patrick.net

Kinda like on ScamBay where people are counting the price of things by the asking price, not what it sells at.

When my house in San Jose sold in May 2006, the FB used 103% cash-back NINJA financing. The country recorded the 103% price, not the actual price. So the FB got to pay higher property tax over the life of ownership too.

DennisN,

Where you live, property tax is based on sales price rather than an assessed value?

Kind of the inverse of a private-party car sale where the seller and buyer often collude to record the price as lower, to help the buyer avoid some tax lol.

In CA, prop 13 bases any property tax on an assessed value baselined on the sales price. Here in ID it's based upon an area-based assessment: the assessor figures out $/square foot and multiplies it by your square footage.

Haven't read the other posts but replying directly to the thread topic. Yes, if a house sells at a foreclosure auction for the full balance and fees owed it correctly would be recorded at that price. That is the truest market price since it is at auction. (What I don't know is if a sale is recorded for the bank value if there are no buyers willing to pay for it and the bank takes it back)
If the house fails to sell it goes to a bank owned auction like REDC which is probably the biggest player. Those houses are the ones that put downward pressure on house prices because the banks will take whatever they can get for the houses. If I am missing a component that somehow makes this not accurate then I'd be happy to be enlightened but there doesn't seem to be anything unfair about this that I can think of.

Correction, just reread the thread, so I guess if there is no sale it is being recorded. That would not seem right to me. I'm going to research this for myself, if it is true you have a legitimate gripe.

The sales history on one of my houses seems to support this. Check out http://www.zillow.com/HomeDetails.htm?zprop=16786367

Sale History & Tax Info Sale History
05/23/2007: $401,000
08/21/2006: $379,260
12/14/2004: $440,000

I sold it for 440K. I assumed the sale on 8-21 was the foreclosure for 379K, and it looks like the bank sold it for 401K last May.

In that case even if the foreclosure was factored into sales data it actually was a lower data point in the statistics.

HeadSet Says:
January 6th, 2008 at 4:42 pm
"DennisN,
Where you live, property tax is based on sales price rather than an assessed value?"

They will take the higher of the two. Normally the sales price is the assessed value, but if it is clearly below the other drivers (like Dennis said $/ft, or comparabes) they will put the assessed value at the market price. You have the right to appeal this but normally it is pretty clear. I had this happen with a condo I purchased at auction. We paid $44K for it and the assessor said it was a $50K condo. The comps clearly showed this, I knew we had gotten a deal so didn't really care to fight it.

ptiemann Says:
January 6th, 2008 at 7:27 pm
"What I am trying to say is, that the first mortgage will rarely or never be 100%. And it SEEMS (please correct me) that REO shows what the first mortgage balance was."

Sometimes it is a second who forecloses. Some of those loans are 125% loans so if the sale is recorded for the full amount that really does suck to our side.

Patrick said:
The net result is that foreclosure sales are causing peak prices to get recorded as “sales” in the current year

Fehhh... eventually it will get back down. I am in no hurry anymore.

Is that bank now liable for property-taxes at the recorded price? That would be kinda sweet. Poetic, almost.

OT to this thread, but relevant to Fortress Real Estate trendz...
I was at a bunch of social events, aka parties, this weekend and for the first time, everyone seemed to be talking about real-estate falling. Most of the crowd was the shallow fortress type - and for once, I could happily shut up and NOT be the guy talking about RE going down. Some of them were also openly anxious about what a recession would mean to their job situation, specially the low-level manager or product-marketing types.

Somehow, parties have become more fun all of a sudden. :evil:

SP,

Shouldn't that be :twisted: ?

Back on topic, I thought FAB stated back in September that foreclosures do NOT get recorded as Sales.

http://patrick.net/wp/?p=507#comment-612199

You know we're near the end game before collapse when the "Enron-style" accounting is all that's propping things up.

Back in September someone asked:

> I was wondering how the official statistics can be so wrong
> compared to numbers from someone on the front lines.

And I wrote (putting the word "official" quotes and adding the tm after "Realtor):

> The only “official” sales that Realtors ™ report are
> “full price” “market” sales. Short sales, foreclosures
> and even distressed sales (where someone needs to
> sell in a hurry to take a job in a new town) do not
> count at “official” sales.

My point was that Realtors only report the "official" numbers they want you to see to support the fact that "it is always a good time to buy" (so they get paid a commission". Any time a property changes hands is is a recorded sale and short sales and foreclosures are very much official sales (even if Realtors don't want to talk about them)...

SP Says:
January 6th, 2008 at 11:21 pm
Patrick said:
"Is that bank now liable for property-taxes at the recorded price? That would be kinda sweet. Poetic, almost."

This is correct. The bank continues to pay the property tax bill after foreclosure. Not sure if foreclosure causes a reassessment but that is usually irrelevant.

Reader Bryan S. points out:

> That “when a bank forecloses on a house, it’s being
> recorded as a sale and it’s being listed with a sales
> price of the amount still owed to the bank.”

