Local Media Misdirects Massive Foreclosure Freak Out

Foreclosure-tracking company RealtyTrac released their third quarter report yesterday, which included a ranking of major metro areas around the country by their respective rates of increase in foreclosure activity compared to the third quarter of 2009.

With a 71% year-over-year increase in RealtyTrac’s report, the Seattle area ranked #1 as the metro where foreclosures increased the fastest. Obviously, this sent the local media into a frenzy, running stories with startling headlines like these:

Of course, as any regular reader of Seattle Bubble is no doubt aware, RealtyTrac’s eye-popping headline number leaves out an important piece of the puzzle: SB 5810.

SB 5810 is a law that was passed by the Washington State Legislator in April 2009 that basically added some additional red tape and an extra 30 days to the process that banks must follow when repossessing a home through foreclosure.

As we discussed at the time, the result of SB 5810 was a massive spike in foreclosures in the first half of 2009 as banks rushed to “beat the clock,” then a subsequent lull in the third and fourth quarter as the local foreclosure pipeline slowly filled back up.

Here’s a quarter-by-quarter chart of Seattle-area foreclosures that I produce for Sound Housing Quarterly that graphically illustrates the effect of SB 5810.

King / Snohomish / Pierce Notices of Trustee Sale

Comparing the third quarter 2010 to the third quarter 2009 is obviously going to give you a distorted view of what is really happening with foreclosures. While they are clearly on the rise here in Seattle, the true increase is nowhere near as dramatic as RealtyTrac’s report implies.

There was one local news outlet that avoided the urge to turn RealtyTrac’s data into an attention-grabbing—but misleading—headline. KUOW (94.9 FM) contacted me yesterday morning to get my take on the data, and allowed me to explain the effect of SB 5810 on the year-over-year numbers on the air.

Here’s the audio from my appearance yesterday on KUOW’s “The Conversation”:

KIRO 7 TV also contacted me yesterday morning, and I provided a concise explanation of the effects of last year’s legislation in a pre-recorded session for them, but they cut that part out and focused on the sensationalism instead. *sigh*

Here’s KIRO 7’s clip from last night’s 6:30 “Eyewitness News”:

[Update: KIRO filed a DMCA takedown notice on the video. Classy. I’ve filed a counter-notice that gives them 14 days to either sue me or YouTube puts the clip back up. In the meantime, enjoy this clip instead.]

[Update 2: The original video is back up on YouTube. Thankfully it appears that KIRO has decided not to sue me for giving them free material followed by free promotion. Thanks, KIRO!]

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

87 comments:

  1. 1

    Just about any time you have a working understanding of a topic that is in the news, the reporting on the topic is misguided and incomplete. It makes you wonder how you can rely on any reporting.

    BTW, KPLU’s (another NPR station) reporting wasn’t much better, but I didn’t quite catch what they said in one sentence, so they may have made a slight reference to the statutory effect.

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  2. 2

    Interesting post Tim. It is always good to get an expert’s insight and a little historical perspective on an issue as important as this. Unfortunately, today’s media is first and foremost a for profit business operation instead of a public service that provides timely, accurate, and objective reporting of issues. As a result, we get stuck with this sensationalist spin on important issues because unfortunately sensationalism sells.

    Anyways, thanks for the insight. I was unaware of SB 5810 and it really does put this jump in foreclosures into perspective.

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  3. 3
    Tim's Dog says:

    That’s funny. It’s obvious that you’re just about to say “but…” and they cut you off.

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  4. 4
    Lurker says:

    Heard you on the radio yesterday on the way home from work Tim!

    Don’t worry, next year when spring/summer YOY volume skyrockets, our local media will make up for this horrible piece of reporting.

    Regardless though, ‘Seattle was late to the game, all time high foreclosures and prices are dropping’ pretty much sums up what people need to hear.

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  5. 5

    RE: Miami Foreclosure Defense Attorney @ 2 – Another part of the problem is they typically do things on such short deadlines that they don’t have the time to get the details. Blame the 24 hour news cycle for that.

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  6. 6

    RE: Kary L. Krismer @ 5 – Good point Kary.

    Thanks again for the post, Tim. I shared it on my Twitter account.

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  7. 7
    David Losh says:

    Kelman really owes you a lot. I said $240K to start, but your media presence is stellar.

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  8. 8
    David Losh says:

    RE: Miami Foreclosure Defense Attorney @ 6

    That’s nice, but more to the point are the number of people who exploited the Hispanic population. As an attorney, how do you feel about Fair Housing, Preditory Lending, and do you have a class action lawsuit against your local banks to recoup all of the money your clients gave to the banks? Just wondering if you are a part of the problem or pro actively attacking the root cause of the problem.

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  9. 9

    I Read the Blogs and Checked Out the KIRO News Story

    http://www.kirotv.com/news/25556826/detail.html

    The victim of a foreclosure on the news URL above gave an interesting take too, the state isn’t giving litigation a chance in her opinion.

    IMO, the Seattle City limit unemployment rate [much higher than the Metro unemployment rate they quote] and high priced real estate no one can afford really caused this mess. Also, did the Seattle Metro area unemployed get 99 weeks unemployment benefits with extentions….I’d guess “Not”. Meaning, a lower unemployment rate is IMO bad. It means their unemployment ran out and now they’re like sponging off relatives [not counted anymore].

