As I observed, the momentum of downfall in Los Angeles County is so huge. The speed toward South is just beginning to accelerate.
About 3 months ago, I asked our real estate agent folks help me in buying a piece of property in San Gabriel valley. I wrote some articles to express my frustration in making offers. Finally, I had an all cash deal made to Wells Fargo bankers. They are more aggressive to Countrywide and I have had a very smart agent to work with. But, the escrow failed through because my situation changed. We decided to cancel the escrow without losing a dime and still have a very good relationship with the agent.
Why I changed my position. It is a long story, just make it short. My personal situation was changed so that I had no pressure or timetable to work with. In addition, the discount given by some financial institutions is expanding so large that I don't think it is a good time to buy at least for now.
From my personal touch, I can see some strange things happen in San Gabriel valley, CA:
1. Condo markets have NOT been falling so fast as it should be, if the 1990's Patten sustained. Condo owners are still in "denial" stage and it seems not so big pressure for a banker since not so many condos were foreclosed upon so far. We can see the asking prices are pretty steady, even they are down about 30-45 percent from its peak.
Some regular condo owners are still so crazy in making fun to ask about $350 per square footage for their units, even REO listings in the community are sold less than $200. In one complex, we see a REO with 2+2+2 asked less than a regular 1+1+1 unit. Generally, the price went back at least to the level of 2004.
Well, some people said that the market would be stablized and sustainable when the housing price going back to the year of 2002. I found one condo (3+3+2) in a 3-complex, its asking price has approaching $100 per square foot, about half the previous sold price at its peak. However, it is weired that condo price downfall is NOT in the lead, at least in the moment, not ahead of single housing as in 1990's.
2. On the opposite, the single house markets are really starting to meltdown fast , sharply and quickly, particularly for those built in 50' or 60'. It is amazing to see that a REO listing of similar single house is going down about 25-30 percent in just 3 months. Furthermore, a few months ago, it is out of my imagination to buy a single house in SoCal for the same price range in a remote Texan countryside. But, it is not true anymore. A house with 1,000 sqft and half acre is currently available for less than $23,000 in Barstow, CA. What a heck, still nobody is willing to buy it?
A friend of mine just closed escrow last week to buy a late model in the area for $600K price range. But I don't see any excitement of his, just sense a little sad or sorrow since there is no excuse clause for him to cancel the deal without losing his deposit. Generally speaking, those REO bankers asked about $400K 3 months ago, and now reduced to $320K. It seems to me that nobody is looking for anything above $300K from a simple fact that they are not moving.
A single house with 100,000 square foot lot was sold for $about $560K in 2005. It is in a decent neighborhood. It was foreclosed and a bank took it back for $440K in June 2006. Now it was listed for $162K last week.
When I saw the listing coming up, I am so excited about the price. For a 1400 square foot 3 bed room single house at that price? In that decent area, you must be kidding and out of your mind. It is a steal or bank robbery.
But now, I know why the price is so "low?" After 2 year's vacant condition without TLC, it was severely vandalized. It is an almost stripped house. From outside, it looks as a house. Once you stepped in, you'll realize it is just a "frame," everything is gone, even its carpet. Realistically, it is just a "land value only" offer. At this time, new construction is down, demand is low, do you expect anyone in business to do a remodeling (to make sense, I will say to tear it down and build a new one will be a smarter move)? If you do, look eastward to Florida where the value of a vacant land has been dropping crazy, 80% off. Will you be so brave to take the risk? I doubt it.
Well, it also seems that the financial credit crunch is showing some signs to an end. Maybe, we have to thank FED. But, I haven't be able to see the bottom in the light of real estate tunnel.
Okay, give me your two pennies for my penny.
In response, I am enclosing herewith is a post for you guys' reference:
As I said in the main article A Funny World (23): Mail Your Keys In and No Foreclosure Record Out?:
Homes being foreclosed are growing steadily and strongly while the normal transaction is rapidly shrinking, if not down to zero. The former foreclosure SALES offsets the reduction or disappearance of later's numbers and even makes sales numbers look better and rosier in the end. No wonder Zillow.com has sales figures bigger than other websites and its Zestimate of housing price are too high in some cases.