Most of the time the price recorded for a foreclosure sale is the amount owed to the first lender (who hopes that the 2nd TD holder or some other sucker will come in and save them). Some Banks that know they have no chance of getting what they are owed at the foreclosure sale will lower the price and if there are no bids it will record at the lower price (less than they are owed).

> Since most recent foreclosures are houses bought in
> 2004-2006, the buyer paid the peak price and probably
> had no down payment, nor ever paid off enough of the
> debt to have any equity.

I have not heard of any 100% 1st TD financing, so most foreclosure sales will be for well below the “peak price” but in areas (like the central valley) some foreclosure sales may still be for above “market value”.

Then Malcolm Says:

> Haven’t read the other posts but replying directly to the
> thread topic. Yes, if a house sells at a foreclosure auction
> for the full balance and fees owed it correctly would be
> recorded at that price. That is the truest market price since
> it is at auction.

A foreclosure auction is not a “true market price” since the sale is “as is” and most people are not set up to do proper due diligence (to find out about deferred maintenance, liens etc.)

> What I don’t know is if a sale is recorded for the bank
> value if there are no buyers willing to pay for it and the
> bank takes it back.

The bank gives a price where the bidding is to start (that is usually what they are owed) and if there are no bids the “sale” is recorded at that starting price…

"A foreclosure auction is not a “true market price” since the sale is “as is” and most people are not set up to do proper due diligence (to find out about deferred maintenance, liens etc.)"

There are enough of us out there who are set up. You don't just show up to these, you actually do run the title reports. Where I agree somewhat is that financing is not available, they are cash deals.

Is anyone here a real Prop 13 guru? I know the basis for property tax changes with a "sale" to the "sale price". But in the past foreclosures were rare enough - and the prices didn't go down - so that I don't really understand what the new basis will be post foreclosure.

Although the current bubble is the largest this has happened before in the 90s when I was actively buying. Yes the basis goes down with the new lower sales price. My first house was a VA repo originally sold to the previous buyer for 132K. I bought it for 113K and that was the basis for the property tax.

FormerAptBroker Says:
January 7th, 2008 at 8:08 am
"The bank gives a price where the bidding is to start (that is usually what they are owed) and if there are no bids the “sale” is recorded at that starting price…"

The question still is whether that sale is included in median sales price statistics which is the topic.

The question still is whether that sale is included in median sales price statistics which is the topic.

Well, let's just call up Lawrence Yun and ask him!

I hate to get all Elephant in the Room on people but as one of the premier housing bubble sites, I think we need to discuss marketictecture. My gut is telling me Silent Spring 2008 is gonna happen as a lot of pent up supply is going to hit the market.
“‘I’ve been doing this for 26 years, and it’s never been this bad,’ Kolkey said. ‘The difference is, in (the housing downturn during) the early 1990s, we at least had people looking. … I don’t have a soul going through my models now. Nobody’s looking.’” Queue crickets chirping in the background...

SP :

Fehhh… eventually it will get back down. I am in no hurry anymore.

Me 2. Finally, the BA prices have started coming down. I have stored all the mails from ZipRealty and every time I get another email, I search the archives. I see houses that were listed in early 2007 coming back on market for a lower price - something like 50K on an 800K house. It is still at lest 100K over what I would consider pre-bubble prices.

So I made an offer that was about 15% below. Received a polite and firm NO. Without counter-offer. I consider rejected offers a blessing. With my rent locked at 2K for a year, I can wait. Peacefully.

SIBA,

How dare you! 15% off asking price? That's an insult (to your friends at Patrick.net). I would have lowballed them by at least 50%.

"Well, let’s just call up Lawrence Yun and ask him!"

Well, there's the real rub in this whole mess, right?

There exists no impartial entity in our current system of real property sales. Everyone involved is acting in their own best interest, to extremes and as opaquely as possible. Clearly, true price discovery is taking place, its just being ignored or hidden by those who are set up to counter the due diligence crowd.

On a side note, I hear that Lereah's book is being called "more honest."

OT,

Yes, of course a back-to-the-bank foreclosure auction sale is inlcuded in the median price stats. After all, these stats are reported by the NAR (or their regional counterpart -CAR). They will do anything to juice the median price stat, including tallying "incentives" (cars, plasmas, vacations, cash-back at close, etc.). And I'm quite sure plenty of short sales and deep-discount foreclosure sales "accidentally" get left OFF the statistics as well.

Just couldn't resist:

http://www.neworleanscitybusiness.com/viewStory.cfm?recID=25524

“‘People are concerned about the way things are going,’ said Chris Daigle, who bought a new double-shotgun on South Chippewa Street last year. He paid $300,000 for the pumpkin-colored home before KB Home sheared prices.”

Looks like the clock has struck 12:00, the Housing Ball’s over, and Mr. Daigle’s splendid coach has turned back into a pumpkin.