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  10. 10

    RE: David Losh @ 8 – Great questions David. I am not currently participating in a class action lawsuit in South Florida against banks that operate here. As for Fair Housing, predatory lending, and how this impacts the Hispanic community of South Florida…I think that could make for an interesting post on my blog. I’ll give it some thought and try and get something up next week. I’ll circle back here and let you know when I do.

    To quickly address your final sentence, I do not feel that I’m part of the problem and I am trying to do all I can to help South Florida homeowners.

    Have a great rest of the day and a Happy Halloween everyone!

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  11. 11
    robotslave says:

    It’s a particular pet peeve of mine, too, when a rate of change is reported rather than, and not in addition to, the underlying value (it annoys me particularly in drug/health/medical reportage).

    If I’m reading the report correctly, Seattle’s foreclosure rate is just slightly above the national (non-metro) average. Foreclosure in Seattle+Tacoma+Unspecified is no more “epidemic” than it is in America as a whole, but you have to pry that tidbit out of the RealtyTrac report with your fingernails.

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  12. 12

    RE: robotslave @ 11 – I hate rate of change without referencing whether it’s to the prior year or prior month.

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  13. 13
    redmondjp says:

    Hey Tim, have you been sleeping in your office again? ;<)

    Residential foreclosures are one thing and we've definitely not out of the woods there, but the slumbering giant in the room is the ticking time bomb of commercial properties, stay tuned for 2011!

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  14. 14
    Dirty_Renter says:

    By David Losh @ 8:

    RE: Miami Foreclosure Defense Attorney @ 6

    That’s nice, but more to the point are the number of people who exploited the Hispanic population. As an attorney, how do you feel about Fair Housing, Preditory Lending, and do you have a class action lawsuit against your local banks to recoup all of the money your clients gave to the banks? Just wondering if you are a part of the problem or pro actively attacking the root cause of the problem.

    Banksta’s:
    Approve loans: Predators
    Refuse loans: Discriminators, Crushing Small Business

    Foreclose: Sued by AGs, Community Activists, Individuals.
    Don’t Foreclose: Sued by Pimco, Blackrock & NYFed for not servincing loans.

    Banksta’s = BAD

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  15. 15

    The media can’t report it unless they can spin it into something “epidemic”… thanks for your reporting, Tim.

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  16. 16
    CalEngineer says:

    If the foreclosures of Q3 and Q4 last year were pushed to Q1 and Q2, then the “real” foreclosure rate for last year should have looked much steadier, at a higher rate than Q3 and Q4, but at a lower rate than Q1 and Q2. Therefore, I think the graph in your post may actually be deceiving in that sense — that, of course, the RealtyTrac numbers are blown out of proportion, but the overall foreclosure rate last year pales in comparison to this year’s rate, as well (That may be a slight exaggeration).

    Would you agree with this assessment?

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  17. 17

    RE: CalEngineer @ 16 – This is a link to something I wrote over a year ago, which The Tim linked in his “as we discussed at the time” link above.

    http://blog.seattlepi.com/realestate/archives/175792.asp

    It explains in some detail what was probably going on at the time (the peak before the lull).

    But yes, foreclosures are higher this year, but not anywhere near as much higher as suggested by the news reports.

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  18. 18
    patient says:

    That we now are at a level above the ” massive spike” induced by SB 5810 is pretty sensational independent of the YoY percentage increase.

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  19. 19

    Tim, do you have a similar graph for Trustee Deeds, at least for King County? As you know, notices can be deceiving because you can have multiple notices for the same property, and it’s possible that we’ll see some of that shortly due to the foreclosure moratoriums, etc.

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  20. 20
    The Tim says:

    RE: Kary L. Krismer @ 19 – Here you go:

    Of course Trustee Deeds don’t capture all instances where people ultimately lose the house. Deed in Lieu & short sales are effectively the same thing, but aren’t reflected in the raw # of Trustee Deeds.

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  21. 21

    RE: The Tim @ 20 – First, thanks!

    Second, I would agree that deed in lieu is largely the same, but short sale has advantages and disadvantages compared to a foreclosure, for both the bank and the borrower. And in theory, if not actual practice, a short sale could occur without a notice of trustee’s sale. (I’m not sure what the typical bank’s current position on that.)

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  22. 22
    LA Relo says:

    I don’t recall, but I’m sure they reported every drop in the foreclosure rate between mid ’09 and early ’10 as a tell tale sign of a bottom in housing.

    Maybe if the 4th quarter YOY change from this quarter’s 71% increase to a 35% increase they’ll report it as a 50% drop in the YOY rate of foreclosures, and therefore unequivocally the bottom in housing.

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  23. 23

    RE: LA Relo @ 22 – Maybe, I don’t recall that. Looking at one site I’m just seeing them being oblivious to a reason:

    http://blog.seattlepi.com/realestatenews/archives/182115.asp
    http://blog.seattlepi.com/realestatenews/archives/178788.asp

    I didn’t see anything on the Time’s site that would suggest anything different.

    That was searching for Realtytrac. Searching for 5810, my blog piece is the only hit on either the P-I or the Times.

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  24. 24
    ray pepper says:

    Tim, you are becoming day in and day out more “Godlike.” Don’t forget about us little guys who are slowly dying at Claim Jumper Southcenter.

    Anyway spent all morning at Pierce County Trustee Sale and up at 7am touring properties. About 50 people at the Couthouse with the usual “fair-like” tone of 300+ properties. Two guys from the investor groups bought their own homes back that I observed. This has become common place week after week. All 3 of my interested properties were POSTPONED again…DANG IT! So I just stuck around and watched two homes sell basically 60% off their sales price in 2006. The Buyers were very happy to say the least.

