.
However, if you start to make these deals, and then the purchaser finds out it is a disaster, they would have you to go back to and pester about it (instead of say, absolutely nobody).
So in a nutshell, you would pre-inspect (what this involves, I have no idea) a list of potential auctions, or have someone ready to drive around on the day-of, and do a eyeball inspection, while you stand at the steps and bid.
It is my understanding that a lot of auctions get canceled at the last minute, so spending time and resources to take a good look at them all, with the knowledge that only a small percentage will actually make it to auction is the value added service.
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Not bad, could pan out. I'm sure I have stated before I think all the good deals are at the court house steps.
Why should I buy if it's not a good deal and a good investment ?
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David9 says
sure you do. you think that. have you ever been to the courthouse? ever bought at auction? Have you researched any recent sales to compare to comps in the area? you know, maybe the first baby steps of due dillegence anyone with any brains would do, to see if there truly were deals at the courthouse steps? No? of course not!
IWOG and I have, I personally bought my first home at the courthouse 15 years ago...
You might notice we don't bother to go to them now. Because the deals there suck, and they are full of fliptards who think they know what they are doing.
You get no inspections, no nothing. And the prices are actually worse than what you could have gotten in a short sale last year. ALOT worse.
On two short sales I had in contract, so I had done inspections and new everything about the property, i went to the auctions. The homes sold for 20% more than the contracts I had on them as short sales...
So, you're ready go dive in? Have fun!
that's after all, what patrick.net is for: people who don't have a clue giving advice to the even more naive.
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robertoaribas says
Yes, in 1993, from an auction company, the condo I sold in 2005. Before the earthquake I had 50k equity upon signing.
robertoaribas says
Someone picked up this little number for 110k at a 'foreclosure auction' And by the way, Fannie Mae has them too, it's right on the Homesteps page.
http://www.redfin.com/CA/Tarzana/5652-Yolanda-Ave-91356/unit-7/home/4055222
robertoaribas says
Ok, good to know. :)
robertoaribas says
Correct, same with auction.com, plus I would have to remove the tenant/squatter, 'buyer assumes responsibility of occupancy'robertoaribas says
Maybe, but not at auction myself, I don't have the full amount of cash
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David9 says
If fannie mae owns it, it isn't a foreclosure auction. It is just a sale. However, Fannie does have a "first look" policy, a time period when only owner occupants can bid, and they will finance them under failry lenient terms. They aren't quite the deal HUD homes are, but for a regular buyer, they are one of the few opportunities around. When it gets out of the first look period, forget it, the investors will swarm if it is a good deal, and it will go for much more.
[which brings up a good question: why do our bankrupt government lenders sell homes for less than they could to owner occupants, when they could sell them for more to investors? After all, our tax money is propping them up, don't they have a responsibility to the rest of us to maximize the return? or at least minimize their ongoing losses?]
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robertoaribas says
Using the example, I would pay 110k for that unit in Tarzana, but no, not 179k. Redfin does not go into detail just where when how this 'foreclosure auction' happened for that price. It's actually around the corner from me in a very quiet spot.
Not sure if I'm following investors will pay more ? So, you are saying if no street buyer like myself buys this unit for 161k, investors will pay much more than that ? There have been some sales around 200k, generously, but usually investors want more margin than that.
http://www.redfin.com/CA/Encino/5460-White-Oak-Ave-91316/unit-E127/home/4776443
Here is the HomePath investor page I was talking about, financing tab, if you click more info, it's a sign up sheet.
Good luck !
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David9 says
Speaking of flips-it appears someone bought this for 450k in Calabasas in Nov 2012 and did some nice upgrades and is listing it for 789k-in barely two months! That is more than 300k in three months-if he/she gets the asking price!!
http://www.redfin.com/CA/Calabasas/4074-Old-Topanga-Canyon-Rd-91302/home/3583134
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Keep accumulating that c rap. I love it that someone is putting a taxation target on their backs, it takes the load off me. RE is going down and down. Investments that have such high holding costs are a fools dream. There will always be off chances that red comes up in the roulette wheel but you get better odds at Vegas
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robertoaribas says
These are the people who you associate yourself with. It's really not a good idea to take your audience/community and call them a bunch of dickwads.
There are too strong and emotional sides of the fence in this forum, but it still has it's merits. If you think everyone is an idiot, you should find an arena where you appreciate people's opinions and intelligence for what it is.
Otherwise you are a Hypocrite. There are some bad apples, but others are trying to navigate through this crazy time in which the real estate market (good bad or evil) is disconnected from reality.
