Foreclosure Flipping

I chronicled some of the parties buying houses at Trustee’s Sales and then flipping them a while ago in The Investors Club.  Most are still active on the courthouse steps, one crashed and burned with multiple foreclosures.  Many of their flips have been astonishingly profitable, though there have been a few missteps and near misses along the way.  In my opinion, if the banks truly understood the value of their properties going into the Trustee’s Sales (assuming these deals are clean), there should not be huge opportunities for profit in these sort of transactions.  Well there are, and that bugs me.

There is a new big dog on the foreclosure flip scene.  Page Ventures LLC / National Real Estate Services has picked up at least 21 properties at auction since November, and their activity is increasing dramatically.   In chronological order and in round numbers, here are their transactions – the number in parentheses was the amount due at the Trustee’s Sale: 

UPDATE:  1780 Desert Mountain closed Friday for $285,000, and 6309 Park Place closed yesterday at asking of $179,900.  Since people seem to be interested in the timing of the deals, I have updated the the property information with the actual Trustee’s Sale and resale dates instead of the recording dates when I can easily find the information.  In at least 90% of the cases, the recording date was at least 2 weeks after the Trustee’s Sale date.  Updated data is in red :

 5525 Wedekind – Purchased for $228,000 in November 2008 from lender.  Sold for $299,000 26 December 2008.

7655 Corso – Purchased for $152,000 (276) 19 November 2008.  Sold for $157,000 15 May 2009. (Corso has a huge number of foreclosures on it, which has cratered prices).

14061 Stead – Purchased for $72,000 (182) 19 November 2008.  Sold for $85,000 22 June 2009.

1656 Spring Vista – Purchased for $165,000 (165) 1 December 2008.  Sold for $215,000 30 January 2009.  (There was a huge second mortgage / HELOC on this one),.

3764 Big Dipper – Purchased for $159,000 (309) 17 December 2008.  Sold for $215,000 6 February 2009.

5136 Palo Alto – Purchased for $152,000 (297) in January 2009.  Sold for $215,000 24 April 2009.

2640 Starr Meadows – Purchased for $270,000 (362) 31 December 2008Sold for $310,000 24 June 2009.

4445 Cobra – Purchased for $277,000 (498) in January 2009.  Sold for $350,000 3 March 2009.

 8475 Castlehawk – Purchase for $310,000 (590) 11 February 2009.  Sold for $455,000 23 March 2009.

3065 Markridge – Purchased for $186,000 (494) 18 March 2009.  Status unknown.

1364 Northview – Purchased for $120,000 (275) 15 April 2009.  Listed at $179,900 (back on market).

481 Shire – Purchased for $252,000 (482) 29 April 2009.  Sold 2 July 2009 for $320,000.

1595 Bethal – Purchased for $223,000 (431) 6 May 2009.  Sold 26 June 2009 for $304,000.  $224K new loan.

1780 Desert Mountain – Purchased for $204,000 (193) 13 May 2009.  Listed at $289,900.  Sold 26 June 2009 for $285,000.  $100K new loan.

7618 Desert Plains – Purchased for $272,000 (442) 6 May 2009.  Listed at $344,900.  Sold 16 July 2009 for $335,000.

465 Sawyer – Purchased for $53,000 (211) 13 May 2009.  Listed for $99,900 (pending, loan).  Sold 7 July 2009 for $100,000.

8564 Timaru – Purchased for $305,000 (568) in May 2009.  Listed at 399,900.

1601 Emerald Bay – Purchased for $186,000 (385) 6 May 2009.  Listed at $269,900 (pending, loan).

6309 Park Place – Purchased for $116,000 (286) in 26 May 2009.  Listed at $179,900.  Sold 29 June 2009 for $179,900.  $135K new loan.

3818 Allegrini – Purchased 27 May 2009 for $170,000 (434).  Listed at $219,900 (reduced).

2635 Friesian – Purchased for $305,000 (736) 10 June 2009.  No status yet.

One of the "status unknown" properties sold yesterday, but the information has not posted on the Recorder’s site yet.  Remember, these sales will show up as "organic" sales in the MLS database.  The spread between the amount owed on the first loan and the amount paid at the Trustee’s Sales is truly amazing in many cases.  This is providing the window for successful flips, even in this market.

