patrick.net

Good for you, Bap33!

Troy,
This all took place after the courthouse steps part, as an REO.

TW1968,
I am still looking at eggs, and seeing a few cracks, but I am not counting any chickens yet. Tomorrow the executed contract should be delivered.

Bap33 says

This all took place after the courthouse steps part, as an REO.

So it failed at the steps. They really need to just get rid of that artifact. It's not the 1840s any more.

I have logged a few hours on the steps. Here are some observations:

The REturds have access to the bank info, such as "actual starting bid amount", that JSP never gets to see unless he happens to attend the court house show. That starting amount is not always the bloated loan amount, but is very often an amount that is well below market amount.

I have seen the REturds that are front-faces for big money backer bid on stuff just like a straight auction, and then open up a brief case with a few dozen certified funds checks in various amounts, look through them like playing cards, and hand over one that matches the amount that they just bid on a place.

I watched a place I was interested in go to an investor for the exact amount I felt I would pay for it ... the trouble is I would need financing and the investor had a briefcase full of certified funds. So, the home goes to the investor for a fair price of $230K -- not a big deal .... until it gets listed for $290K (nothing done by anyone, place is in good shape) and some set of dumbasses bid the thing up to $310K. So, someone smart enough to have the ability to buy a $300K home did not have the brains to see how much it went to the investor for a few weeks earlier. Stupid buyers are in large supply still.

Cash Investors at the courthouse steps get rewarded for the liquidity they bring to the process. Financed buyers get rewarded with banks finally bringing more shadow inventory to light due to this liquidity the cash investors provide.

As IrvineHousingBlog best explains it:

The main reason funds are forming to buy these properties is because there is a huge need for liquidity at the auction site. The banks have far too many delinquent borrowers, and there is not enough cash at the auction site to absorb the inventory of these foreclosures.

Banks gauge the liquidity at the site through dropped bids. Not every dropped bid gets purchased by an investor. It is quite common for a lender to drop their bid 20% below resale value and no third party steps forward to purchase the discounted property. When banks see their dropped bids are not being purchased, they don't bring more properties to auction because it will become another REO.

http://www.irvinehousingblog.com/blog/comments/professional-investment-funds-take-over-the-foreclosure-flipping-market/

Bap33 says

So, the home goes to the investor for a fair price of $230K — not a big deal …. until it gets listed for $290K (nothing done by anyone, place is in good shape) and some set of dumbasses bid the thing up to $310K.

Here's the thing: The courthouse step auction exists to protect the homeowner that defaulted on his loan. Basically, the auction process ensures that the bank doesn't take the house away and into bank ownership unless NOBODY else is willing to bid above the amount outstanding on the mortgage.

The idea is that competitive bidding at the courthouse steps is supposed to ensure that the house is liquidated at market value.

Now, in your example, unless the market price had suddenly moved from 230k to 290k overnight, and the winning buyer was the only person that knew that fact, the bid of 230k would have failed.

Why would the house be liquidated below market value? One argument is that there may be something wrong with the house, and therefore an as-is auction buyer must get a discount to take the risk. Another argument is that the courthouse auction is not an efficient market.

I have read somewhere that in most cases of foreclosure, the market value of the house is less than the loan amount owed. Otherwise the owner would just have held a non-short sale and gotten some money back.

It seems to me that only in the case of sudden market dislocations or liquidity crises can there be money to be made by buying on the courthouse steps.

Bap33, how often have you seen a house get auctioned for significantly below market value?

In my opinion the auctioned amount was or is market value. THe resale of that same home for more, just because the secoind buyer is A) stupid, or B) not able to swing cash, is the part of the deal that frustrates me.

The banks bid against the investors too, so in my opinion the end result of a true auction is a pretty close to market amount.

Just my observation

Bap, what city/state do you live? $134k is a nice price.

The price is just a little below what it should/could have been .. and well below what the local REmafia would have listed it for (and they probably would have found a stupid buyer).
After repairs I will be into the thing about $160K. In repaired trim, in todays market, it will appraise for $220K or more. Something close to $120per ft is what I see for clean '80's built ranch-style homes on a nice acre. This one has a pool, some have nice shops, but the by and large average for this particular area is about $120 a foot, move in ready.

Since the average HH income is about $50K in this nicer rural area, a $150K house should be more common than a $250K house. So far, the local REmafia, and stupid buyers with free money, have kept the upper-end bubble inflated around here.

Thanks Doc.