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Inside the cave
"In Plato's fictional dialogue, Socrates begins by describing a scenario in which what people take to be real would in fact be an illusion. He asks Glaucon to imagine a cave inhabited by prisoners who have been chained and held immobile since childhood: not only are their legs (but not arms) held in place, but their necks are also fixed, so they are compelled to gaze at a wall in front of them. Behind the prisoners is an enormous fire, and between the fire and the prisoners is a raised walkway, along which people walk carrying things on their heads "including figures of men and animals made of wood, stone and other materials". The prisoners cannot see the raised walkway or the people walking, but they watch the shadows cast by the men, not knowing they are shadows. There are also echoes off the wall from the noise produced from the walkway.
Socrates suggests the prisoners would take the shadows to be real things and the echoes to be real sounds created by the shadows, not just reflections of reality, since they are all they had ever seen or heard. They would praise as clever, whoever could best guess which shadow would come next, as someone who understood the nature of the world, and the whole of their society would depend on the shadows on the wall.
Socrates then supposes that a prisoner is freed and permitted to stand up. If someone were to show him the things that had cast the shadows, he would not recognize them for what they were and could not name them; he would believe the shadows on the wall to be more real than what he sees.
"Suppose further," Socrates says, "that the man was compelled to look at the fire: wouldn't he be struck blind and try to turn his gaze back toward the shadows, as toward what he can see clearly and hold to be real? What if someone forcibly dragged such a man upward, out of the cave: wouldn't the man be angry at the one doing this to him? And if dragged all the way out into the sunlight, wouldn't he be distressed and unable to see "even one of the things now said to be true" because he was blinded by the light?
After some time on the surface, however, the freed prisoner would acclimate. He would see more and more things around him, until he could look upon the Sun. He would understand that the Sun is the "source of the seasons and the years, and is the steward of all things in the visible place, and is in a certain way the cause of all those things he and his companions had been seeing"
Socrates next asks Glaucon to consider the condition of this man. "Wouldn't he remember his first home, what passed for wisdom there, and his fellow prisoners, and consider himself happy and them pitiable? And wouldn't he disdain whatever honors, praises, and prizes were awarded there to the ones who guessed best which shadows followed which? Moreover, were he to return there, wouldn't he be rather bad at their game, no longer being accustomed to the darkness? Wouldn't it be said of him that he went up and came back with his eyes corrupted, and that it's not even worth trying to go up? And if they were somehow able to get their hands on and kill the man who attempts to release and lead them up, wouldn't they kill him?" The prisoners, ignorant of the world behind them, would see the freed man with his corrupted eyes and be afraid of anything but what they already know. Philosophers analyzing the allegory argue that the prisoners would ironically find the freed man stupid due to the current state of his eyes and temporarily not being able to see the shadows which are the world to the prisoners."
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donjumpsuit says
You will see it is not disconnected at all when you follow the money.
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lostand confused says
Yes, the volatile nature of the housing market prices is a red flag for me. Then again, this is the nature of any financial 'market' isn't it ? No longer does the local bank screen the buyer and hold the title for 30 years. As far as I know these factors are still in effect:
1.) Mark to Market accounting was changed in 2009 allowing the banks to use the asset price at purchase, not current market value. Thus, as an example, a 500k house purchased in 2005 is still on the banks books to be worth, yes, 500k.
2.) The Quantative easing by the Fed is still buying at least 40 billion in mortgage bonds each month.
3.) The financial institutions, the banks, Fannie Mae, etc., do have a due diligence to the investors and the taxpayer to keep losses at a minimum.
4.) Mortgages are still being bundled and sold as financial securities to investors.
True, some will make money. I'm not a gambler by nature and I would just kick myself if even buying at the low end and 5 years from now some black swan event happens and I'm underwater again.
A new apartment lease for a year at Warner Center with a heated pool, gym, balcony, and closer to work is looking like a sweet option.
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robertoaribas says
yep
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robertoaribas says
Nice qwertyan slip. You have created a new word!
Failry: the kind of loans Fannie gives.
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donjumpsuit says
That is why I originally came to Patnet, to figure out WTF is going on with my house value and why is my neighborhood filling up with rentals? I just wanted a nice place to live.
Unfortunately, by lurking on patnet, I have opened a pandoras box of plausible conspiracies. I have discovered cannibal anarchy and ways of coping with its eventuality. My eyes have been opened to things I did not want to see.
Roberto and Iwog should be less arrogant, but they're not. They are, however, intelligent and (almost) always have a valid opinion.
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The Professor says
OUCH! That hurts Roberto.
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donjumpsuit says
True. This is what I have in mind. Every Wednesday, we will email the list of all properties that will come up for bids in the next week to Patnet subscribers. Then the potential buyers will email Patrick the properties that they are interested in buying so we know which properties to focus on.