Update 20 July 2009 – Page ventures has sold three more properties that have shown up on the Recorder’s site – 481 Shire, 7618 Desert Plaines, and 465 Sawyer.  They are updated above in green text.  They have also been on a buying spree:

1233 Lawton – Purchase for $101,000 (292) 10 June 2009.  NL.

6563 Bloomfield – Purchased for $$193,000 (359) on 18 June 2009.  NL.

7781 Big River – Purchased for $66,000 (207) 24 June 2009.  Listed at $114,900.

3251 Rockwood – Purchased for $80,000 (235)  1 July 2009.  NL.

1086 Tiller – Purchased for $892,000 (1,662) on 1 July 2009.  NL.

The Tiller property in Incline is way out of modus operandi for this buyer.  I’m sure InclineJJ, smarten, and Paul know this property.  Can you add any intelligence?

 

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About Mike McGonagle

An architect, business owner, and compulsive public records hacker, Mike reads the tea leaves of the local real estate market from a unique perspective.. A former Chicagoan, Mike earned his MArch from Harvard University. Mike can be reached at mike@macassociates.com or 775-345-7435. His continued musings can be found on the REreno.com blog.
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76 Responses to Foreclosure Flipping

  1. Avatar OddieC says:

    Anybody who is willing to spend $1 million in cash in ONE month at trustee’s sales must have some “inside connections” as Sully says. Nobody is going to throw $1 million in one month at the foreclosure game with all its potential problems as Smarten outlines, unless he has it greased in a major way.
    The forelosure game is not just shooting fish in a barrel. If it was, any fool could do it. And this guy is making it look like shooting fish in a barrel.

  2. Avatar 3niner says:

    Per LandLawyer: “Nobody bats a thousand. Not if you stay in the foreclosure game long enough.
    So if Foreclosure Flipper is about to go 21 for 21, then I agree with Smarten. Something is fishy here.”

    I find this, and similar comments to be very strange. First, many of the 21 properties have not yet been resold, making claims of “21 for 21” extremely premature.

    Additionally, one property was purchased for $152,000 and sold, six months later, for $157,000. This doesn’t even cover minimal transaction costs, much less transaction costs, plus time value of money, plus maintenance and repair costs.

    In fact, it is common for these kinds of properties to require significant repairs, so some of the apparent winners, may not be what they appear. I see nothing wrong with the activity being performed here, and someone else (on this thread) used the term “arbitragers”, which seems apt.

  3. Avatar smarten says:

    3niner, I think what LandLawyer meant was being the successful purchaser at a trustee’s sale thinking there are no liens/encumbrances/claims against you and learning after-the-fact that you were wrong. For me there had better be a hell of a pot at the end of the rainbow to make up for the latent risk. But maybe that’s just me.

  4. Avatar DownButNotOut says:

    I doubt we have all the facts since this ‘flipping’ doesn’t add up. It’s still fun to speculate whats happening. Any reason someone can’t contact this Mr page for Q&A?

  5. Avatar RB says:

    Sorry to sabotage the direction of these comments but since this is the place with people in the know I have a question…..

    Who has the best FHA loan rates in the area? I’m a first time homebuyer with 800 credit and a secure job who is shopping for rates. With mortgage rates holding for the time being, I would like to get a few names to contact as I have a counter offer which I expect to be excepted by tomorrow.

    Thanks for any help board commentators can provide in advance!

  6. Avatar big baby says:

    BB..

    600k isn’t enough to buy in montreux yet?

    geez guess I will have to keep waiting.

    🙂

  7. Avatar billddrummer says:

    To big baby,

    What’s the appeal of Montreux, anyway? It’s a long way from primary employment centers, gets cold in the winter, and has snow that doesn’t fall in the ‘lower elevations.’

    Just curious.

  8. Avatar inclinejj says:

    The problem I have with this..he lined up all these properties and bought them and not one of the 21 properties had the owner still in the house or the renter who had to be evicted..

    Some of them didn’t even have enough “juice” ( profit) in them to pay a realtors commission

    I wonder how many of these properties come right back into foreclosure..

    Time to open the windows cause something stinks about this

    And everyone in the business has been burned a time or two on a flip..

  9. Avatar big baby says:

    billdrummer

    I’m not the least bit interested in montreux despite my comments ( a joke )

    if anything, I find montreux to be pretentious

  10. Avatar billddrummer says:

    To big baby,

    Forgive me for not recognizing your joke.

    I don’t want to be saddled with a debt I can’t pay, ever again.

    The only way I’d live in Montreux is if I could pay cash for a house there.