    There were 6 interested parties in the listing I wanted in Gig Harbor on 5 acres. We all began to crowd the table and I knew I didn’t have a chance but since I paid the 6.00 parking I figured I would wait. I had my # in mind but alas………………..POSTPONED………One of these days……………..I predict late 2011 I will finally nail my bid in the Harbor because after all…………..as we know……………they are ALL coming back….

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  25. 25
    The Other Ben says:

    By LA Relo @ 22:

    I don’t recall, but I’m sure they reported every drop in the foreclosure rate between mid ’09 and early ’10 as a tell tale sign of a bottom in housing.

    Maybe if the 4th quarter YOY change from this quarter’s 71% increase to a 35% increase they’ll report it as a 50% drop in the YOY rate of foreclosures, and therefore unequivocally the bottom in housing.

    I don’t even understand what kind of misunderstanding could lead to the phrase “new evidence that our housing market may have hit bottom” concerning a 71% yoy increase in foreclosures…

    I think they might actually think that “hit bottom” means “OMG it’s terrible”.

    People are idiots. :(

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  26. 26
    Lake Hills Renter says:

    “contacted me yesterday morning to get my take on the data”

    Get a haircut, hippie.

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  27. 27
    Lurker says:

    RE: patient @ 18

    That’s pretty much what I was thinking.

    Just step back and look at the upwards trend we are getting with NoTS. I feel that the price drops we are having around here are only going to help help continue that trend.

    2010 could be the year of the short sale while 2011 could be the year of REO sales.

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  28. 28

    RE: Lurker @ 27 – If you look at Ray’s post it might be the year of the flipper, or the SFR investor landlord.

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  29. 29
    David Losh says:

    RE: Miami Foreclosure Defense Attorney @ 10

    In my opinion, and it’s just an opinion, the places of the highest foreclosure rate are also concentrated in heavily Hispanic neighborhoods. I at one point sat at my desk and felt like a loss mitigator for the number of people of Hispanic decent called, or were referred to me with problem loans, and properties.

    Even our immigration attorney had two of the worst loans I had ever seen. We corrected his final purchase loan, which he turned around and refied on the recommendation of a loan originator. We can’t fix this one, but fortunately he now makes more money than most.

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  30. 30
    Gern Blanskyn says:

    Question : At what point does the lender collect on the mortage insurance when loans are in default? And what are the implications with regard to the increasing forclosures?

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  31. 31

    RE: Gern Blanskyn @ 30 – I think it varies by the type of loan, but from what I’ve heard the existence of such insurance can affect the processing of short sales.

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  32. 32
    The Tim says:

    RE: Kary L. Krismer @ 21 – I just meant that short sales have the same basic outcome for the former homeowner as a foreclosure or deed in lieu: they lose the house and get zero equity.

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  33. 33
    sp6859ch says:

    How many were sold to third parties today Ray? RE: ray pepper @ 24 -

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  34. 34
    ray pepper says:

    RE: sp6859ch @ 33

    as of last check in Pierce and King it looks like 17…They will update later in week.

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  35. 35
    Jonness says:

    By softwarengineer @ 9:

    Also, did the Seattle Metro area unemployed get 99 weeks unemployment benefits with extentions….I’d guess “Not”. Meaning, a lower unemployment rate is IMO bad. It means their unemployment ran out and now they’re like sponging off relatives [not counted anymore].

    As far as I know, Washington claimants get:

    26 weeks of regular UI benefits
    + 20 weeks of Tier 1 EUC
    + 13 weeks of Tier 2 EUC
    + 14 weeks of Tier 3 EUC
    + 6 weeks of Tier 4 EUC
    + 20 weeks of EB
    ————————————
    99 weeks total

    The EUC is only good through Nov 2010 unless the politicians extend the deadline again. Once the deadline hits, I believe you can run out the rest of your EUC tier but not progress to the next. If you exhaust all other benefits prior to Nov 2010, you can draw your 20 weeks of EB up through April 30th, 2011.

    We are on the countdown to Armageddon unless the govt. performs another massive mercy session. Enter Ben Bernanke a couple of days from now and his upcoming announcement the he is going to print like crazy so the govt can afford to stimulate with reckless abandon (if China stops buying our debt, Ben will always be good for a few trillion in Treasuries paid for with magic money created from thin air).

    The stock market will rally like nobody’s business, as all the world celebrates the stay of execution.

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  36. 36
    Jonness says:

    71% is 71% no matter how you slice it. The fact is, market prices are heavily influenced by cheap foreclosures forcing homeowners to compete with ever lower prices. We’ve seen years of phony prices propped up by massive govt stimulus, foreclosure moratoriums, et al, while RE agents claim “Now is a good time to buy” or “Nobody knows whether prices will go up or down.” Well, Tim Ellis knew, I knew, Ray Pepper knew, and numerous other knew that prices would go down, and we’ve been warning for years that despite unprecedented support, the overall trend will continue to be down for as far as the eye can see.

    So let’s get in reality. No not Realty as in real estate sales with enormous 6% profits on each and every sale, reality as in what’s true and separates fact from biased opinion aimed at selling overpriced junk to economic newbies in order to line our own pocket-books. Puget Sound prices are plunging. The only thing that nobody is certain of is where all the money and jobs are going to come from that will stop Seattle house prices from continuing to plummet off the edge of a cliff. The closest thing anybody can come to explaining it is that Bernanke will print so much money that we go into hyper-inflation. But that opinion bodes well in the future and says very little about the enormous risks involved when buying into today’s market that is clearly overpriced compared to historical fundamentals and is currently collapsing at a rate of 6% per month.