My question is: As I know, Zillow.com reports a "foreclosure" as a "sale." Now comes Trulia. How do we know NAR, Shiller index collect their data for sales number sensibly, even I know everyone uses different methods?
(p.s. I will say misleading as claimed in the following blog is too strong, but it would be safe for me to say: "to have the public confused." And believe me a decent professional appraiser won't be trapped by the tricks. He or she will take it out of a comp. research.)
Misleading Listing [p.s. from Parick.net]
I found definitive proof of misleading data from http://www.trulia.com/.
I hate to sound like a paranoid conspiracy theorist but it does strike
me as deceitful to pass off a bank foreclosure as a recent sale.
For example, the entry on Trulia.com for a Los Banos property lists it as recently sold.
When I look up this same property on Realtytrac, the property was not actually sold,
it was was repossessed by the lender. I know for certain that this listing was reduced
to $120,000 before it found a buyer because it is a house I was interested in purchasing.
It has not shown up on Zillow yet-I suppose because it would blow all the comps out of
the water. --E.R.
(p.s. I believe, Zillow is very slow in updating info. I will double check a listing price on Zillow withNAR website since I found some listings already reduced twice and took $50K price cut when Zillow still keeps the origional listing price at its website. It may not be Zillow's fault since some agents or owners don't update information promptly. )
Address
23238 Orange Ave #5
Lake Forest, CA 92630
New bid! New bid of $146,000 has been placed by nassar on
Details
| 23238 Orange Ave #5, Lake Forest, CA 92630 2BR, 2BA, 985SF  | $147,000 | Taking Post Auction Offers |
The above information is from Realtybid.com, a pioneer auction site. Let's see what Zillow.com has to say about this piece of property as follows:
23238 Orange Ave APT 5 Lake Forest CA 92630
2 beds, 2.0 baths, 893 sq ft
ZESTIMATE®: $329,000 What's this?
Last sale and tax info
Recently Sold: $297,459 (p.s. This is the foreclosure minimum bid.)
Now, you can see Zillow.com treats a foreclosure as a sale. Compare the original auction price of $146k and the 21-day final bid of $147K with $329K of Zestimate. What's going on for so-called "market value"?
( p.s After two bids, now it is under after auction 5-day negotiation period. Seems a very chilly California auction over there in Realtybid.com. If you want it, you still have two days to invite your agent to get 3% commission. The job will be neatly done in one month. Trust me Realtybid.com has an excellent marketing service. No hassle at all. Forget about a short-sale that consumes a century time of you if the condo fits your needs.)Who's in control? Who's the boss, Americans, Politicians or those Wall Street fat cats? Are we still in so-called "free trade" zone? Or those big guys has tried to cook something out of our people's dead body? Why they are intentionally holding their REO assets, while they are anxious in writing off or writing down billions dollars paper value of their ABS collaterals to take tax credit? Are they trying to use accounting principles later to their advantage to boost profits at the expense of the publics? Two pennies for your thought?
If you guys are inputing your comments enough to show me your interest to know what's going on, I will probably release what I have in my mind as to the difference between 1990 RTC crisis and today's GWB's fiscal solution to the housing bubble.
No Bank Update Its REO Operation In Cyberspace
Keith, thank you for your reply.
You're starting your RE auction business. Well, you are a little bit late in this field, but not too late.
There are someone dominating the market share. The major one started at least 3 years ago. They are great to serve and to make a lot of incredible profit. But I do believe they are so lazy to improve their business that leave them many weak spots. If there is a real good player coming up in the field and attack them efficiently, they will be eating up their market share easily. Hope you are the one.
Do you kow your competition well enough to have a market niche? Or you just get in to the trend trying to share the huge profit potential without a precise plan?
It took me 1 minute to review your business plan explained in your blog at ActiveRain to reach a conclusion:
I have no further to say. Good luck for a normal operation.
| 11/15/2007 02:22 PM | by Ed Tse | Edit | Delete |
Correction: 01-20-07
For the newest development, I am here to correct my observation stated in my article: "No Bank Update Its REO Operation In Cyberspace"
I have to give an excellent credit to REO management of Wells Fargo Bank. They advanced their market niche by hiring Hudson to do "smart" auctions.