  11. Avatar smarten says:

    FWIW, last Wednesday a very, very nice Incline Village SFR [1086 Tiller] in a very good area sold at trustee’s sale for $890K+. Recently it was listed for sale at $1.6M [down from $2.1M] which the listing agent hadn’t disclosed would be a short sale. About three months ago when the property was originally scheduled to go to trustee’s sale, I submitted a short sale offer of a little over $1.2M. The listing agent [who is notorious for being in denial] refused to present my offer to the lender. Meanwhile, I found something else and didn’t follow through with my original offer.

    IJJ and I thought the sale last Wedensday would be continued again, or the trustor would file BK. Well it wasn’t, and he didn’t.

    So yesterday I ran into a local IV agent I know and we talked about the sale. She told me she has two ready, willing and able buyers at [coincidentally, $1.2M]. She is already in contact with the person who purchased the home at trustee’s sale, and it looks as if that person stands to make nearly $250K overnight!

    Although trustee’s sales for IV properties are no longer a rarity, insofar as quality SFRs like this one are concerned, they ARE.

    So this agent and I discussed what was going on in the IV market in general. She told me she is busier than EVER and there are a TON of qualified buyers out there she’s working with. No nothing is selling unless it is very, very attractively priced [like nearly everywhere else]. But the fact there is now so much pent up demand in IV, tells me [and her] we’ve hit the bottom. I’m not saying we’re going to see the bottom in the traditional data [median sales price, DOM, absorption rate, number of listings, etc.] but if buyers have returned to the marketplace en masse and the quality attractively priced homes are being snapped up [as they are], these factors tell me there HAS been a change.

    And BTW for those who are interested, last Wednesday my wife and I closed escrow on our IV SFR. If there’s enough interest on the blog [tell Mike so he can tell me], maybe I’ll author a post or two where I share the process as to how we identified what we ended up purchasing; the almost impossibility of finding purchase money financing [and ultimately whether to go traditional fixed rate or ARM 5/1]; the hidden challenges to closing [with a seller (and agent) who didn’t disclose the things they were required to disclose which we discovered during our due diligence]; the $275K second the corporate owner’s principle had conveyed to himself that I was able to get released for nothing; the $700K third which had been conveyed by a stranger to title and how I was able to sweet talk the beneficiary into releasing it for nothing; reducing the listing broker’s commission to 1% and how the deal nearly fell apart when at closing he submitted a demand for 4%; etc.

    And a Happy 4th of July to everyone!

  12. Avatar Guy Johnson says:

    Smarten, Congrats on your IV purchase. Regarding seeing the bottom in the traditional metrics, check out this morning’s post. Median up 3.4%; Units way up – 21%; $/sq.ft. up 1.6%.

  13. Avatar Martin says:

    To the new owners of 970 Mica Ct. in Incline Village, congratulations!

  14. Avatar BanteringBear says:

    So, Smarten bought new construction? By the looks of the hugely bloated asking price for that place, it’s hard to imagine how a “good buy” could be had at this juncture. The upper end is just beginning to crack. Most of the pain is still ahead.

  15. Avatar smarten says:

    BB –

    Don’t be so critical.

    When our home was originally constructed and placed on the MLS, the asking price was $2.7M. I’m not saying that price represented FMV, but if you want to talk about a “bloated” sales price [and probably at the top of the bubble], that’s what it was. At our $1.49M purchase price, there’s already been a 45% drop in price.

    Originally there was a $1.44M construction loan placed against the property which purportedly represented a 50% LTV. At our $1.49M purchase price, basically, the construction loan[, $30K worth of arrearages on that loan and $15K worth of delinquent property taxes] was paid off [leaving essentially nothing for the sales agent].

    There’s nothing in this price range even remotely close to the quality of construction/features, let alone new construction. In order to find something comparable, you need to start looking in the $2.5M range and above [which is way, way out of our price range]. Of course for $2.5M+, you get 6K square feet instead of our 3.45K. But other than that, they’re really pretty much identical. So for just the two of us, we’ll trade 2.5K of excess square footage for a savings of $1M+ every day of the week.

    Now I’m not suggesting it’s an apples to apples comparison but take a look at 968 Mica Court [next store] which has been for sale for about as long as our home. Similar construction and square footage but NOT new; a remodel. Yet even today, it’s priced at $1.79M.