    Do NOT listen to your RE agent unless that person foresaw the bubble and warned his/her clients not to purchase of a home until the coast was clear. Fail to heed this warning at your own peril.

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  37. 37
    Jonness says:

    By ray pepper @ 24:

    I predict late 2011 I will finally nail my bid in the Harbor.

    The Gods are shining on you, Angel Pepper, by keeping this thing off the auctioneer’s lips. Every time it comes to auction and fails to fly, it’s worth less than the previous time.

    The nuclear winter is upon us. :)

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  38. 38
    Macro Investor says:

    By Jonness @ 36:

    71% is 71% no matter how you slice it. The fact is, market prices are heavily influenced by cheap foreclosures forcing homeowners to compete with ever lower prices. We’ve seen years of phony prices propped up by massive govt stimulus, foreclosure moratoriums, et al, while RE agents claim “Now is a good time to buy” or “Nobody knows whether prices will go up or down.” Well, Tim Ellis knew, I knew, Ray Pepper knew, and numerous other knew that prices would go down, and we’ve been warning for years that despite unprecedented support, the overall trend will continue to be down for as far as the eye can see.

    So let’s get in reality. No not Realty as in real estate sales with enormous 6% profits on each and every sale, reality as in what’s true and separates fact from biased opinion aimed at selling overpriced junk to economic newbies in order to line our own pocket-books. Puget Sound prices are plunging. The only thing that nobody is certain of is where all the money and jobs are going to come from that will stop Seattle house prices from continuing to plummet off the edge of a cliff. The closest thing anybody can come to explaining it is that Bernanke will print so much money that we go into hyper-inflation. But that opinion bodes well in the future and says very little about the enormous risks involved when buying into today’s market that is clearly overpriced compared to historical fundamentals and is currently collapsing at a rate of 6% per month.

    Do NOT listen to your RE agent unless that person foresaw the bubble and warned his/her clients not to purchase of a home until the coast was clear. Fail to heed this warning at your own peril.

    Joness, jobs aren’t coming back from China. And as soon as real estate stabilizes, interest rates will go back up and clobber the market back down again. This is the long haul.

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  39. 39
    Ross Jordan says:

    By Macro Investor @ 38:

    By Jonness @ 36:
    71% is 71% no matter how you slice it. The fact is, market prices are heavily influenced by cheap foreclosures forcing homeowners to compete with ever lower prices. We’ve seen years of phony prices propped up by massive govt stimulus, foreclosure moratoriums, et al, while RE agents claim “Now is a good time to buy” or “Nobody knows whether prices will go up or down.” Well, Tim Ellis knew, I knew, Ray Pepper knew, and numerous other knew that prices would go down, and we’ve been warning for years that despite unprecedented support, the overall trend will continue to be down for as far as the eye can see.

    So let’s get in reality. No not Realty as in real estate sales with enormous 6% profits on each and every sale, reality as in what’s true and separates fact from biased opinion aimed at selling overpriced junk to economic newbies in order to line our own pocket-books. Puget Sound prices are plunging. The only thing that nobody is certain of is where all the money and jobs are going to come from that will stop Seattle house prices from continuing to plummet off the edge of a cliff. The closest thing anybody can come to explaining it is that Bernanke will print so much money that we go into hyper-inflation. But that opinion bodes well in the future and says very little about the enormous risks involved when buying into today’s market that is clearly overpriced compared to historical fundamentals and is currently collapsing at a rate of 6% per month.

    Do NOT listen to your RE agent unless that person foresaw the bubble and warned his/her clients not to purchase of a home until the coast was clear. Fail to heed this warning at your own peril.

    Joness, jobs aren’t coming back from China. And as soon as real estate stabilizes, interest rates will go back up and clobber the market back down again. This is the long haul.

    Don’t worry, then the boomers will downgrade and die off and there will be a huge surplus of family homes on the market… err. Yeah, housing doesn’t look too good for at least a decade.

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  40. 40
    Haybaler says:

    RE: ray pepper @ 24 – Ray, Could you clarify a bit about “2 guys from the investor groups bought their own homes back”? Do you mean they played “chicken” with the lenders and paid less at auction than the loan balance? These were investment properties, not personal residences?

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  41. 41
    Cheap South says:

    By Kary L. Krismer @ 28:

    RE: Lurker @ 27 – If you look at Ray’s post it might be the year of the flipper, or the SFR investor landlord.

    At least there is investor interest. In the deep South they can’t even give them away at auction. Complete lack of interest.

    A few weeks ago I was waiting for a friend at a Chase branch. As I was staring at the low 4s interest rates, an employee approached me. I told him I was not interested; but that those rates were amazing. He said: “I could put 0% in there, and nobody would accept the money; people are just not ready to take on debt.”

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  42. 42
    One Eyed Man says:

    RE: Haybaler @ 40

    I don’t know the situation in the two deals Ray mentioned and that’s a possibility. Another is that if there were junior encumbrances against the property that were owed solely by an entity like an LLC or a corp so they could be wiped out without personal liability, and the property is worth more than the loan being foreclosed, the investors will let it go thru foreclosure and buy it at auction to wipe out the junior encumbrances. Remodeled flips and new construction sometimes have mechanics and materialmans liens that weren’t personally guaranteed, and occasionally there will be judgment liens or junior deeds of trust or that weren’t guaranteed either.

