Are they starting to jump off the sinking ship? A quick review of todays new listings showed a lot of "second" homes hitting the market, tons of old time (10 year or more) owners listing, 8265 Trail Hollow hitting the market as an REO 1 day after the TD of $598,000 at $557,750 (2/04 $634,000). And of course, the usual "my house is special" crowd who will be showing up as NOD’s in a couple of months.
Nothing really meaty to report, but it has been a couple of days since there has been a new topic here for you folks to go balistic on. Miss you Lindie! Come back to the 5 and Dime!
NAS
There’s never just one cockroach, ditto with the rat thing. Also applicable to the REO’s multiplying. Was wondering when Trail Hollow was going to hit the bricks,
along with a few others.
Back from Big Island Kona. Would like to report R.E. is booming out in Aloha land,
but it isn’t. Unlike a certain newspaper in Reno, Hawaii is reporting the downward price trends. Hotel where we stayed was about 60% occupied, mostly Asian & European guests getting a bang out of their currency.
playtonium
I just returned from Hawaii about a week ago as well, and on the eastern side of the Big Island it’s amazing how much real estate has fallen. Lots in Hawaiian Paradise Park that were once $70,000 and $80,000 are now $50,000 or less. There are ‘almost’ affordable homes in Kona now. You can pick up a home on the eastern side for $250,000 to $300,000. Lower end homes in Kona are starting to drop below $400,000 for the first time in a long time, and I go to the Big Island 4 or 5 times a year for business.
Waiting for just the right time to buy a winter-time retirement property on the eastern side near Hilo.
RoyalFlush
The most recent post by Mike is over the line. “Rats”? really? Metaphor? attempt at humor? Innapropriate.
Although half of the posters derive some voyeuristic pleasure out of watching people lose their homes, ruin their credit, and drive home prices down not everyone reading this board would characterize a ten year second home owner as a rat. Allowing such a post and others like it drag down the quality of the the board and it’s readership.
Phil
It seems obvious to me that with the increase of forclosures the market has only one way to go. Down!
How low can builders go to sell new homes? It seems that the price of materials are only increasing. When will the margins get so small, they close shop? How much money to carry the undeveloped and partialy developed land is effecting the decision to cut the margins even more?
I was quoted a base price of $200 a sq foot to build a custom home. Have these changed?
Times are rough, no doubt about it.
But!
Then you see investors are re-entering the markets in So. Cal. and buying up some forclosures. Can it spill over here? Somehow I doubt it as our market just do not have the jobs. When the job growth was partially due to the construction industry we have a bigger problem. The degree of this problem can be debated.
DERRICK
Royal Flush, I completely agree with you.. no class at all in this post, and headline.. very distasteful.
DERRICK
Now I have a real good vision of you mike..
can you say scumbag?
DERRICK
Shame on you diane for letting mike post this garbage.. it really does put a dirty stain on your blogs otherwise clean shirt.
NAS
Well, there you have it. Like I said, there’s never just one cockroach.
Phil
Lighten up people. Mike is only making a point of the outgoing demand for housing here.
Some of us will be captains and stay until the bitter end!
What would cause a ten year owner to sell now? Has rental demand gone? Was he cash negative in the house after 10 years? (seems unlikely) Or was it a personal reason such as the owner died? Or could it be othercash flow issues, as other investments are turning sour?
What I am curious about is what is “alot”? One example might just be an extreme case.
SmartMoney
Good post and informative. Keep up the good work Mike!
SkrapGuy
Welcome to the club Mike. As we all know, it’s only a matter of time before Derrick eventually insults everybody who posts here.
And Derrick, you can skip insulting me at this time, youv’e already put me on your list. I am curious, however, as to why you never repsonded to the comment by MikeZ, about why we can’t find you as a member of IEEE. Since you are being honored by IEEE as you say.
Marla
Derrick, why the cheap shot at Mike? Mike contributes substantially to this blog, especially with his extraordinary ability to mine the data from the public websites.