The "contract" was sent into escrow on Friday. All the docs came pretty late, about 4ish, so no lender activity yet. I will be at the loan broker's office Monday to update my personal info (proof of wages, down payment, few years worth of taxes) so they can get actual quotes from lenders.
I am looking at a few choices, and input from you and other smart people is welcome. Here's a couple that we have talked about.
1) 3.5% down, FHA 203K for purchase(134,500) and repairs(25,500) all in one(160,000) @about 4.50%
2) 7% down, Conventional for all in one(160,000) @about 4.25%

Or, if one of you is sitting on $160K and is tired of getting 0.5%, you can play bank for me and I'll pay you 4% for $160K. Can't beat that!! Double your money in 30 years. I have 800 credit, plus the house is actually worth the money against it!! lol ...

Are these loan amounts based on owner occupancy?

I would guess they are. That is the situation. What makes you ask?

Hello Bap33. I read about your purchase of a circa '89 3 bed 2 ba SFR. I am also looking for a house---since 1999 and I still have not found a reasonable price. Because I have been renting since 1999, I saved the difference between my rent and PITI and can now easily pay cash for whatever I want on my original house punch list. I have looked at literally thousands of existing houses, and have not found one house that I want which would cost LESS than the cost to build new. That is one of my decision points. Why buy a 'used' house ---like a used car, when I can build exactly what I want for less?

Back to your zip code. If you work nearby fine...you know your personal situation.

My list of "musts" require that I must prepare to sell the house within a month or so of buying it. If I can SELL the house I buy within a maximum of 30 days and I don't lose any money on the deal including closing costs, that is another "go" decision point. As long as I treat my "home" as the money pit that it is, and constantly evaluate its SALEABLE value in the market, whenever that is, I am somewhat confident that if I pull the trigger FAST (sell) , I might not lose too much money other than property taxes and upkeep.

If this zipcode is in Atwater, CA I would hesitate to but because of the location location location idea from RealWhores tm. The AFB closed down a few years ago and left an economic bruise on the area.

A cursory trip through the town using Zillow shows me almost new 4 and 2 houses on large lots built in 2000 and later with a larger square ft footprint for less than you paid.

I see the Zillow map bleeding with red houses. This does not include at least three times that many houses thar are not for sale but are sitting in the rain rotting to keep house prices high.

I know someone who had three flipper houses with rent paying tenants and they walked three years ago. They want nothing to do with that city. Please look carefully at City-Data http://www.city-data.com/city/Atwater-California.html The crime stats are up, and annual estimated median income is low.

Atwater is located in Merced county where the FBI found that 54 gangs including 5,627 gang members make up 2% of the 255,250 population. Thats a strong gang presence which is not good for real estate sales or the economic vitality of the area. People are trying to leave and that may explain many of the houses for sale. Look at this link--> Feb 07, 2009 "Taking the fight to Merced County's gangs--Task Force started to battle scourge" http://www.streetgangs.com/topics/2009/020709taking.html

Check out the large Mall adjacent to the 99 freeway that looks like it may have been abandoned during construction. Look at the hundreds of vacant commercial leases. Look here at Applegate Ranch with two possible anchors --- Target and Walmart but the mall has 26 vacant spaces available on 63,134 sq ft ... WHY? See here --- http://www.loopnet.com/Listing/16706840/Highway-99-Applegate-Road-Atwater-CA/

It looks bleak for the anchors---> look here ---> "Atwater awaits its Walmart" 6/16/2010
http://www.modbee.com/2010/06/15/1211756/atwater-awaits-its-wal-mart.html

I would not pay anything over $40/ sf on less than a ten year old house, CASH only, and NO Realtards tm

Think about this for value. In 2008, a friend built their own CUSTOM 4,000 sq ft single story house on one acre in East Contra Costa County with river access, sewer, underground utilities, all amenities, high end appliances, Travertine tile, cioncret driveway, hous on REAL raised foundation (not a cheap slab) ... REAL plywood sheeting on trussed roof and custom SLATE tile roofing, central HVAC, 3 car garage, landscaping etc . Sounds good? TOTAL COST including permits, A&E stamp, hook up fees = $375,000. In the SFO BAY area near million dollar houses.