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  43. 43

    By Cheap South @ 41:

    By Kary L. Krismer @ 28:
    RE: Lurker @ 27 – If you look at Ray’s post it might be the year of the flipper, or the SFR investor landlord.

    At least there is investor interest. In the deep South they can’t even give them away at auction. Complete lack of interest.

    That was the point I was trying to make. And if you think about it, it makes sense.

    For all the attention the latest median and C-S numbers get here, and all of Ardell’s changes in market call, we’ve been basically flat here since January, 2009. 155 vs. 145 on C-S (or 149 3/09 if you want to deal with C-S 3 month moving average issues) and 382k vs. 380k on NWMLS KCM. If you’re a flipper and you can’t make money in that environment, you’re doing something wrong, most likely picking the wrong price range of your properties.

    I would add that people have short memories. As proof I’ll point to politicians getting re-elected, but in any case we’re now over 18 months past the start of the crisis, and many people whose business is heavily impacted by the economy and have survived have discounted the effect of the overall economy. They might be wrong in that analysis, but they’re at least not sitting for 18 month doing nothing but worrying.

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  44. 44
    Haybaler says:

    RE: One Eyed Man @ 42

    OEM, I can appreciate the power of Foreclosure to wipe out junior indebtedness. Especially when large numbers are involved.

    It seems to me that on “houses” where the dollar amounts aren’t generally large, that the bidder is paying the principal owed on the First AND the unpaid interest payments and the legal costs of getting to the courthouse steps, all to defeat some, generally, small amounts of money.

    The capital requirements to do so are steep…. All cash to cover the sale price, plus some kind of fee or steep interest rates if that cash was borrowed, and then the costs (opportunity cost if it’s personal money) of carrying that purchase money for a period and then the costs of refi out of that into new permanent debt -at best 70% of the new acquisition cost.

    I’d really be interested in some info on how and why a few of these deals are able to be done….Hope Ray will cut loose with some inside info..

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  45. 45
    Blurtman says:

    Will The $426 Billion “Second Lien Monster” Require A New Marshall Plan For Housing? Reuters Special Report On Fraudclosure

    http://www.zerohedge.com/article/will-426-billion-second-lien-monster-require-new-marshall-plan-housing-reuters-special-repor

    “The biggest joke is FASB and CONgress which through Voodoo Accounting is allowing the banks to hold second liens on the books at full value even when the underlying properties have a negative net valuation to the original mortgage and the homeowner is no longer servicing either the primary or secondary liens.”

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  46. 46
    ray pepper says:

    RE: Haybaler @ 44

    Haybaler and Joness..

    1st Joness ..I…. or I should see WE didn’t time everything perfectly. We let alot of homes go about 3 years ago in our LLC’s when Nevada/Az/Calif were crashing. We did know the disease was going to spread however, in nearly every property we bought we He’loc’d the homes and wrapped them with 2nd’s to buy additional properties. When everything began to crash our losses were minimal due to our 2nd’s recouping our initial investments. However for the 8 years prior we did very well buying and selling these homes before they were even built. If we would have done it perfectly we would have dumped everything in 2006 and sat on all the cash. Instead we still have a few that are going back to the bank but due to the 3 years now it seems to take to foreclose we could have hung onto some or all and they would have been HUGE cash cows while waiting their date with destiny. Either way we can only look forward and I find extreme values that will hit the Trustee sales in another year or two.

    Haybaler many people across the nation are buying their homes back at Auction through different parties or LLC’s. Homeowners default, live for free 2-3 years, then either buy at Trustee sale, negotiate with lender while their “tenant” continues to live in the home due to “Obama Tenant Laws”, or they purchase their own home through short sale. However, the short sale buy backs is closely guarded now and the banks are all to aware of whats going on. So the homeowner/investor simply lets it foreclose in general. I have personally known 4 people who have bought back their homes and on Thursday night I met a 5th who is a lender.

    Haybaler you must understand people can save up a tremendous amount of money when they do not make their mtg payment for 2-3 years. A fellow investor (that I have known for 20 years) let his home go in Puyallup (Sunrise I believe) owing well over 340k. He purchased it back right in front of me for 168k. There were no other bidders. He told me he saved nearly 80k by not making his mtg payments for close to 3 years. He used Eastside funding which lends you 75% @ 12% and 4 points. (I know very expensive)…But, since his taxes were escrowed he didn’t even have to pay back taxes at Trustee sale. And get this…he never even moved out of his home. In the end he said it cost:

    He placed 50k down and paid 5k in points and owes now about 170k.
    His payments are about 1200 a month and he secured “alternate” funding. He also has 25k in the bank upon last check. Bash him or applaud him..It doesn’t matter.. Its happening all over the country and it will contiinue happening because they are all coming back one way or another. Through short sale or foreclosure. People will only be stupid for so long..

    However, I’m still waiting on the FED to astound me with their next plan. I think it will be BIG because far too many people will do the same thing.

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  47. 47

    By ray pepper @ 46:

    Haybaler many people across the nation are buying their homes back at Auction through different parties or LLC’s. .

    What you’re describing sounds a lot like the type of thing they made illegal in the Distressed Property law passed in 2007 or 2008.

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  48. 48
    ray pepper says:

    RE: Kary L. Krismer @ 47

    Kary, it will all come out soon. The media is very slow to report what is happening at the Trustee Sales. People are tight lipped. What I see astounds me week after week. But, make no mistake about it, people are doing very very well at The Trustee Sales……..