I would have thought that you were out perfecting cold fusion, or making a few hundred thousand on your latest option trade, and not have the time to even bother with the scumbags here.
3 Wombats
Derrick,
“The lady doth protest too much, methinks.”
Chill Dude!
BanteringBear
I love the title Mike. In fact, it may be my favorite yet. Keep up the great, informative posts. Methinks those who have taken such offense, have rodent like tendencies. Furthermore, I think it’s quite clear who the “scumbag” is.
NVMojo
I enjoy your postings too, Mike! Keep it up!
These house are still too high!
smarten
I too vote for Mike!
Changing subjects [listen up Allen]. A 3BD/2BA 2,100 square foot, lower elevation, Lake Tahoe view, Incline Village [“IV”] SFR came on the IV MLS yesterday for $680K. Too good to be true? Turns out YES.
This property is one of the ever growing number of IV REOs [I thought no one had mortgages in IV; they don’t need them]. The lender [American Home Mortgage] turned down a higher offer [$700K] from a local agent some months ago. Now it demands any buyer accept the property “as is;” waive the mandatory SRPD property disclosure form; and, any offer include an addendum it has prepared which basically states that notwithstanding acceptance of the offer, the seller is free to continue offering the property for sale. If anyone offers anything better down the road [and someone will], the seller is free to enter into a contract with that Johnny-come-lately and not be obligated under the contract it has entered into with the initial buyer.
When I learned of this addendum requirement, I balked and will not be dealing with people like these. And just so you all know who they are, you can go to http://www.silverstatereo.com.
We’ve talked before how Reno REO sellers are intentionally under pricing their properties with the intent they get bidded up via multiple offers. It looks like the practice has moved to IV. We’ll see if it’s going to work here.
And as a side note Diane. Doesn’t this sound like such a great idea for any seller that this addendum should be plagerized and incorporated into your standard deposit receipt?
Dave
Smarten hits on my pet peeve too, REO sales with conditions that transfer all risk to the buyer while the seller keeps all options open. The agent in his link is one who represented property I considered for purchase… the real estate agent’s paperwork included hold harmless provisions, not just for the bank, but for the agent too. Not only do the banks want waivers and no responsibility, the agent wants it too.
I agree with Smarten, buyers should refuse to sign waivers and hold harmless provisions, and they should insist on a disclosure up front that the asking price will be honored. With the bulk of sales coming up REO, it’s time the legislature put some teeth in the law requiring waivers so banks have to enter the market under the same rules as anyone else.
BanteringBear
In stark contrast to Smarten and Dave’s sentiments, I actually enjoy these sorts of shenanigans by the banks, et al. It discourages the sale of the property, costing them even more dough in the long run. There’s absolutely no reason to hurry out to buy property right now. Sit back and watch the carnage as prices continue their free fall.
doofus
Wow. It took the village idiot 3 comments to put forward a semi-coherent post. Consider the source, Mike.
RoyalFlush, where I was educated, punctuation counted for something. Where do you get 10 year second home owners out of what was posted when they were clearly (comma) separate issues?
I love this blog! Pass the popcorn.
GratefulD_420
Smarten… sounds like the bank is shopping.
This is definatley a different tatic than orignially used on me for the Sagittarius listing.
Shouldn’t you make an offer with a contingency for (1)Interest Rate (2)Inspection (3)Offer valid for 2 weeks after that it is removed
I think these are very acceptable terms… maybe it will get the bank to rethink their tactic. Take a small hair now for sure….. or like Bantering Bear says…. play games, loose you as
a buyer… and loose more later?
smarten
As a follow up to all of this, it turns out the lender is in bankruptcy. Therefore any offer that is acceptable must be approved by a bankruptcy court in New Jersey [sound familiar Guy?]. And apparently the listing agent in my example is the agent of choice for all of American Home Mortgage’s REOs [so one or two of you are probably going to come across my situation in future months].