Compare the values. The house was built with CASH -- no mortgage -- No Realtards tm. The work of another ex- renter. That is a good price ~ 75/sq ft TOTAL lot + structure

THanks for the breakdown Investor. Atwater may suck, but only until welfare gets cut and the border gets closed. After that, it will be AWESOME living there!! lol

Ok folks, update:
The lender has set up the 203K loan. The contractor and I have started collecting bids for roof, HVAC, flooring, painting. Will submit prices for appliances too, since I was told they are part of what HUD covers. If they say "no", then no biggie, I'll buy 'em. The FHA 203K deal has me only needing 3.5% down on the completed loan (buy amount plus repair amount). The interest rate is 4.5% locked for 30. I am hoping to come in at or below $160K total. So, I would imagine I'll need about $11K in cash to close the deal. Does that sound pretty close?

The bank gets paid, property goes into my name and then the repairs get paid out of escrow after that. Payment goes out in "draws".

One bid from a general contractor is all that is required. FHA appraisal will be called out after bids are handed to loan broker. They want to see the before and the after. Final payment after FHA appraiser sees completed work.

SIDE NOTE: The pool is the site of a mass suicide ... of those big mean looking Jerusalem Crickets (I grew up calling them "sweet-potato bugs") ... must be 1,000 of them things in that pool.

Anyone with any input, or "watch for's", please speak up.

On $160,000 I'm showing a monthly expense of $1000 +/- $100, and an average TCO over the 30 year loan of $632/mo, and a $400/mo expense after the loan is paid off.

This is with a $220/mo utilities/maintenance fund btw.

Troy,
what does TCO stand for?

total cost of ownership. All outgo less principal paydown basically.

I would imagine the place would rent pretty easy, and stay rented, for $1,000 or so a month. It's hard to say, because the rural areas with the acre lot type subdivisions do not have many rentals (I don't know of any personally - but I am sure they are out there), so the amount someone would pay to get away from all the crap found in town (see Investor's post) is hard to figure.
I am hoping for the total monthy payment with all taxes and stuff to come in under $1,100. That is the planned outlay. Most other costs associated with the house will be flat vs where and how we live now - I think/hope. WIth the exception of the dang swimming pool. I never wanted a pool, but it's there so we shall see. If it gets too crazy, the pool will become a planter.

waiting for the loan underwriting to get done. Should have some news next week.

loan underwriting still going on..... sloooowly.

Bap33 says

SIDE NOTE: The pool is the site of a mass suicide … of those big mean looking Jerusalem Crickets (I grew up calling them “sweet-potato bugs”) … must be 1,000 of them things in that pool.

was it filled with koolaide?

just had to ask. ;)

so far as the owner occupancy question, I haven't a clue why I asked. It was a couple of weeks ago...

Jim Jones never would have stood a chance against these bugs. And squirrles ... big mounds all around. Next spring will be a joy.

Squirrels, OMG. Get those suckers.

still jumping through lender hoops. This is insane. There is no excuse for the lax lending of the past .... but this Procto-system now in place is kinda TSA-ish.

one bad thing I have found ..... a GFE is heavy on the E and light on the GF.

Bap33 says

still jumping through lender hoops. This is insane. There is no excuse for the lax lending of the past …. but this Procto-system now in place is kinda TSA-ish.

There is an old saying "if you are burned while drinking hot milk, you better be careful while drinking cold butter milk" :)

How are the rental properties keeping up?

Where is this property? Big house for such low price in Bay area, I would be surprised.

Not the Bay Area, inland empire near the 99 if memory serves.

Central Valley 99

Here's what's happend of late.
Lender approval of loan
Lender oreders an FHA / HUD 203b inspection to confirm requested repairs and bids that I have submitted (5 times). (if anyone was not stupid, this would have been day 1, and not day 25) And this dude that came out is a failed contractor and a complete tool. He took on the role of house proctologist and spend 5 hours at the house. He then spent 4 more hours telling me and my REagent how smart he was. He had told me he did not like to do anything with REagents around because they always "feel I am messing up thier deal." Yes, he does mess up deals, and he is a complete tool. Me and my agent waited and waited for this guy to start talking about the issues we I gave bid on. He stalled and stalled until my REagent left due to getting late, and THEN this pile of crap inspection guy starts wanting me to sign some contract and crap. I asked "what's this for?", he said "it's just common procedure ... blah blah". So, I skipped reading the paper and signed it and went home. My wife called me about dinner being ready, to give you an idea how long this idiot had me there.

