Mike this is a great thread. Super job. It raises in my mind an appraiser question. When an appraiser is appraising a property, does he/she just ignore the price paid at a recent foreclosure sale? In all of these examples the price paid by the buyer from the “foreclosure flipper” represented a still big decline from what the original foreclosed out owner paid. But in comparison to what the foreclosure flipper paid, they represent a sometimes substantial increase. When working up the appraisal for the sale from foreclosure flipper to buyer, does the appraiser just disregard the price paid at foreclosure sale?
Any appraisers out there care to share some info?

Good question IncJJ - left out often is costs of even peripheral improvements made to property to facilitate a sale (or resale) Most bank sale houses have been left unattended for some time, and usually require a minimum of a few dump runs, irrigation maintenance and white washing.I suspect getting the sales they’ve had they’ve invested a few bucks.

Not every home buyer is comfortable or knowledgeable when buying on the the courthouse steps,and paying a few percentage more for a cleaned up unit, with clear title for financing may make more sense. Although the difference this particular flipper is making - less fees - might be profitable, it seems to be chancy.

8475 Castlehawk. Foreclosure Flipper buys it at auction for $310K on March 4. 19 days later, on March 23, sells it for $455K. New buyer gets a mortgage for 80% of the purchase price. Does anybody here think that flipper can buy at auction, put the house on the market, attract a buyer, buyer can arrange an 80% loan, and the whole thing start to finish is completed in 19 days?
Maybe it can, but I have to believe that flipper and buyer didn’t meet each other for the first time on March 5.

Some of the sales seem contrived, that’s for sure. That doesn’t necessarily make it underhanded though.

Around ‘90-’93 I was buying distressed houses then lease optioning them to pre-screened buyers that couldn’t get a loan but were willing to gain some equity through higher rents,or sweat equity and I got lucky as all of them went hard and bought when the option came due.Maybe this guy has his buyer and loan already lined up,who knows?

When I did it I was about ‘Mr Page’s’ age and nothing bothered me. I’m more conservative now as I’ve seen how ugly non-liquid assets can get.

It seems obvious that the appraiser on Castlehawk did not consider the price paid by the flipper at the foreclosure auction in rendering his/her appraisal. Unless this whole thing is bogus, and I am not suggesting that, then quite clearly the appraiser did not consider the $310K auction sale price when appraising the house literally just a few days later for $455K.
How does one get a mortgage approved in less than 19 days in this market? I’m wondering if this appraisal wasn’t done BEFORE the house sold at auction for $310K.

I suspect that the bank is unwilling to accept in a short sale the price that Diane was asking. So her buyer walked. Now she has to increase the price to something the bank will accept.

Just out of curiosity I drove by that house the other day. It appears to be unoccupied.

At some point very soon it is not going to make any sense for Diane to continue to feed this alligator. If Diane has already moved, the only reason to keep paying the mortgage is to preserve her credit score while she hopes to attract a new buyer who will pay something the bank will accept in a deal that will net Diane nothing. We have had this discussion before, maybe too many times before, but at some point it just makes financial sense to walk.

Raymond-et al

I’m a strong advocate for personal responsibility, etc. etc. However, when it comes to taking care of one’s family, especially children and a future? Never thought I’d agree,
but some circumstances warrant folding up the tent. Sometimes we spend 99% of our
energy beating the problem into the ground and only 1% toward the solution.

I’d walk. And, yeh, yeh, out there in blog land…easy for me to say.

It’s nice to say we’d stick in there, but I suspect most of us, including my self, would walk if we were in a situation Diane may be in.

As to the flipping, something seems out of place when you look at the prices and the dates. I’m not suggesting inappropriate actions are taking place, but like IJJ says, how do you even find a buyer, let alone close in that time frame (19 days) unless you’ve already have that person lined up. And maybe that’s the angle.

‘I will buy you a house on the courthouse steps and sell it to you for 90% of it’s value’

Anyone seen that add running?

With the ad Down points out as evidence, there are a lot of “investors” in the market right now, trying to make money in a variety of ways. Some are, no doubt, paying cash for homes on the steps of the courthouse, then carrying the loans for the buyers they place in the homes, oftentimes at exorbitant rates. I would guess that many of these people believe that they are getting properties for a good price, which they don’t mind owning long term, and subsequently could care less if the people they “sell” them to default (they expect it), as they’ll just take back the property and find another sucker to overpay (risky). This has been going on forever.

