I was with a RE agent to look at a couple of repos to see about flipping.
On the way back she wanted to show me one that she looked at last winter, but did do anything about. It was still on the market.
However, in the meantime the bank had a bunch of work done and up the priced.
And it is the FEDERAL NATIONAL MORTG ASSOC and a local bank.
Mostly what they did was cosmetic – paint and new carpet. But they put in a first floor laundry area and they cut a hole through the dinning room wall to the deck. Before to get to the deck you had to either go out the front and around to out the walkout basement and up the deck stairs.
But they left the pink tub and toilet.
And later, after talking to several listing agents for different banks, she told me that the banks are not wanting to deal right now. And they are hard to work with. All of them that we looked at where large national banks. BofA, Watchovia (sp?), Nationwide Mortgage, etc.
This is the Kansas City area.
Replies
and the point of this discussion is......?
There has been a lot of discussion in the past about buying and fixing up property to resell (or rent).Just a mention of something different happening in that area.
Maybe I am just too tired to make sense of it but I really cant find the point of your original post. I understand it relates to the earlier discussions of flipping real estate but what is the "something different" you are trying to point out?
Perhaps they're just trying to hide the weenie? Lenders are walking on egg shells these days as the number of RE listings grow and non-performing loans start to pile up on the books. These short sales and fix-ups may be their way of trying to keep the growing problem off the radar screen.In some markets like Phoenix and Las Vegas there is already blood in the water, and that is the last thing banks want - buyers willing to wait for prices to bottom out.
There is probably some of that going on.But in Kansas City, in general, the market has had slow positive growth. I am guessing 3-8% per year.Not that all are like that. In fact I live in a high growth rate area (but I don't have any specs on the rate), just a couple of miles a way. But I am on a lake.And those 3 house that I have mentioned I believe would be on the lower end of the growth rates (assuming normal maintance conditions).
One point in this discussion is that I can't get my contractor to come over and give me a bid because he is now up to his eyeballs in re-model work for Washington Mutual and BofA. They are getting into the business of fixing up thier repos instead of just selling them at auction. My GC says it good steady work and pays better than I do.
Experienced, but still dangerous!
Bill, I just had two separate conversations with two differerent real estate agents this past week about REOs. Amazingly, each had opinions about dealing with the bank that were 180 degrees from one another. One said that that banks were very easy and open to work with right now and the other said that the banks were in a holding pattern and using their deep pockets to get better prices on their stuff.
So, I think perhaps, the realtor's past experience might be more important in the equation than the bank's.
Two weeks ago, I was discussing real estate and foreclosures with my CPA. He relayed the following: He and another guy were approaching the bank ten days before the end of the quarter and offering to purchase something in five days. Their strategy was to hopefully find some Loss Mitigation Officer that was deparate to hit his numbers for the quarter. He told me that they were able to negotiate three decent short sales, and that they even included some repairs that "the bank" did. After discussing the deals, he admitted that he thinks he aggravated the officer by requesting that the repairs be done, then making an extremely low offer after the repairs.
In that case, I think he was being too greedy, grabbing 2k worth of repairs while getting the houses 25 and 30k undermarket.
A friend just lent me a book by Thomas Lucifier. It was an excellent read that dealt strictly with the foreclosure market. http://thomaslucier.com/
blue
She told me that the listing agents that she talked to said that they only have email contact with the banks and get back yes or no answers so it is hard to negotiate.Much different that being able to go to a local bank.However, in the case of the orginal house that we went to look at (and there is one across the street) they have only been on the market 2 months and 3 weeks respectfully.Also I noticed something interesting. MO is a Dead of Trust state. I first notice the Winterized and No Treaspassing sign on the one house back in Dec. Then the court house records show activity in April with transfer of mortgage and transfer of the name trustee. Then in May the actual foreclosure deed was recorded.The one across the street has a March date on the winterization notice and the foreclosure deed was recorded the middle of June.So it appears that the banks take physical prossesion to protect the properties long before they get legal prossesion.
http://imis.usfn.org/
Heres a site that supplies information to the industry.
I did some quick research about MO and found a chart that said the average foreclosure timeline in MO would be about 3 months. The fact that it is a deed of trust doesn't really mean that much. Your state is a non-judicial foreclosure process the same as Michigan.
According to Lucier, many homeowners abandon their houses early in the game. Perhaps yours was abandoned. If abandoned, the bank has the right to step in and protect their property. I think they need to show that the house was abandoned for a period of thirty consecutive days.
blue
Thomas Lucifier <=> http://thomaslucier.com/
Freudian slip!
splat
It has tightened up here also over the last year or so. And occasionally a bank will allow a realtor to talk them into doing a few upgrades to "help sell the unit". It usually winds up being a half baked job that rarely allows them to get the invested money back out of.
