Splits

Interesting things can happen when the lenders let the spread between the first and second mortgages get too large.  If things go bad and into default, who steps up at the Trustee’s Sale?  And is it an opportunity for the cashed up buyer to swoop in for the deal of the decade?  Here are 3 properties with major splits up in Incline:

–  119 Pine Cone –  This property was purchased in November 1996 for $270,000.  After multiple refinances along the way, a new 1st for $484,000 was issued in November 2005.  A HELOC for $379,846 was recorded in August 2007, and the NOD was filed on March 20 2009.  Currently listed at $600,000. with an original listing date of June 2008 (can someone fill in the listing history?). 

–  826 Ellen – This property was purchased in October 2005 for $980,000 with a $735,000 first and a $147,000 second.  The second was wiped out in march 2007 when the owner opened a HELOC for $339,766.  The NOS was recorded last week, and the property isn’t currently listed.

–  501 Lakeshore #57/58 – The early history is a bit confusing, but it looks like the units were combined and purchased in August 2001 for $649,900.  There were refinancings in 2003 for $1,500,000.  Then a refi in February 2007 for $2,000,000 and a HELOC in July 2007 for $1,000,000.  A lot of the money obviously went back into the unit, which is currently listed at $2,999,000 (reduced $600,000 in December according to the listing – 298 DOM).  The NOD just hit.

It will be curious to see who steps up at these foreclosure auctions.  Is the split so great that the parties in second position will be tempted to purchase these properties and hope to mitigate their loses?  Do they actually have the means to do so in the current economic environment?  Can investor’s ride this seam for great deals?  Stay tuned.

Thanks to inclinejj for the tips and the source material for most of this post.  I always appreciate contributions on properties worth profiling here on the blog, so keep them coming.

 

 

11 comments

  1. Reno Ignoramus

    Great photo, Mike. Great photo.

  2. smarten

    Interesting theory Mike. But I don’t think you’ll see it play out on any of these properties for a simple reason.

    If the holders of the seconds wanted to protect their positions, why wouldn’t they have already cured the underlying senior defaults; recoup them as subsequent advances; and then record its own NOD? It certainly would be less expensive than the route you suggest.

    Pine Cone is a tear down. IMO $500K at trustee’s sale is pushing it.
    Ellen is way overpriced and located in an area I describe as “geographically undesireable.” Now that it’s neighbor [996 Tyner] is listed for $355K and there’s another neighbor [889 Tyner] coming up for sale in the $350K range, I can’t see someone bidding in $750K at trustee’s sale.
    Lakeshore is a very nice property – two adjoining condos merged into one with the elimination of a common wall [don’t know how the owner pulled this one off given the wall is common property]. Then a top to bottom high end renovation to boot.

    My recollection is these condos had a price reduction to $2.5M and nothing. At $2M it might be an interesting [assuming you’re into condos] but IMO, certainly not more. Now at $1.5M, I’d be a whole heck of a lot more interested.

    I predict none of these junior mortgagees will come forward, assuming it goes that far.

  3. Randolph

    So if Smarten is right, then about another $1.5 million in “equity” (I use the word very loosely) is up in smoke. Poof! Easy come, easy go. It was all just smoke and mirrors bubble money anyway.

  4. inclinejj

    I have seen some odd things as far as 2nd covering the 1st then putting the owner in NOD..

    Case in point..

    Property down in the Bay Area has a first of about 400k BOFA and 100k equity line of credit..

    Property went to sale on the BOFA 1st then cured then the 2nd went NOD.

    Property is worth around 750k..latest comp closed in Feb..

    Pine Cone is a tear down..The owner was quite refi-happy.

    How the condo board let this guy on Lakeshore tear out the common wall is beyond me..Nice property nice grounds but if anyone really wants to deal with an HOA go for it..

    Ellen Court is an area I don’t really care for but just thought I would mention it..I didn’t catch that the equity line of credit was paid off..National City..I didn’t pay that much attention to the title of the property being it didn’t have enough equity to buy at the sale..Plus nothing is moving in IV in that price range so a turn and burn..buy and sell for a quick profit is out..

  5. EastBayMan

    Randolph’s comment has got me to thinking about how much “value” (and I also use the term very loosely) at Incline Village will go up in smoke (and mirrors) before this thing is all over. I note there are now condos at IV listed in the 170s and 180s (I know they are the bottom end in desireability, but still). Heck, not just IV, but all of Lake Tahoe. By the time this market meltdown is over and all the smoke and mirrors have cleared, Lake Tahoe houses are going to be worth hundreds of millions of dollars less than they were at the height of the bubble. Now a lot of the delusional sellers may not acknowledge this, but it is true nevertheless.

  6. smarten

    I agree w/your comments EBM –

    Here’s another one for your consideration – 889 Tyner [just up the street from 996 Tyner (which RI brought to everyone’s attention several days ago)]. 889 Tyner is scheduled for trustee’s sale on April 8. The amount owed to the foreclosing lender [according to the NOS] is about $1.052M. But based upon 996 Tyner’s current $355K asking price [996 Tyner is newer and larger than 889 Tyner], at what price do you think 899 Tyner will have to come back on at as a REO?

    IMO the stuff we’re seeing coming back from foreclosure in Incline Village is by-and-large not particularly “nice” [although there are a couple of nice ones in the NOD pipeline], but assuming the foreclosing lender for 889 Tyner relied upon a 80% LTV fmv of $1.262M, you’re looking at a potential haircut of roughly 72%!

  7. MeeksPeaks

    I totally concur with EBM and Smarten about Tahoe values. I am more familiar with the West Shore and from Homewood to Meeks Bay to Rubicon the “value” on a per sq. ft. basis is down about 20% from what it once was. You can purchase about 20% more house today for the same money it would have cost you in 2006. This does not show up the sales data, such as median price, but it absolutely is the case.

  8. billddrummer

    On 500 Lakeside–

    The owner purchased both units simultaneously, so there was no problem with him tearing out the common wall.

    Here’s something that may hurt jumbo mortgage originations–Thornburg Mortgage will file BK and shut down.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=aGlYd.Vsh._g&refer=home

    If you recall, Thornburg used to be one of the largest originators of jumbo mortgages in the US.

  9. Sully

    Thornburg also was THE blue chip in mortgage related stocks to own.

    Here you have a company that did everything right, wore a bullet proof vest, detailed all loans, etc. – but got caught in the dominoes collaspe when they were not able to keep their credit going.

    On the other hand, Goldman Sachs comes out smellng like a rose – when they were the biggest gamblers in the game.

    Just had to vent that, I realize no one cares….. 🙂

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