While it’s hard to get an accurate figure, it appears that “investors” are rife in the Reno market, and that’s just not a good sign of health. Furthermore, vacancies, and falling rents will put a crimp on cash flow, weeding out the weaker hands. It’ll be interesting to watch this all play out.

In all of these cases, Foreclosure Flipper bought the property for well below what the bank was owed. Why aren’t the banks just bidding in the amount of their unpaid debts and taking the properties back? Is it because the banks have too much REO already and just don’t want anymore?

I would love to know if Foreclosure Flipper actually had to competively bid to obtain these 21 properties at auction. Was he the only guy who showed up at the auction? In most cases he paid so much less than what was owed, it’s hard for me to imagine that some other bidder didn’t offer a dollar more more.

Interesting questions are raised. There are some big deficiencies being created here, and yet banks don’t sue for a deficiency judgment. I’m still not sure I understand exactly why.

Maybe Diane will default on Castleridge and Flipper can go buy another house on that street at auction.

As to the flipping, something seems out of place when you look at the prices and the dates. I’m not suggesting inappropriate actions are taking place, but like IJJ says, how do you even find a buyer, let alone close in that time frame (19 days) unless you’ve already have that person lined up. And maybe that’s the angle.

I don’t think you can get an appraisal report and fund in 19 working days..

Wait, did the buyer at the court house steps carry back financing on all these resales?

Back in the good old days we could close a hard money loan in less then a week, but the good old days are long over..

I have been at trustee sales at the court house that go on for over an hour..The cryer has had to make a rule and go in 100 dollar increments and the bidders keep bidding till they are out of money..Last person standing gets the house

Foreclosure Flipper - Is not robbing the bank, however he is in the neighborhood of running a sucessful business.

FF is Grossing 33.6% over 4.3 Months with a current leverage of 2,170 k. Cash made since Nov-2008 is $876k with a total rolling sum of $3.9 M in play.

Big Baby…. why would you prefer your 5% over FF’s 35% ? Would you not enjoy the 600% difference?
Is it safer but less profitable?

Property
Forcl-Sal Purchase Flip Sold Dat month to sell
5525 Wedekind Nov-08 228000 299000 Dec-08 1
7655 Corsi Dec-08 152000 157000 May-09 6
14061 Stead Dec-08 72000 85000 Jun-09 7
1656 Spring vista Dec-08 165000 215000 Jan-09 2
3764 Big Dipper Dec-08 159000 215000 Feb-09 3
5136 Palo Alto Jan-09 152000 215000 Apr-09 5
2640 Starr Meadows Jan-09 270000 310000 Jun-09 7
4445 Cobra Jan-09 277000 350000 Mar-09 4
8475 Castelhawk Mar-09 31000 455000 Mar-09 4
1595 Bethal May-09 223000 304000 Mar-09 4

Purchase Flip
SUMS 1729000 2605000 43
AVRGE 172900 260500 4.3

CASH MADE $876,000
% Gross Margin 33.6%
AVG Time 4.3 Months

MONEY in the HOLE
3065 Markridge Mar-09 186000
1364 Northview May-09 120000
481 Shire May-09 252000
1780 Desert Mountain May-09 204000
465 Sawyer May-09 53000
8564 Timaru May-09 305000
7618 Desert Plains May-09 272000
1601 Emerald Bay Jun-09 186000
6309 Park Place Jun-09 116000
3818 ALLEGRINI Jun-09 170000
2635 Freisian Jun-09 305000
2169000

total= 3898000

deferring smarten…

I’m entertained by all of the speculation about how someone can buy a property from a bank and resell it for a profit.

I always look first for a free market explanation. When you buy something, the purchase price is not the full cost of the transaction. There are associated hard costs (commissions, fees, etc.), inconveniences, and risks, which make the real cost higher than the purchase price.

In the case of banks, many are simply not good at selling real estate. They do many things to increase these costs. Someone, who specializes in dealing with these fools, can gain the expertise (and have the leverage) to minimize many of these costs, while someone, who merely wants to complete a single transaction, will often simply decide to not get involved.

This means that the banks need to lower selling prices to attract buyers. The expert buyers can perform minimal cleanup, turn on power and water, and generally be less of a pain in the ass to deal with, thus attracting fair market offers.

I have heard that there are eBay professionals, who look for products which are posted incompetently, buy many of them for low bids, then resell the items for a profit, after posting them for sale more competently.

Could this economy be developing a new type of occupation? –Something like an arbitrageur of foreclosed houses, who attends foreclosure sales, or cherry-picks REO’s, does some inexpensive cosmetic work, than quickly re-lists and markets aggresively for resale.