The agent I’m working with says this is the way all of these resales work and if you want to purchase any of them, this is what you have to put up with. I say shame on the agent! If agents refused to deal with sellers like these, the practices I describe and abhor would end. But they won’t so contrary to BB’s joy, I think these listings upon their sellers’ conditions will sell.
Now it turns out I’m not that enamored with the property [it requires total renovation] so I won’t chase it. But if I were so inclined, I’d keep my eyes on what is happening and when the case came up before the bankruptcy court for sale confirmation, I’d rear my ugly head and outbid the high bidder [of course if someone else’s bid were too high, I’d simply pass]. Unlike probate sales, there’s no minimum up bid required in bankruptcy court [all the court’s concerned with is generating the most dollars for the estate’s creditors]. You’d probably blind side the sap who agreed to the seller’s unconscionable sales conditions.
MikeZ
Derrick lecturing on class? My hypocrisy meter just broke!
Oh, yeah, how’s that oil short working out, for ya, D-man? LOL.
RoyalFlush
Mike’s post is a lame (albeit successful) attempt to generate traffic and flame up this board. He admits this in the post itself – “Nothing really meaty to report, but it has been a couple of days since there has been a new topic here for you folks to go balistic on.”
Don’t dismiss my point b/c Derrik commented.
My point is this topic and others simply to allow “…folks to go ballistic on.” are out of place when I consider the quality posts that keep me coming back.
Maybe I’m in the wrong blog?
doofus – a title is a title and should apply to all contents of a post.
Allen Murray
Smarten, here’s another example, I just put in an offer on a foreclosed triplex. Last sold for 460K, starting bid $270K. After my inspection, offered $235K. The bank refused the offer saying that the $270K reflected the current market value. Bidding closed last Monday and they had no other offers. This property was “as is”, but that doesn’t bother me since “as is” is my specialty. This game doesn’t bother me at all, in fact I find it amusing, its a free market. The bank is trying to maximize its sales price and I’m looking to steal something. I keep looking and they keep trying to sell. You may see it differently since you are looking for a personal residence. The fact of the matter is, the bank may find a willing buyer at their $270K, it pencils at that. I’ll keep you posted. I wouldn’t be surprised if the bank calls us back.
smarten
Thanks Allen. But did the bank also tell you that as a condition of the $270K offer it was holding out for, you must execute its “seper addnd?” I don’t have a problem with any seller [even you] “playing the game” by holding out for a higher sales price. My problem is forcing the the buyer to be bound to a purchase contract when the seller is not; it’s called a lack of mutuality [or as I like to refer to it, eBayitis] which probably [Tom, John?] renders the contract unenforceable.
Now if the buyer could also excise from the contract without penalty if [let’s say]: he/she found a different property he/she liked more [or, woke up on the wrong side of the bed one morning]; or, the buyer were paid liquidated damages for his/her time/effort should the seller unilaterally terminate; I could see the practice’s fairness. But under the current sinister structure? Not.
Allen Murray
Smarten, you have the freedom to NOT enter into any agreement you don’t feel comfortable with. Obviously, if you feel its one sided, keep shopping until you find a deal that isn’t. The banks aren’t “forcing the buyer” to do anything. The free market will eventually prevail.
Ann Onn
You guys do realize that Derrick makes his comments just because your reactions amuse him, right?
Sully
Allen, at least your not playing into the multiple higher offer game. Hold your position, as you said they may call back.
Allen Murray
I hear you Sully. The lender said they were getting much action and it would surely sell above the asking price, and honestly, I’m surprised it hasn’t. It sure is a great time to be a buyer, and there are deals out there to be had. The property I’m looking at can be purchased with 20% down, renovated, and rented with a positive cash flow. If valued at a 5.5% cap rate, can be sold for $150K profit.
KB
Allen,
Do you use a 5.5 cap rate when you pencil you apartments to flip, I am trying to make a deal on a 28 unit apartment but My investors are baseing their plans on a 7.0 cap rate and I am stuck at about a 6.4 cap?