Among those properties on auction block next month, Wells Fargo didn't even consider to give a real estate broker a chance to do regular listing and marketing. Some went to an auction directly from court foreclosure steps. Wells Fargo abandoned the way we used to be familiar with. No BPO or asset management needed probably. All they have done is using the market forces to naturally set the price of REOs, not other artificial mechanism. These strategies will dramatically save time, cut middlemen out, and reduce their operation costs. (p.s. Unfortunately, the real estate professional is one of those being bypassed.)
Wells Fargo used one of the creative and untraditional marketing inventions that I have kept in my mind when I exchanged viewpoint with Keith on his auction business plan in the above quoted. Wells Fargo created a fantastic skillful method that all other auction websites have never done, except realtybid.com. Wells Fargo does negotiation to accept offers first, just the opposite the realtybid does. I believe Wells Fargo's formula is better.
However, the success of this kind of negotiation depends on how much the discount rate (recovery rate) set prior to the final day (kind of reserve). So far, Wells Fargo seems not aggressive enough to be willingly to give sufficient discount to cope with the market. In the first 3 business days, there are some results: two properties were sold and off the Hudson's block at the next southern California auction. That is less than 1 percent out of its 250 REOs it put out for the auction. Not very great!
Even Wells Fargo and Hudson have a too rough and primitive start in its trial operation and they do need to improve their website a lot at this moment, I have to say "great job done" to Wells Fargo to be creative. (p.s. Hudson claimed it was a success in Detroit auction, I would say it is anything, but a success. The auction was a very tough one for them since there was no auction fever, if not a failure or setback. But it is just the beginning. We have to wait and see whether this is going to be a decisive general trend or future mainstream for REO market.)
It is a great step forward to solve the current housing bubble.
BEWARE! The Worst Lender EVER to deal on Short Sales Washington Mutual-WAMU
01-15-2008
Wamu is no different than a regular seller. Both of them are ignoring the reality that housing price dramatically goes down, by somebody feeding them wrong ideas.
Look at NAR website, we can find so many listings in San Gabriel valley, CA that still have price tags of housing peak. In a zip code, there are about 55 condos listed up to $400K. Per Ziprealty stats, there were maybe less than 2 condos sold in that zip code in Q42007 (there were more than ten times sold a year ago). Some are REOs with a price of mid-250k, but most sellers who have about the same unit in the complex are still asking near $380K that's even higher than its peak. I saw one condo going for a short sale. It is very funny that the listing agent is asking a price higher than what the seller paid for a year ago. Does the seller expect a bigger fool than him?
In the same neighborhood, some houses are asking even lower than those condos. Just tell me how can they sell their condos? I don't know how good advice they got from their listing agents. All I can say is that those condos definitely wont' move since their prices are about the same as its peak time, so artificially high and scary.
Can we stop blame Wamu while we, as real estate professionals, are doing the same sh*t trying to get a listing by giving sellers imagined price hike and unrealistic expectation. Let me ask you guys who did BPO for WAMU? Isn't it one of our fellow agents? Yes, he or she is able to get $20-50 for doing an "inflated" BPO to "survive." Its fine, eveybody deserves a living. But, oh, no. He or she in fact creates a hurdle to "sell" the property and "cut" income source for the profession.
If a lender is so anxious to sell and see no result or offer coming in, he is going to give an auctioner the property on auction block. That's exactly the situation Wells Fargo decided to let Hudson handle its three hundreds REOs in southern California next month. Hudson gets 5% buyer premium (p.s. Isn't it a regular commission for a REO?) and takes our income away. To whom shall we point our fingers if our fellow agents are pleasing a seller and "discouraging" buyers from presenting an offer? (p.s. I am one of them. Please see my recent experience at A Funny World (19): Can Agents Refuse Receiving Offers or Not?)
As I know, there are a lot of buyers who really want to buy. But there are just TWO things stop them from buying: unreal listing price and those listing agents who are playing very high attitudes. They "discourage" selling when they are saying: "don't give me an offer if your price is no more than.......", just as they used to do unto a buyer in the housing peak.