If it works, I give them credit for being creative. Seems like a risky occupation, in which you would really need to know your market very well.

And to big baby,

Congrats on your investment returns. Mine are upwards of 400%, because I’m paying off some high interest debt.

To BB,

Could be true. Doesn’t make any difference in the long run.

In the long run we’re all dead.

“earning less than 15k/year + tips”

now THAT is hilarious!

sorry BB but my after tax income was roughly 50k last year.

Some room for “flipping” seems baked in. From what I understand, banks don’t want to deal with loans, so buyers making cash offers will get a better price. Also, the banks may not be very good at evaluating market prices, that shouldn’t surprise anyone.

But inclinejj has a good point about how you flip a house to someone getting a loan in a couple of weeks, especially in this climate. From what I’ve heard from people buying houses the loan process is quite the ordeal these days.

In a darker vein, I do know of one person who was recruited to participate in a scheme wherein the buyer of the foreclosed property fronted them the loan and some cash so that they could “buy” the property. He knew of several others who had participated and seemed nonplussed when I mentioned he would probably be committing a felony. The idea seemed to be that the phony purchases would increase later appraisals.

i find it shameful how so many people on this blog are willing to drag Diane’s personal life through the mud and rehash time and again whatever mistakes she did or didn’t make. And to think all she gave to build this blog. you reward her efforts with your gleeful bloviating over her misfortune. Sheesh! unbelievable!!! or maybe i missed something????

Besides the fact you just DON’T find bona fide purchasers to buy your foreclosure finds within the time parameters outlined by Mike [especially in the market we’re in (because the only things that are selling are for steal pricing)], am I the only one who questions how incredibly “lucky” this flipper must be? WHENEVER, and I mean WHENEVER you purchase something at a trustee’s sale you’re taking a risk. Maybe it’s the state of title you think you know but you don’t [what are you going to do; order a title report on every property you intend to bid on whether or not it actually goes to sale]? Maybe it’s the condition of the property you think you know but you don’t [because you haven’t had the opportunity to tour all, if any properties that actually go to sale]? Maybe it’s the hateful former owner who intends to take it out on the house, to your detriment? Maybe it’s the occupant who’s not going to leave unless you pay him [as IJJ points out, some of the margins Mike has reported are pretty thin]?

I could go on and on but if you play this game long enough and you’ve never been burned…it’s NOT because of your skill set.

There’s something fishy here with Mr./Ms. Flipper. Also I’d be curious who, if anyone, represented him/her in the various resales reported by Mike? Also I’d be curious if the “so called” purchasers of these properties have secured purchase money financing and if so, from who?

Here’s something else to consider. When you buy at trustee’s sale, it’s for all cash. I did a quick total of the purchases this flipper made just in the months of November, December of 2008 and January of 2009. Forget about everything else - that’s about $1.04M of cash expended in just 3 months - with no losses!

As I said. There’s something fishy here.

Speaking of foreclosures, with one day to go in the month, there have been 344 trustees’s deeds recorded in June. This figure totally obliterates the numbers from recent months. I doubt that there have been 344 REO properties sold this month, but I can’t say for sure since that info is only available to an MLS insider.

Also, 880 NOD and 650 NOS.

Bottom?. What bottom, Lucy?

In the clear majority of cases, the TD is to the bank. Yes there are a few people out there like Foreclosure Flipper, but most all foreclosures go back to the bank. So in June we may see that the banks take more properties into REO than they sell through the MLS.
This does not suggest that the bottom is at hand. People have to stop looking to sales volume as an indicator that the market is improving. Almost 90% of all the sales are banks peddling REO and short sellers trying to get out of Dodge. They are not contributing to stabilizing prices. In fact, they are contributing to the opposite.

Smarten, Foreclosure Flipper is picking up the pace. Just THIS month, has has paid $1,084,100 at trustee’s sales.

Speaking of something fishy - I had a serious interest in the first property on the list. I mentioned it on a post back in Nov. The for sale sign was hardly dry and the house was “pending/no show”.

Loan was VA; buyer was local. Lien was held by Western Thrift. I thought at the time this was a set up - as nothing was selling that fast back then.

The only info I could get on Page at the time was a Minden address. I suspect this guy has some inside connections and maybe him or the wife are RE agents or has a deal with one for discount commissions.

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.

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.

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!

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.

billdrummer

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

if anything, I find montreux to be pretentious

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!

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

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.

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

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?

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.

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

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.