In our area they have so many I think they are hoping to make it a profit center. Or at least a lose as little as possible center. But most investors I know just wait and sooner or later they soften up after holding it to long. Or a new investor buys it too high, rehabs and it sits on the market because he can't sell it cheap enough to move it in a slowed down market. And I did understand the point of the post. DanT
FWIW, I recently inspected a repo being sold by one of the mortgage backers (FHA, perhaps) which had some new stuff - toilet, sink, a few other things
very unusual, given the typical condition of their stocj for sale.
"stocj"Typo for stock or ???
I've looked at many bank foreclosures and none have had any remodeling.
The bank will pay someone to "secure" the house and this means placing plywood over a broken window, changing the locks, fixing a leaking roof, etc.
Always "just the bare minimum".
And the bank will pay to "winterize" the home.
Something I've seen that's puzzling is watching a bank lose money on a repo because they won't spend the coin to just CLEAN IT.
Would it really cost that much to send someone in the house for a day with a scoop shovel and a box of contractors heavy duty trash bags?
Wouldn't the house show better if you cleaned out the used tampons, cases of cheap beer, and dog turds as big as beer cans?
Is $200 too much too invest in a $100,000 property?
How much money have they lost time after time by refusing to even shampoo a filthy carpet in an otherwise "decent" house.
I know there are bank loan officers or former lenders who read this message board and I wish they would comment.
Do the banks wrongly assume their real estate agent is going to "take care of it"?
Do the banks even know how trashed out these homes are and how poorly these homes show?
^^^^^^
S N A F U (Situation Normal: All Fouled Up)
The orginal house that we looked at was clean. In fact very clean.But the one across the street, which had only been foreclosed on 3 weeks ago was a mess. EVen had some change on the counter top.I don't know how long the RE has had it listed.
>Something I've seen that's puzzling is watching a bank lose money on a repo because they won't spend the coin to just CLEAN IT.
Not just banks.
I was visiting a new neighbor down the road, and he invited me in to check out the house. He pointed to the walls & ceiling and said how he was surprised it only took one coat of paint to cover the blood spatter from where the previous owner had blown his brains out.
Seems like his relatives, who made numerous trips in & out to remove valuables, or the realtor would have thought to do some minimal cleanup to keep potential buyers from freaking out.
My new neighbor got a really good deal on it. . .
Don
I've seen a couple of smaller banks and realtors attempt the flip business - without much success. My observation is that some higher-up decides a limited fixer-upper flip is the way to go, after all, the TV is full of shows about people making a killing doing this.They delegate it to an underling who has zero vested interest in the outcome, no bonus, no big payout, just one more thing on their 'to do' list but it could be fun.
This person is given a limited budget and not much direction so they do what they think is right. The underling doesn't know exactly what to do, doesn't know how to qualify or hire an appropriate sub & doesn't know how to manage an upgrade or remodel job. With the limited budget the sub goes in and does some work but can't begin to address all the issues. The budget runs out and the bank or realtor is left with a half-azz remodel that looks incomplete but they think they can play hardball with the price because they've cut out the middle man, had some work done, and are fliping it themselves - and they've got the higher-up convinced it was worth it.
I've seen it a few times locally but no one's rushing back to do it again.
-Norm
I thought there were some legal issues w banks repo'ing property, making improvements, and then selling them?
I can understand that they have a right to foreclose and sell to recover their investment, but if they can make improvements to foreclosed property as they see fit, what is stopping them from say, increasing the sqr footage, or even tearing down and building a blow up, ect. This is not to say they shouldn't get the carpet cleaned and windows washed.
I don't feel though they should ( or are even legally allowed to) have as an incentive to foreclose some type of windfall.
H
Actually they don't "take" the property.What happens is that they "buy it".They have to advertise it. Then it is sold on the court house steps.99% (I am guessing) the holder of the first mortgage, or in some case a 2nd with larger outstanding balance, will bid the outstanding amount of their outstanding loan.If no one else bids higher then they get it.At that point they own it and can do with it what they want (except in some states I think that there is a redemption period).And I don't see where there is any problem with this. They can't foreclose until after a certain number of payments have been missed and the owner is well notified that it is going to be foreclosed on.And in most cases they really are not in a position to make any real money on it. And they are really not in the realestate or construction business. The best that I can tell looking at the record is that they orginally tried to sell it for slightly less than what they "paid" at auction. Now it has been increased about $10,000. I am guess that is only a little more than what they have invested in the fix ups. And by the time that is negtiated and the RE agents comission is paid, etc they will be lossing cash money, not to mention time value.