It is very clear that housing price has to be adjusted. Can we stop snow falling down? Let's the market function naturally. Why NAR has to deny the pricing trend in California? Can we make this market adjustment period shorter, smoother, and be realistic to get things going? There will be less pain if we can let nature heal itself.
I beg your pardon that my wishes are so unrealistic that won't come true, with the most popular mentality of our fellow agents. We really can't see the bottom until 2010 by the status quo. But how can we bring in the bread to our families if there is vurtually no market in the next 2 years?
Well, nobody cares about that. Anybody can say: "that is your, his, her or their problem, not mine." Nobody can do nothing about the system, right? But please tell me, collectively, isn't it OUR problem?
As a savvy real estate investor, I will say IMB is very foolish and conservative in its REO operation.
IMB is the one who has been more willing to put out more REOs in its website than others. However, nobody in financial service is taking the advantage of Internet to treat its website as a marketing channel to get rid of REO. You name one for me if you know. (p.s. there are traditional reasons for that: public image and self-protection. I don't want to get into the detail about that.)
US Bank is one of the most aggressive banks to reduce its REO price to cope with the future price trend. In stead of dreaming the top dollars at 2005-2006 peak price, US Bank is positioning itself at a market edge to set a realistic price for others to follow. If you know RE appraisal business, you know US Bank is a leader so smart to do market price setting. Nobody can have a better chance to easily get a better price than US Bank.
For examples, US Bank took in a Southern Californian REO at foreclosure minimum bid of $380K (the previous sale price is $520K) on 07-13-2007 and immediately priced it for $347.9K on the market, regardless of a fact that the next door was sold at $440K right before the foreclosure. After two months, it dropped to $324.9K. The first price reduction of $50K is about 15 percent off its listing price. (p.s. It's available yesterday. But to me, its price is still too high for an investor.) I also witnessed it took in a Texan REO at $82K in the last May, priced it for $49K and had it sold for $37K in last October.
In Texas and California, I saw that US Bank has acting as a real businessman, not a lousy and conservative banker, with very good sense to deal with its REO inventory. But still it sticks to its real conventional channels and has never treated its website as a selling place, too. Go to US bank site at https://usbankhomemortgage/reo/reoReport.asp#CA and you will see there is ONLY ONE REO property listed in CA that is in central California. Nothing in Southern CA. I can show you ten times more than that it has had in San Gabriel Vally, southern CA.
As I said before, I am a trash digger who doesn't mind to dig, dig, and finally dig a gold nugget out of many dumpsters scattered around many places. But why all the banks have to make it a hassle to their potential customers by processing its disposal of REO in a so-called conventional "BPO" or a bureaucratic "assets management"? Why they don't see the Internet advantage of money saving method?
Okay, I believe that they are a real patriotic hero trying to "add" more red tapes, "create" more jobs and "consume" more papers to figurely increase our Gross Domestic Production. But those "productions" won't improve our "productivity" or "efficiency" to compete with others or add a real "constructive value" to our GNP. They are in fact purely a "consummated " waste in terms of global natural resources or our national strength.
Back to the REO strategy, IMB is too passive and conservative that I don't like what I saw at all. I can do much better than that to make a non-performing asset (by name, it is an asset. it is really a debt in fact) back into a real performing asset! But IMB's operation on REO tells me that IMB may not have an urgent liquidity issue or IMB is trying to bluff itself to cover up such a disastrous pressure. I have no reason to believe that IMB is too stupid to see a credit crunch is coming toward them, if there is one. However, I do believe that IMB has to sent its REO asset managers for an advanced learning course.
But it is the personality of Mike Perry and his "balance sheet recession" mindset (prepare to conserve cash, to "minimize losses", not to "maximize profit".) It seems to me that Mike has been long ready to be responsive to IMB's possible loan loss and liquidity crisis, if any, from his previous experience. He is doing what he believes is right in a broad banking perspective. I don't blame him and I trust him on banking business that is why I bought a stock first time in all my life on Dec. 21: it's IMB at $5.91.
I wish IMB stock price could be lower further for me to buy more. So Mr. Cramer, may I ask you do a better job to create a "strong sell" for IMB, please.
As Ronald Reagon forgot, I don't remember anything. Did I work there in that little white cloudy house? Are you sure that was ME up there? How come I am down here? That's definitely not me!
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