    For those looking to get an education I suggest you start here:

    http://www.vestus.com/

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  49. 49
    David Losh says:

    RE: ray pepper @ 48

    People need to be very wary of a group like Vestus, or any type of foreclosure auction. Banks are not stupid, don’t get caught up in the hype.

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  50. 50

    By David Losh @ 49:

    RE: ray pepper @ 48

    People need to be very wary of a group like Vestus, or any type of foreclosure auction. Banks are not stupid, don’t get caught up in the hype.

    Not familiar with that one, but I will say don’t assume that just because someone teaches you something, that it is legal.

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  51. 51
    ray pepper says:

    RE: Kary L. Krismer @ 50

    “I will say don’t assume that just because someone teaches you something, that it is legal.”

    Well Yes……Its Buyer due diligence always…Isn’t it? If you do not like Vestus then there is also:

    http://www.mydatasnap.com/about_us.php

    Its great to be well-rounded when your shopping or selling property. These groups are FREE until you buy something then you must pay a 3% commission. Until then you can eat all their food at the meetings and listen and learn.

    Good Luck Hay Baler and all the rest inquiring!

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  52. 52
    David Losh says:

    RE: Kary L. Krismer @ 50

    What they teach you is legal. They lend hard money at 14% with a six month balloon, and the 3% commission for what you buy. What’s happened lately is that buyers at auction can’t resell the property so they have to refinance. Problems with selling, and refinancing are cropping up. The market is in a price decline, so today’s bargain may be fair market value in six months.

    Be careful, Real Estate has a value, and banks are very much in tune with what to sell at auctions, and what to sell REO.

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  53. 53
    ray pepper says:

    RE: David Losh @ 52

    actually 4 points and 12% 9 month term

    If you refi in the 1st 60 they drop it to 2 points.

    If you still have not sold or refi’d then you sit and renegotiate. Nobody I know personally has made it even near 6 months.

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  54. 54
    David Losh says:

    RE: ray pepper @ 53

    I agree, but the margins have been shrinking. People are making less, and less. I did a post about the return on my time, and found that my cleaning company nets me much more than playing with the Real Estate market, especially in foreclosure. We have however done some work for investors that also gives me, I think, a better return.

    Most importantly, in my opinion, anything can set off a collapse that might have me, or any one, holding a property.

    Did I do enough hedging there? Because I do agree that there are rare opportunities today, that we have never seen before.

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  55. 55
    sp6859ch says:

    I have been playing it very safe with the trustees sales i am buying now.. Of course i use all of my cash no loans, and keeping the downside risk to a forced hold netting me over 7% after factoring in vacancy rate, taxes, hoa, ins etc etc.I flipped several in Vegas and now have kept two paid for rentals returning me 10% after vacancy rates taxes etc etc, Green Valley Ranch no brainer…I have seen people get stuck with houses in Vegas all day long. Look at the mls trustee sale properties listed. You can pull up the sale price, figure out their rehab costs time on the market etc etc and now you see a huge percentage of them that are losers. They are overpriced will not appraise and theres maybe 30k profit in these at the lofty prices they are currentlylistet at, that 30k will be sliced to get a deal and maybe more so theres a loss… I see losers out there.. I just sold a fannie mae homepath home last week, it was a steal for my clients at 145k and 5k in costs being paid 1800 sq ft home in Providence master plan i mean immaculate.. ALl the comps say 150k is a no brainer. I called the agent wondering why this home fell out of escrow before, he said appraisal. Low and behold it came in at 130k for the previous buyer and i really thought our offer at 145k was good, of course they always appraise low and the banks lower the prices anyways!!!! That is insane but it has a case number and now that whole neigborhood has a new value.. I have seen people in Ventura County get stuck with properties. Like i say i wouldn’t be playing unless it was with your own cash and just buy as many at a time that you can handle turning into rentals.. Lake Tapps waterfront, Wollochet bay you name it pick your area tax star some high end sales in 06-08 then wait to grab it. If you were a great investor you got away with using leverage during the peak got out and now are conservative

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  56. 56
    GrizzlyBear says:

    By sp6859ch @ 55:

    Like i say i wouldn’t be playing unless it was with your own cash and just buy as many at a time that you can handle turning into rentals.. Lake Tapps waterfront, Wollochet bay you name it pick your area tax star some high end sales in 06-08 then wait to grab it. If you were a great investor you got away with using leverage during the peak got out and now are conservative

    Those homes won’t cash flow at current rental rates (which are bound to fall). I don’t understand how you are making money buying properties which don’t offer positive cash flow. Just because you don’t have a mortgage doesn’t mean you ignore the fundamentals.

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  57. 57

    By David Losh @ 52:

    RE: Kary L. Krismer @ 50

    What they teach you is legal..

    That’s a very bad assumption to make, but plantiff’s attorneys love that type of thinking. When deposed the defendants admit everything, thinking that they’ve done nothing wrong.

    I’ve addressed this before with respect to clock hour courses, and how a lot of information taught agents is typically wrong. Those classes are usually ones where the teacher is representing a product or company–for example a 1031 Exchange facilitator or short sale negotiator. There’s no reason to think that classes in this area taught to non-agents would be any different. In fact, there’s probably less protection in this area (e.g. no Department of Licensing review of the course materials).