    So I respectfully disagree with your observation that the high end is just starting to crack [in price] and has a long way to tumble. Our home is far, far from the “high end” of IV. And as I’ve been reporting for some time now, the high end [I’d say $2.5M-$3M and above] as well as low [I’d say under $700K] HAVE cracked! It’s all the stuff [like 968 Mica Court] in the middle that needs to crack.

    In any event, it is what it is; it’s our home [probably our last] so we’re not looking at it as an investment per se; my wife is excited to death [and RI knows how one can’t put a price on something like this]; and, you already know my reservations which I’ve shared [because I don’t know what the future portends].

    Why don’t you “come on up” on a Tuesday morning and we can go on the brokers’ tour. You want to see bloated? That’s where you’ll find it.

    And thanks to Martin.

  16. Avatar billddrummer says:

    To Smarten,

    Congratulations! I’ll be interested in hearing the story about your closing experience.

  17. Avatar Reno Ignoramus says:

    Smarten, I wish you and your wife many years of happiness in your new home,

  18. Avatar SkrapGuy says:

    Smarten after reading your posts over the last many months about your house hunting ventures at IV and your analysis of the IV market in general, I think you ought to hire yourself out as a consultant to other potential buyers. Yes, it may turn out that you guessed wrong as BB suggests, but when does life come with a guaranty? I can’t imagine that very many buyers, even in “sophisticated” IV, could apply a more a sophisticated analysis than you did.
    Let me also extend my congratulations to you and your wife.

  19. Avatar BanteringBear says:

    I have no doubt, Smarten, that you found the best deal available at this time, and one which surely looks like a bargain as compared to the fantasy listing prices which smother the mls. But, I think you overlook the fact that $1.5 million is A LOT of money. The reality is that only the top 1% of the population can afford a house in that price range. If your house is not “high end”, then why is it priced as such?

  20. Avatar smarten says:

    BB, you should know this.

    One man’s “high end” is another’s doormat.

    As RI has observed, there are now condos selling in Reno/Sparks in the $20Ks. Those same crapy condos are selling in IV in the $160Ks. But they’re both very low end – just low end for different markets.

    In IV, $1.5M or so is kind of middle range – what our friend Don Kanare [Lakeshore Realty] would describe as “the sweet spot.” IMO, IV high end starts at about $3M and goes up.

    We’ve spoken before about IV and the fact that during the first part of this year, the SFR median sales price actually increased by about 40% over last year. Now that didn’t mean prices were actually rising. What it meant was that many of the SFRs that were actually selling, were selling for in excess of $2M. And why? Because two years ago those very same SFRs were selling for $3.5M-$5M and those with the financial wherewithal, were snapping up the deals! So my point at the time, you will recall, was that although the median sales price really hadn’t gone down in IV [at least for the first part of this year], what one could buy today for that median sales price was heads and shoulders above what could be purchased two years ago.

    And really, that’s what happened to my wife and I – we basically paid the median sales price but what we purchased was heads and shoulders above what we could have purchased two years ago. Stated differently, two years ago we never, never could have found anything like this. And this is the same in many metropolitan areas including Reno.

    Now maybe you’re right and the kind of “crack” in IV pricing you refer to, hasn’t yet occured. But remember, our purchase price was less than the cost to construct assuming the cost of the land was zero. And remember that the house appraised for more than our purchase price – I think IJJ will confirm this is unheard of in this market – you’re lucky if it appraises for your purchase price [and that assumes the comps your appraiser is using have been adjusted downwards by a minimum of 1%/month for the last 24 months because of the declining market].

    On the other hand, maybe this is a once in a lifetime opportunity to seriously upgrade your housing [assuming that’s important to you]? In my book anytime you can purchase for less than cost, you’re ahead of the game because the materials generally don’t go down in value [at least not appreciably].

    In any event, thanks to all for your well wishes and we’re still absolutely thrilled with our new home. While most of you have been basking in the sun, BBQing and watching fireworks, we’ve spent the last four days doing what all of us deplore; MOVING [ugh]!

    If the group wants to know more of our experience, I probably will be happy to share it. But let me leave with one aspect. My wife and I represented ourselves in this transaction and basically reaped the benefit of the selling commission in the form of a lower sales price. We structured the deal; we drafted the contract; and when all was said and done, the listing agent [who has been working for over two years on this project] realized less than a 1% sales commission. Now I realize that unless you’ve been around the real estate block several times you may not be comfortable doing what we did. But if you can, there’s nothing that stops you from realizing the equivalent of a sales commission even if you’re not licensed [sorry Guy]!