The next morning I sat and read the entire contract this dipshit inspector tool had me sign. At 8am sharp I called him and told him I was not comfortable with the contract he had me sign and I asked for some FHA/HUD documentation to support the positon and authority he expected to have in this deal. Since I am using a general contractor, and all subs are contractors, and all bids are broke down to labor and materials, this idiot tool has no friggin role -- and it pissed him off because he wants to have as many "draw bid inspections" as possible (my guess) because he gets paid $150 per inspection PLUS milage. I told him I would only need one draw inspection at project completion. He was all angry at that. So, I explained to Mr. Tool that I would be talking to my REagent and the Lender to find out WTF is up. Mr. Tool said he would not work with any changes in his contract. He said "if you don't like it, tear it up and throw it away". I went to Lender, Lender answered my questions - and made it clear that there was no time left to make any changes or adjustments and we now have to keep our lips firmly pressed against Mr. Tool's ass. I said a few words that you can not say in church, and left. THis is what happens when the wrong person is put in a position to have effect on others. THe tool's personality type is commonly called bullshitter assbite.

Now we all wait to see what this maggot sends as a report. This process is too slow and friggin insane. Escrow extentions are being requested. Stupid people are drawn to inspection work.

ok ... up date time.

I do not hate the inspector anymore ... he is just doing his job. But, he made my life suck more than it needed to.

We got an extention to 1/11/11 (that may be an omen huh?)

Everything that was requested to be done has been done. $1,675 in inspections and certifications thus far. All paid in cash as I went, to the suprize of all thus far.

The only lasting negative I have is the fact that the interest rates are creeping up as I sit waiting. That kinda sucks.

Anyways, the HUD/FHA inspector has all of the final paper work in his lap now ... as soon as he "ok's" the work detail and bid package, we should be funded and done.

Merry Christmas folks.

Bap33 says

Anyways, the HUD/FHA inspector has all of the final paper work in his lap now … as soon as he “ok’s” the work detail and bid package, we should be funded and done.

Merry Christmas folks.

Happy holidays and good luck, Bap!

Bap33 says

The only lasting negative I have is the fact that the interest rates are creeping up as I sit waiting. That kinda sucks.

To give you a bit of relief, I read an article this morning that stated interest rates actually went down today. I was trying to find the article for ya but it's burried somewhere now.

Merry Christmas to you too.

HAd I been able to lock when I started this process, I would have been at 3.75

I think I'll be lucky to stay under 4.5 when it's all said and done

underwriter is underwriting - everything completed.
next step is "move to close" (not sure of the correct verbage)
should be signing docs this week, maybe early next week.
Today I bet the loan broker $20 that some stupid assed request will be made by the underwriter that will hold up the process, will cause me to miss escrow closing time, and I will not get the house. He's pretty confident it will close with no sweat.

Stay tuned.

oh, and 4.5 is what the GFE had on it yesterday when I signed some stuff..

Bap33 says

Today I bet the loan broker $20 that some stupid assed request will be made by the underwriter that will hold up the process, will cause me to miss escrow closing time, and I will not get the house. He’s pretty confident it will close with no sweat.

Stay tuned.

Yes, yes, and YES but I still managed to Close on time. Well a day latter actually.
Although all was moving forward the whole time and I was putting money out I would never see again, on inspections and other appraisal fees. Nor if the deal fell flat, was I convinced I'd get "ALL" of my money back from other fees like Title fees, and Broker fees, and other deposit monies.

It was very stressful, and keeps the Home buyer, imprisoned in agony and suspense, trapping them from shopping other lenders for a better deal. In spite of the verbiage in the HUD addendum attached to the daily changing GFEs I got, that were all over the map. I wasn't even sure what my total closing nut would be. In spite of the "new laws" that was supposed to make lenders more forthcoming.

Ok, here we are. The loan docs are supposed to be in the lender agent office tomorrow. The escrow will have to stay open a couple of days. An extension was requested on Friday and no response yet, but the REagent and the Lender agent both asure me that the seller will not have any problem with waiting a couple of days for escrow to wrap up.

Had to come on here to get away from the political area! I find life is a little calmer when i avoid that stuff. That dang shooting pulled me back into the junk, but I'm all done with it now! lol

It is COLD this week.

To recap, my offer was accepted on 11/08/10
Stay tuned.

welp ... the lender did not send docs, they sent more requests for stuff we should have had requests for a month ago, or more.

This sucks all the ass.

Doubt we have enough time to satisfy these underwriters lists.

Not a fun process.

Sounds like it would be easier to just rob a bank and pay the seller with the bank's money directly.