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  58. 58

    By GrizzlyBear @ 56:

    By sp6859ch @ 55:
    Like i say i wouldn’t be playing unless it was with your own cash and just buy as many at a time that you can handle turning into rentals.. Lake Tapps waterfront, Wollochet bay you name it pick your area tax star some high end sales in 06-08 then wait to grab it. If you were a great investor you got away with using leverage during the peak got out and now are conservative

    Those homes won’t cash flow at current rental rates (which are bound to fall). I don’t understand how you are making money buying properties which don’t offer positive cash flow. Just because you don’t have a mortgage doesn’t mean you ignore the fundamentals.

    Maybe I’m missing something, but if he’s using cash to buy the property I have a hard time believing that the property won’t cash flow. What property doesn’t rent for it’s tax payment?

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  59. 59
    Haybaler says:

    RE: ray pepper @ 53

    Ray, I don’t understand what you mean by “nobody has made it near six months”. Is that… nobody gets out within 6 months and therefore is stuck paying additional fees? or nobody holds a property for more than 6 months?… I’m dubious about the ability to flip anything quick these days…in any event I think I’d like to sit around your campfire some. when and where are your get togethers?

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  60. 60
    sp6859ch says:

    My post regarding buy as many as you can with the worst case scenario you turn them into rentals means if you got STUCK with a flip, STUCK meaning you were all wrong and the market sqeezed you and you are gonna get hit. Then you take your medicine and rent it for a return albeit small, this is not the goal it is an alternate exit strategy for messing up, and if those funds were your play funds then its back to flippin burgers or whatever your job is, do not run yourself into the ground like a small business owner you make your money when you buy and collect it when you sell!…You are right the homes in Washington i have been looking at do NOT give me the return i would want yet thus i haven’t bought any yet. The rental rates seem capped at around 1800 bucks in the Puyallup South Hill area for whatever i would buy, maybe 2k for a 400k house,for example and they are selling 3000 sq ft homes for 260k. Rent it if you are lucky for 1700 a month take out 250 for taxes 25 association 40 for insurance (rough numbers) you are at 1425 net, then take out a month for vacancyyou are under 1300. And this is best case slice a little more off for good measures and it just doesn’t make sense… Now slice that home price down to 200k.and you are a bit closer. People will still see that 400k house listed at 350 and call a bottom and buy and if i am in it 300k theres 20k in it for me. The fundamental is the bigger fool theory, I flipped as prices went all the way down the last couple years. I never got leveraged and in the beginning the fundamental i was dealing with was others stupidity that home prices couldn’t go down more so they would continue to buy these flips while they ignored or didn’t care or were basically just sheep, who listened to agents, the gov the media etc.I never partnered with anyone sold snake oil i just did it on my own. Remember we kept hitting the proverbial bottom and people kept buying all the way down. The key is buying the home that someone else will want. I would always go back to the trustees sales and buy another one cheaper than the last, the key is getting them flipped in 90 days or less!!. It is so tough even getting into escrow competing to buy these reo homes on the mls that you got multiple offers on the reos in the past,,, not anymore… Some of my investors in Vegas used the logic that if prices go down 8% a year for two more years but they make 8% on there funds they atleast know where there money is and its a push until prices go up. I don’t let my head explode using infation graphs yada yada. But it and unload it..,,, Chasing yield these days in my opinion in the stock market is a joke.. THe gov could do anything at any minute to skew this whole real estatedeal though so i prefer to buy onesy twosy, people looking to the future of Real Estate based on the past are lost. I see prices to continue to go down and me being able to sell homes i get for great deals to people who continually pick the bottom. Meanwhile my home is paid for i am debt free and i have two rentals that pay basically all my bills, i won’t try to TRADE these, so i see the VALUE of home ownership also. I expect the pricing on the homes i own to go down now also but i will always have a roof over my head paid for and my bills covered. I like that stability.. I explained on my last post how tricky this is and i can see the risk, i really thought 145k and 5k in costs was a great deal on a resale i wrote up and then i find out the fha appraisal just done on that home by the previous buyer was at 130k!! I would of offered 110 at the Auction for that home based on my thoughts thinking i could sell it for 145k then i find out its appraised at 130k take out costs rehab and i would of been lucky to of gotten out if i bought it. Anything can happen moving forward in regards to home price stimulus some form of financing nationalization.. I would just tread lightly. but we all pick our spots.. I prefer to play. Good luck and as Ray said it may not get to the levels i am willing to pay for a year or two but if i find one that i know a fool out there would buy from me so be it.

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  61. 61
    ray pepper says:

    RE: Haybaler @ 59

    Haybaler the “campfire” is 1x per month at ClaimJumper but thats just with the principles in my LLC’s.

    You can find me in the Vestus meetings on Thursday at 530pm in Windermere just off I5 and S 56th Tacoma Mall Way. At the Thursday meetings they go through the top 20 or so deals of the week. You must sign up prior though and attend their Tuesday Night Workshop.

    You know Haybaler when I went through nursing school and got my LPN and then back to get my RN I thought everything I learned about the human body should be learned by everyone. In other words the education was just so important to help yourself, family, and friends.

    The foreclosure buying process is also instrumental to know whats actually going on out there. There are so many ways to buy real estate and I think this is a crucial way going forward. Go learn the process. attend some Friday Trustee sales, and do as I always say: Be patient and look for GEMS. ..You will learn the process very quickly..We already both know there is no RUSH to buy anything but when one pops up you need to be ready.

    (Like the one two weeks ago for 19k that brings in rent for over 1600 or the one this week for 119k in Gig Harbor….Dang it….postponed postponed postponed…….but time is definitely on my side.