I see houses that were listed in early 2007 coming back on market for a lower price - something like 50K on an 800K house.

I think it was SP last year who coined something along the lines of, "I Know You Listed That POS Last Summer!" :)

Anecdotally, I am seeing several retreads being relisted on the Peninsula as "new", but really they just took a break for the holidays. Listing price is still the same.

Also anecdotally, there is a short sale in Atherton, that short sale in Burlingame that's half-flipped is STILL for sale, and socketsite seems to be listing more and more short sales.

As and aside, between the above re-listing scam, the withholding of foreclosure sales data, pocket listings, etc etc., it's no wonder there is extreme stickiness in housing prices' downward cycle.

... Just an homage to Randy H, if he's out there lurking ...

HARM :

How dare you! 15% off asking price? That’s an insult (to your friends at Patrick.net). I would have lowballed them by at least 50%.

:-) In 2003, prices declined in many BA parts - including the Fortress. I think I mentioned it before - that in 2003 one of my close friends reduced his property tax basis by about 100K on a 1M home. Unlike the Southern CA where the bubble ran uninterrupted - BA prices took a hit from the dot com bust. This is not something people admit openly - else how can they go on about BA prices always go up, everyone wants to live here blah blah . At the most you get "a temporary blip" defense if not outright denial.

So I use that general timeframe (early 2003) to infer the pre-bubble prices. For reversion to historical mean, I need to go back to 96 - which was a real low point, and then use the standard appreciation rate. So yes, that would be even below the 2002-3 level.

More like desperation sales!

The holidays are over, now the gloves come off.

It was refreshing to hear The Pres. in Chicago today sound off about all the "investors and speculators" when discussing bail-outs for "hard working Americans".

And they say blogging is a waste of time!

Meanwhile (here in WA's Mexico) they've recently passed HB 2592. In addition to making "non-periodic" withdrawals from our 401K's MANDATORY 10% Withholding they are making out-of-state investors leave as much as 10% with the Title Company upon the sale of their specuvestments here in OR!

For those that have never been a party to a pre-mature withdrawal from a 401K it had ALWAYS been an elective if you wanted to withhold ANYTHING from your distribution! ALWAYS. I've made a few calls but I haven't gotten a feedback yet. This "may" have (2) impacts here. 1) Bend is done, so you can stick a fork in it and 2) FB's counting on raiding their 401K's to keep their primary or specuvestment afloat may be in for a rude awakening?

EBGuy / Skibum :

Related to both your posts. Based on the huge sample size of 1 offer we made.

The Realtor was surprisingly honest. He told us at what price points the seller tried to sell the home (which I already knew). He said that seller has priced it as low as he can go - no room for negotiation. When he heard our offer, he looked exasperated. He openly said, "They are not going to like it. They think prices are going to go up in the spring. Actually, prices are falling every day".

I must admit I was a bit stunned at that last sentence.

Propertyshark had already told me that the seller had purchased this house for half the listed price 10 years ago and had very low mortgage. So he would have made a killing even at our offer price. The house was unoccupied for a few weeks now - said the Realtor - so there are carrying costs without any utility.

But as Randy H had talked about mental accounting - the sellers were dismayed at the profit they missed out by failing to sell last year. And not looking at the profit they can still make.

I think this is how the early spring market would be. Very disappointed sellers, reluctantly lowering the price a little but thinking that they are leaving so much money on the table. When the reality is they are still making a lot of money, and not selling now would only mean carrying costs, missed opportunity cost on the sale proceeds and almost a guarantee that they will have to sell even lower a few months from now.

Some panic may set in by late summer. But it will be 2009 before BA starts looking like other parts of the country. It is begun just now. And has a long way to go.

StuckinBA that logic of holding out cracks me up. I bought a horse for $1,800 and then a couple of years later wanted to sell it. I asked $1,500 and eventually got an offer for $1,000 which I accepted. All my friends were like, look at all that money that you lost when you could have held out for a few months. Well, the upkeep on a horse is $250 per month min, just the boarding alone was $125 so what is the point? Typical know it all boomers. Again, they would rather shoot themselves in the foot to avoid someone getting a clean pair of shoes.

In moderation, little help please.

StuckInBA,
I have seen so many people chase the price down. In a market like this, the seller should undercut his competition. It's funny how people will give up $50,000 to avoid eating $10,000 on good will.

Typical know it all boomers. Again, they would rather shoot themselves in the foot to avoid someone getting a clean pair of shoes.

Yup, there's the ME generation system of "ethics" at work. Life is a zero-sum game where you win = I lose.

"Very disappointed sellers"

I'm thinking of doing like a "condolences" card for friends and family attempting to list their homes this spring.

"Sorry to hear of your recent misfortune,

in these stressful times if there is anything we can do,

please know you are in our hearts and prayers!

Best of luck selling your home" :(

Mr. & Mrs. DinOR