    Happy 5th to all!

  21. Avatar RRB Fan says:

    smarten … congratulations on your purchase. I hope the move and unpacking process wasn’t too painful. I look forward to hearing the details of you saga.

  22. Avatar Anthony Berg says:

    To Whom It May Concern:

    My opinion on this forum will be extremely biased as I am the Vendor Relations Manager for Absolute REO Solutions, Inc. and I profusely believe in our product and in the success of our partner agents along with us. I will try to provide some information regarding what we do and what sets us apart from the competition.

    Our team is comprised of professionals that have been in the mortgage, real estate and wholesale lending industries for an average of 15 years each. The owners ran one of the largest mortgage broker shops in Illinois and were consistently on the top 10 list of several of the Nations Largest Wholesale Lenders. Our Asset Managers are former Regional Managers and Account Executives from these very Mortgage Wholesale Lenders. As a result they have a wealth of personal connections in the industry with the lenders that remain as both wholesale lenders as well as servicers. In addition to that, through our association with the ICBA (Independent Community Bankers of America) we have access to their 5,000+ member base and are the only REO company endorsed by them. We will have a booth at their Convention in Orlando in March as well as one at the ABA convention in October. We provide lenders with a “one-stop-shop” solution to dealing with their defaulting loans. We offer the option to take the process over from day one, from the first default and start of negotiations with the mortgagors on behalf of the lender to try to find a workable modification plan. If that option does not work out then we try to Short Sell the property to minimize our lenders losses by not incurring additional interest losses as well as property tax losses and legal expenses. If all options fail, we continue on through the foreclosure process. We constantly inspect the properties to make sure that no economic or physical deterioration is taking place while the properties are in initial default or when they become bank owned assets. We have been operational in Illinois and have Banks, Institutional Investors and Private Investors that have handed over their portfolios for us to manage. Due to our contacts in the industry and our presence through their respective associations we have decided to expand out to more foreclosure prone areas and offer our services to a wider client base. Before doing that we have to ensure that we set up a good vendor list of Realtors TM, Preservation Companies and Attorneys that will be able to service our clients needs.

    In most cases we try to retain the management portion of the transaction and leave the Realtors TM with what they do best… MARKETING AND SELLING THE PROPERTY. As a result, our vendors are able to market more properties in less time without focusing on the many ministerial acts involved in an REO transaction.

    Some of the benefits that we provide to our vendors are the ability to post their listings on our website for wider exposure and a free advertising venue. In addition to that we try to give our vendors all the tools they could possibly need to grow their own business. We provide fully customizable forms that Realtors TM could use with their name and logo for the following tasks:

    REO forms, disclosures and contracts
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    These are forms that have been prepared by our legal and marketing teams and are at your disposal at no additional cost.

    By partnering with us you are joining a “Lobbying” group of professionals from within the industry to “Lobby” the lenders on your behalf as well as the possibility to use the tools provided to you from the onset. Finally, as an added bonus, we send our vendors out a 1 GB Credit Card sized memory sticks which contains all the aforementioned forms that are accessible off-line and plenty of memory left to use for their own needs.

    Should you have any further questions please do not hesitate to contact me at 847-999-4346 or by email ataberg@absreo.com

    Sincerely,

    Anthony Berg

    Vendor Relations Manager

  23. Avatar inclinejj says:

    umm this is an ad..buy an ad somewhere else

  24. Avatar smarten says:

    Hey Anthony, what do you charge for your “one shop” REO services?

  25. Avatar smarten says:

    Hey IJJ –

    Do you see this is the guy who purchased Tiller at trustee’s sale?

    As I commented before, this was a STEAL! Over 4,000 square feet; new [within the last two years], high end construction, Tahoe/craftsman style. Also located in the Millcreek subdivision – very popular with families [which is kind of a rarity for IV].

    On the eve of the previous trustee’s sale for this property [that got continued], my wife and I offered $1.22M as a short sale for this property. But the listing agent [and his client] were in denial.

    This fellow is going to make a quick couple of hundred thousand! To me it will be interesting to see who he lists it with.

  26. Avatar Paul says:

    That thing on Tiller was an amazing deal. Jeremy apparently bought a large house and a lot in Genoa at the top of the market a few years ago.
    He is however, making up for his past mistakes in a huge way, dollar cost averaging his real estate portfolio cost basis WAY down!
    I like his strategy.

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