A friend of mine asked my to check out his next door neighbor’s house. There was some sort of notice tacked to the front door (neighbors don’t pry and go up the steps to read them), and some strangers poking around the kitchen. The strangers turned out to be the new owners. Completely under the radar of those living in the area, the property worked its way up from NOD to NOS to a sale on the courthouse steps.
This particular house is rather odd. 1997 purchase, no refis or HELOCs, and never listed for sale. The owner took his underwear and socks and just went quietly into the night, leaving all the rest of his possessions in situ for the successor. The neighbors never had any clue that the property was in distress (a couple of them would have bought it) or that the owner was in any sort of trouble.
So how is your next-door neighbor doing? It doesn’t take just a scorched earth lawn, an unplowed driveway, or the new Yellow Pages still on the curb to identify a distressed property these says. Perfectly ordinary looking homes with petunias and white picket fences are slinking onto the courthouse steps and you would never know it unless you were looking for it.
My own little rarefied piece of dirt has seen this. Of about 62 homes, we have had 2 foreclosures. One was a divorce / business failure, the other was a flip gone tragically wrong. No one (but me) knew anything was going on – all was calm, all was bright. The million dollar log cabin hits the steps next week, over a year after the default. All the neighbors sort of know about this one, but they don’t know that 2 other homeowners that are paying their taxes, shoveling their driveways, paying their HOA dues, and have nerver listed their homes are going to be on the courthouse steps this month.
I’ve learned to ignore a lot of the noise, but it is the quiet that worries me.
Reno Ignoramus
1905 Russell Pointe Cr. in (where else?) Somersett hit the MLS today as a short sale at $420K. This house sold new in 2005 for $736K. There is at least another $80K in landscaping, custom built in shelving, window coverings, flooring upgrades. So, this one is going for 50% off the bubble high, at best.
I believe that this sale will complete the entire cul-de-sac selling for about 50% off. We are no longer talking about individual houses selling in Somersett for 50% off. We are talking about entire streets. Granted, it is a small street, but 50% off the whole street, folks.
Diane’s house in Somersett, dying on the vine at $572K, is rapidly becoming one of the most expensive houses on the MLS in Somersett.
Scarlett
The Cottages at the bottom of Caughlin Ranch is a little enclave of (mostly) older fairly well off folks who downsized from the 5000 sq. ft. albatross after the kids grew up and left home. So surely this nicely maintained and landscaped neighborhood is immune to the downturn, right? All these older folks own free and clear, right? Well, not exactly.
Two NODS have been recorded on houses in the Cottages in the last 3 weeks………..
Riley
It is anecdotes like these that cause me pause whenever anybody says the market has bottomed. Yea, Smithridge condos have probably bottomed at $40K. But anybody who suggests that the market above $300K has bottomed needs to step back from the bong.
billddrummer
To RI,
It’s the bank’s fault that Diane’s home is listed for $572K. But this just illustrates something I’ve commented on before–to me, if a lending institution wants to get out of property management, the way to do it is to price the property to sell fast and take your lumps on the writedown.
Apparently, it’s more important to promote the ‘illusion’ of a vibrant market by keeping listing prices as high as possible, than to clear out the repossessed inventory.
As Steely Dan wrote–“There are things that pass for knowledge I don’t understand”
InclineJJ
I agree with Bill Drummer, The Bank should have taken Diane’s all cash offer and ran with it..
smarten
I respectfully disagree with billdrummer and IJJ [I agree that from a business point of view, the “bank” (whoever that may be) should have taken Diane’s short sale offer. But sometimes it just can’t].
Diane told us there’s a first AND second against her Somersett home and the two lenders are not one in the same. It doesn’t matter what the holder of the first is willing to take in a short sale IF the holder of the second doesn’t similarly agree. Here we don’t know if the problem was the holder of the first or second or both? Or was it the problem of the RE agents [with their commissions, there may have not been enough money in the purchase price pot]?
Or recently I have learned there are third party facilitators many RE agents are using to negotiate with all involved to bring about a successful short sale. Since they too demand compensation, perhaps in this case the problem was the fee such person, if applicable, may have been asking?
Or maybe it was Diane’s HOA which would not allow a short sale to be consummated without the new purchaser assuming Diane’s indebtedness?
Or maybe it was Diane’s fault because she wouldn’t [or couldn’t] come up with the $75K shortfall in consideration of a complete release from liability?