I don't feel though they should ( or are even legally allowed to) have as an incentive to foreclose some type of windfall.
It is my understanding that they are not allowed to profit from a foreclosure (federal law).
blue
"It is my understanding that they are not allowed to profit from a foreclosure (federal law)."They can't from the foreclosure. One step that I forgot in the foreclosure is that if an amount of the bid is more than the amount due on the first mortage then the exess goes to the next lienholders and any excess goes to the HO.The mortage holder can't make anymore than what they are due from the foreclosure.However, after the forcloser, if they are the suggessful bidder, then the own the property and can make any amount that the market allows on the following sale.
However, after the forcloser, if they are the suggessful bidder, then the own the property and can make any amount that the market allows on the following sale.
Thats correct.
The first time is a forclosure sale . The second one is a bank sale .
However they are allowed all costs against said property in the first sale .
Tim
And later, after talking to several listing agents for different banks, she told me that the banks are not wanting to deal right now. And they are hard to work with. All of them that we looked at where large national banks. BofA, Watchovia (sp?), Nationwide Mortgage, etc.
Properties have had a big increase because of the lower interrest rates. When that happened over a period of time labor shot up ,materials , land and lots, and of course the price of homes. Everyone was on the gold rush trail to secure their home for the cheapest rate.
The lending industry has now in inventory a bunch of cheap loans . They are making there way back by higher interest rates but the problem they are having with the homes they are getting back is esculated prices from the past . See the problem? They loaned a high price for it in the beginning . They arent getting homes back theyve had for a number of years . They are getting the newbies back like first time home buyers in the past year or so. Backum up three years ! All those houses sold high becuse of the situation.
Now here we are today. 30 percent higher fuel prices across the board than a year ago effects all fuel including electricty. I think interrest rates have climbed from 5 to 8 percent . [havent checked lately] . Every thing we are buying that was shipped by truck is seeing the higher rates too. Weve have never regained the manufactoring crunch. Its still present .
So every time interrest goes up all this happens to a degree . The bottom is fixing to fall out and its prediction is comming true by the back up in lumber sales . When the demand for houses is met at these prices they will stagnate. That process has started .
The bank wants to sell those repos for the same price they loaned them in a high market. Trouble is we are having to borrow @ 8 percent , not 5 percent . Somthing has to give and it will. We are fixing to enter a recession if we are lucky at best . This may be big bertha and be our next depression.
They will hold the houses for a while and then they will start comming down . If they wait too long they will be falling .
If you forget every thing I said , remember this ;
The only way to buy a repo with high interest rates is dirt floor cheap. Let them suck on them for a while . However just like a crappie spawn, when it happens , be there . There will be repos in the near future that will take at least 40 percent hits on loss and not have enough takers. It will probably be 10 percent interrest rates by then and selling will be rough as h^ll. Its going to get bad. Save your money.
Rents will go sky high on a depressed selling market.
Tim
Ive never done this but to make my post complete above Ill share an email but wont reveal who sent it . Its a simple questin I would have probably been asked anyway.
"Hey Tim -- can you explain this please?>> Rents will go sky high on a depressed selling market.
The answer is in the post I made above but to simplify it :
First you have the purchase price of a home to qualify someone to borrow the money from a lender. Then they must survive a credit check which will reveal their credit score . When they are paying higher every thing else in say the last year it hits the fan so to speak. After the fan sheds it out comes the credit score and their ratios to repay the loan considering their debt load against their W2. At that time its gets real . Heres somthing how it can do in depressed times like these :
They never figgured it but their raise in income doesnt match their expenses as they are realitively higher. They have a car or two that is financed at a higher rate . Gasoline is now at 3.00 per gallon. There is an increase in cost of the payment even from principle because the auto makers took an increase too with cheaper finance rates.Now the purchase price stands with the interrest being raised . . Food got a lot higher with the increase of trucking expense and the truckers are making more too .
Now we have a 150,000 dollar house thats still holding the increase that was 105,000 one year ago which reflects 30 percent . Instead of 5 percent its now say 8 interrest on mortgage .
105,000 @ 15 yrs, @ 5 percent one year ago = 830.33 per month
150,000 @ 15 yrs @ 8 percent today =1433.48 per month
For the same house a year apart .
Since everyone that could borrow money bought a house the last few years the rental market has been stale and could not take an increase of any size till now . Now a house renting for 600 per month is a better deal because the figgures above stink from last year . The option will be to rent instead of buy to many until the rental price becomes reflective with the current market . As you can see right now it isnt fair but it will swing closer together . Its time now to raise the rent to 800 per month in this senario because the 600 has been there for 3 years. The rent will climb and the prices of new will get soft until they match.
Tim