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donjumpsuit says
Well, that's always the risk. If you're not willing to take the risk, trustee sale is definitly not for you.
donjumpsuit says
High degree of confidence is very subjective. Most of these homes are typically being occupied by an owner or a tenant. Tenant is clueless, most of the time, that the house is being foreclosed. There are signs that you can tell if the property is well kept or not, but it's not always accurate.
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donjumpsuit says
Well, how valuable is that service? Can you put a dollar amount on that? What if we ended up buying the property, and the buyer decided not to move forward with the purchase? How much do you think the buyer should compensate us for our service?
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robertoaribas says
So the home borrower can be in hock to the banksters and get foreclosed again in a few years. Rinse and Repeat. After all, Fannie and Freddie and FHA are just vehicle for funneling taxpayer money to banksters.
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robertoaribas says
This has been my niche in the last year or so. Prices at the steps went up faster than short sales. That was the reason for the scrambling in our purchases.
We're closing on a short sale next week for $210k. There's an identical unit on the market and it got offers as high as $280k. The comparables support a price of $210 easy, but not $280k. So how much do you think this will sell for at the steps? My guess is $210k-$220k. Here's the catch. FTHBs have no chance to pick these properties up on the open market. Is that a value added service?
Here's the catch. Good deals rarely make it to the market. The realtors, their LLCs, their relatives, and their investors get a first dip at it. Only over-priced crap hit the market. The only way to bypass them is going to the steps.
We used to be able to buy them for below short sale and FMV prices at the steps. Those days are long gone. What I have learned is that 99.9% of the realtors don't know how to buy properties at the steps. Most of them only know how to cheat the banks and flip short sale or REO properties.
Fall through short sales are still the way to go. Otherwise, it's the steps baby.
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donjumpsuit says
True. Value is relative. You might find home prices in the Bay Area are outrageous while others find them affordable. I saw this with my own eyes in the late 90's and early 2000's. The Chinese moved into the "Fortress" neighborhoods from Los Gatos to Hillsborough. They bought older homes on big lots and started demolishing and building new homes. You're talking about paying $1.8M to $2.2M for a decent size lot in Atherton during that times.
I think the ones that find home prices outrageously expensive will eventually move out of here. The ones find it expensive will have to settle in the outskirts and do the crazy commute. Everyone wants a home at an affordable price to them, but there are not enough homes to meet the demand.
We came from another country where we saw this happened there. So for us, it's de ja vu. It's the reason why we are accumulating real estate in the Bay Area. We want to be sure that all the kids and grand kids will have a roof over their head. Everyone wants a piece of the pie, but there's not enough pie to go around. We just want to get our share before prices are getting out of control again.
This real estate game is exactly like the Monopoly game. The 1% will end up owning everything. We're not even close to that point yet.
Just my 2 pennies.
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David9 says
There's a couple of groups here in San Jose that have been running this business model very successful. However, their rehabs are crappy. Talking about putting lipstick on a pig. Very bad work ethics in my opinion. It's all about the bottom line.
I have been thinking about doing this for a while. My investment buddy told me to offer this service last year, but Patrick is anti-commission, and I don't work for free. :)
My argument all along is that would you pay $10k for a service to save $50k, or would you rather pay FMV or above FMV so that your realtor can make a commission?
Like others, I started investing in 2009, but quickly realized how crooked this industry is. When there's a lot of money at stake, what do you expect? I was frustrated and wanted to find a way to bypass the middle men (RE agents and agents' buddies). That led me to trustee sale. I was fortunate enough to find a mentor to coach me. After being coached, I had to find a title officer that was willing to grant me access to do title search. Then the journey began, and the rest is history.
When the trustee sale market dried up, I returned the favor and showed my mentor how to work the short sale and REO markets. Guess what? His profit margin jumped substantially.
Now, the REO market is dead. Short sales are drying up, but there are still some deals out there. Like I said above, find a way to get your foot in the door. That's how you get a shot at fell through short sale deals. Btw, you have to be able to handle the rejections. Some crooked short sale agents are pretty nasty when you call them up. I guess you're nervous when you're doing illegal things. :)
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robertoaribas says
I agree. I saw some REO agents short changed the lenders on some of these listings. I lost out on two REO offers, where I offered all cash with no contingency, only to later find out that they were sold for less than my offer price to an in-house agent. :)
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E-man says
Thank you for your replies. I was going to comment on how can I compete alone when you lost out on 2 cash offers to someone on the inside ?
In this market, the only safety is through numbers, i.e., an organized pool of investors.
For me, waiting it out alone, I have pretty much decided I'm going to rent a new apartment. I can still invest, in Real Estate or otherwise. An example is this sad little one bedroom condo in Van Nuys, I did not want to live in it for 100k (don't remember exact price) and seriously, it was on the market for a long long time. Now, someone bought it and is looking for 159k. Guess I really don't think like an investor at this time.