For whatever the reasons, in Diane’s case all involved couldn’t come to an agreement for a successful short sale to take place. Was it a mistake? It certainly looks that way from a business point of view. But sometimes we’d rather cut off our noses to spite our faces and that may be what has taken place in this instance.
bob c
knowledge: the economy is so bad we need
artificially low interest rates and
increased spending to stimulate our
way out of this mess
what i don’t understand:
why the medicine seems to be what
created the problem
CommercialLender
Many of you follow http://www.calculatedriskblog.com/
already. See today’s articles, scroll to “Modification Horror Stories”.
Here, a commission-centric wager earner (SFR mortgage broker, ironically) can’t qualify for a permanent modification from the bank because they perceive him to be able at some future point to make money again (!), therefore he needs to remain on the temporary mod plan and have unpaid amounts tacked on to his UPB and poor credit scores as a result.
I am making no opinions as to this particular guy, and I have no sympathy for anyone who makes their living in this business and gets caught in it, but the story is intriguing in several ways:
* shadow inventory is partially explained. Banks are messing around with trial and perm mods instead of foreclosing, short selling, and selling their REO inventory.
* yet another government half-baked idea supposedly to fix this mess is now proven to both prolong the mess and make the situation worse. whodathunk?
* the trial periods were extended, then extended again. Hmmm, just like the tax credit, Fannie and Freddie’s limits, Fed MBS purchases, et.al. These extensions are not helping, but prolonging inevitable pain.
* finally, the banks still seemingly think they have leverage by holding the mortgages. In fact, they are dealing with people who in many cases have no more cash, are not making anywhere near the money they used to make, and emotially may be at the end of their ropes who might previously want to work it out with the bank but now think ‘screw it, give back the house’. I submit the banks have much less leverage than they think. Again, not that I’m taking sides or want to see too many mortgage brokers get bailed out by shareholders and taxpayers, but the banks have not gotten the memo it seems.
billddrummer
To smarten,
All good points, and illustrative of the number of seemingly intractable problems attendant to what should be a relatively simple process.
Thanks for pointing out the existence of two lenders (I’d forgotten), and for naming some of the other players in the deal.
Nothing is free, that’s for sure. And with lenders, mod specialists, RE agents and facilitators at the table with the borrower and lender(s), coming to an agreement seems to be much harder than I thought.
As many of you know, I attempted a short sale on my house before the NOD was filed, but no one at the bank was interested in pursuing it. And I also had a 2nd held by a different lender. None of them could agree on anything, so I let the house go back to the 1st mortgage holder and negotiated a separate note with the holder of the 2nd.
Perhaps I should have considered my own experience before firing off my first response. At any rate, thanks for your reasoned rejoinder.
I’m smarter because of it.
billddrummer
And To CL,
I agree with you 100%. I think banks are dragging their feet recognizing losses because management is in denial about what’s really happening in the trenches–people are fed up, tired out, at the end of their collective ropes, and don’t care a whit about the underwriter in an anonymous loan mod department in Phoenix, or Dallas, or Detroit. I believe most people who are delinquent on an underwater mortgage will do the economically rational thing and walk away before their credit is trashed, and find another place to live.
Now, if a person is current on an underwater mortgage, that’s a different situation altogether. That’s when the intangibles of owning a home (neighborhood, schools, friends/neighbors, liking the house) may trump the eoconomic rationality of walking. In the financial long run, you’re still probably better off walking, but if your kids have friends across the street, the schools are ok, your neighbors like you (and you like them), and you like your house, then it’s more likely you will stay and pay than leave.
I realize this is off topic, but I think we’ve been mixing the thought processes of those who are delinquent and underwater, and those who are current yet underwater. The distinction is vast, in my opinion.
smarten
FWIW, today I received an e-mail from a Bay Area couple I know that states, “despite all odds against my short sale opportunity, my persistence has paid off and as of today, I’m in escrow with two (2) lienholders, plus, a PMI company all reaching written agreement that they have accepted my longstanding short sale contract [to purchase a Truckee second/vacation SFR] and closing is expected 1/29/10. I’m working with a loan officer [who states he’s]…never met anyone who has [actually] closed a short sale.”
Why the post? There are STILL buyers out there for Tahoe second/vacation homes, and some of the persistent ones are actually successful with their short sale offers! This couple owns a home in the Bay Area [with a mortgage] they will continue to occupy as their primary residence, and they’ve apparently qualified for a purchase money mortgage to assist with the financing of their second home purchase.
Again, FWIW.
Marion Vermazen
So where should one watch to see what is coming up on the court house steps? We have friends who just bought a house and then a month later the house across the street bigger and apparently in good shape sold for much less on the court house steps.