Allen Murray
KB, it all depends. As you know, cap rates vary from city to city, area to area, and depend on the condition of the building. A brand new or recently remodeled building in a low vacancy market in Reno, should justify a 5.5% cap. If your building is older, needs work, or has a high vacancy, a higher cap rate is justified. It really depends on many factors. If you need some ammunition to justify your 6.4 cap, have a realtor pull some comps of similar properties that have sold and see what they were capping at. Keep in mind, the exact same building in different cities will sell for vastly different prices. 10 years ago in Reno, everything was capping at 10%, now it is much lower.
KB
Thank you for your advise.
Paul
Smarten, do you know if the “seper addendum” has been litigated anywhere yet? I agree that the enforceability of such a contract seems suspect.
John Newell
Smarten,
After some admittedly cursory research, I am not sure such an addendum would be categorically unenforceable. Yes, at common law, mutuality of obligation would suggest that such an agreement would be unenforceable unless consideration was given for the right of unilateral rescission. We have a case in Nevada that seems to hold this (Serpa v. Darling, 810 P.2d 778, in which an addendum attached to option contracts rendered them unenforceable because the terms were not supported by mutuality of obligation or consideration). However, to my understanding, the recent trend in many jurisdictions is to find that even a non-binding promise is adequate consideration (this is also the position taken by Restatement Second, Contracts). Thus, a promise to sell if the seller does not receive a better offer in the proscribed time period may be adequate consideration for a promise to buy, even though the seller is not bound to sell if a better offer materializes. I suspect that a court would enforce such an agreement IF the time period in which other offers could be entertained had run. Whether a court would enforce it if the buyer repudiated it before the proscribed time period had run is, I believe, an open question in Nevada.
GreenNV
Guys and gals, you rock. After a rough, (and probably earned) rocky start, this thread has turned into a gold mine of information. I would put the content of the replies on RRB up there with any real estate blog out there anywhere for quality and insight. Allen, contact me if you would be interested in putting together a post on what a cap rate is all about, and what the investor is looking for. My email is at the bottom of the page.
Sorry to anyone I offended with this post. Hearty thanks to those who came to my defense. And major salaams to those of you who continue to make RRB the most important source of real estate information in the Truckee Meadows.
DERRICK
“Oh, yeah, how’s that oil short working out, for ya, D-man? LOL.”
Better than the equity on your house mikez.. and just for the record , my short position at 129/bbl is essentially FLAT so far.. keep in mind it has only been about a week as well.. don’t be so short sighted mike! LOL
Paul
Has the Shanghai internet buyer closed yet?
smarten
Well a Chase agent has posted one of the sinister addenda I wrote about at http://buytahoehomes.com/sample_bank_addendum.doc [thanks Lexi]. Take a look at how one side it is; how it requires the buyer to forfeit his/her deposit; how it requires the buyer to waive his/her right to file a legal proceeding to enforce the contract; and, then tell me if anyone in theur right mind would/should ever sign something like this?
Dave
Line up your financing, hire your attorney, pay for inspections, give up your rights, and the seller can back out anyway. A contract addendum that one party does not even bother to sign; maybe the agent can sign binding contract addendums for the client?
Is there a niche for real estate agents to represent homeowners who are facing foreclosure to sell their homes before the banks move in? From a buyer’s perspective it’s way better to deal with a real owner/seller than a bank.
I still think the Legislature needs to level the playing field here.
John Newell
Smarten,
Per the terms of the addendum to which you linked, if the seller repudiates, then the deposit (but not buyer’s costs) will be returned to the buyer. The deposit is only forfeited if the buyer repudiates, and requiring forfeiture of earnest money as liquidated damages if the buyer repudiates is not uncommon. I do not think much of the provision regarding the seller’s ability to cancel the contract for any reason with waiver of buyer’s right to pursue legal action if the seller cancels, but I do not believe the terms are per se unconscionable.