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  62. 62

    RE: Haybaler @ 59 – I don’t see why you couldn’t flip in six months. Two months to fix, which is entirely doable, would leave four months to sell. That second part would probably depend more on what and where you bought than what you did to fix it up. I’m seen some places that were apparently flipped (I didn’t check the tax records), where I wondered why they bought the place.

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  63. 63
    ray pepper says:

    RE: sp6859ch @ 55

    gr8 advice. The Vegas mkt is not for me nor is AZ. Just far too much inventory.

    I have not been tracking Vegas just Reno due to its proximity to Silicon Valley. Growing up in San Jose everyone retired in Tahoe,Carson, and Reno. Many bought 2nd homes there and thus the high foreclosures. However, a far less inventory then those bigger mkts. I suspect in 10 years I will see the lil 63k be worth 180k (still 100k off high)! This one I bought a month ago for 63k could possibly be flipped for 95k but why. My family live in the home and I cannot replace it currently. I really do not want any more rentals but every now and then I find something that I like as a HOLD and buying real estate 80% from their highs is a pretty safe bet. When my parents retired in Carson City back in 1987 I began to go there alot. The prices are now well below that time!!

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  64. 64
    Jonness says:

    By David Losh @ 52:

    Be careful, Real Estate has a value, and banks are very much in tune with what to sell at auctions, and what to sell REO.

    What is the strategy they are using to choose what to sell at auction and what to sell REO? Does the crap get sold at auction, and the cream get sold REO? Or is it something else?

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  65. 65

    By Jonness @ 64:

    By David Losh @ 52:
    Be careful, Real Estate has a value, and banks are very much in tune with what to sell at auctions, and what to sell REO.

    What is the strategy they are using to choose what to sell at auction and what to sell REO? Does the crap get sold at auction, and the cream get sold REO? Or is it something else?

    I’m not so sure that are that “in tune,” but I only see the stuff that they send REO.

    I think more likely they have a number that they think they could get through REO, and that they discount that number somehow for time and expense of REO, and they are then willing to let a property go at foreclosure auction for that amount. Problems arise when they overestimate what they can get REO.

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  66. 66
    David Losh says:

    In the 1970s I used to go to the King County Court House, and Assessors office to research properties. Several of the auctions were good solid purchases, and being the dumb kid I would get some work out of the investors.

    Over the years I have met some of the bankers, because you used to be able to go visit them until about late 1998. Asset Management, and Loss Mitigation, are actual departments aside from the accounting, and actuaries.

    The idea that banks are confused is laughable, it’s ridiculous. Banks know every frigging detail of the file before it goes anywhere. Somebody’s job depends on it.

    The things that go to auction are a problem. If it has a chance to go REO they will take it. These departments are set up to make money.

    I’m not saying don’t go to the auctions, or Vestus, I’m saying that we are in a very strange market place. This thing about robo signing, and not having documents concerns me. It makes sense, but it concerns me.

    My point is that banks usually know what they are doing. What isn’t making sense is the reaction the public, Congress, and stock market is having. Banks sold bogus loans, loans they knew were over priced, to the securities market. Why is that going unpunished?

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  67. 67
    ChrisM says:

    Ray & sp6859ch, how do you guys know you aren’t buying a total dog at the auction? For instance, what about mold or a cracked foundation? The inability to inspect the property beforehand is what has scared me away from the auctions.

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  68. 68

    By ChrisM @ 67:

    Ray & sp6859ch, how do you guys know you aren’t buying a total dog at the auction? For instance, what about mold or a cracked foundation? The inability to inspect the property beforehand is what has scared me away from the auctions.

    You can’t inspect the property beforehand, but sometimes people from Vestus or their competitors will talk their way into a home a few days before the auction, and reveal their info at the meeting the day or so prior to the auction.
    Sometimes, you can ask a friendly real estate agent if he/she can find a previous listing for the property, as some of these homes were for sale as a short sale before they got foreclosed on. It’s not a guarantee, and things can change in a few short months, but you’ll at least get an indication of what it looked like fairly recently.

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  69. 69
    GrizzlyBear says:

    By Kary L. Krismer @ 58:

    Maybe I’m missing something, but if he’s using cash to buy the property I have a hard time believing that the property won’t cash flow. What property doesn’t rent for it’s tax payment?

    I think it’s common knowledge that any sensible investor would be interested in determining if a house is cash flow positive or not, in the traditional sense of the term, regardless of how much money one will be putting down. Taking the average rent payment for the area and comparing it to the amount spent monthly on mortgage payments and upkeep, including utilities, taxes and insurance is how this is accomplished. Mortgage payments are typically estimated based on an average loan—30 years at 80 percent loan-to-value and a the going rate of interest—and the cost of the home. Any fool with cash can buy any home outright, of course, but that doesn’t mean it “cash flows” when talking about it as an investment.

    You remind of a very wealthy woman I once knew who had a “successful business.” Well, at least in her mind. She liked to gloss over the hundreds of thousands of dollars it cost her to go into business, and the fact that she would not only never see a return on that money, but the return OF that money. Some people just don’t understand.

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  70. 70

    […] the largest year-over-year jump since June 2009, but those of you that have been paying attention already know exactly why.Here’s another measure of foreclosures for King County, looking at Trustee Deeds, which is […]

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  71. 71

    By GrizzlyBear @ 69:

    By Kary L. Krismer @ 58:

    Maybe I’m missing something, but if he’s using cash to buy the property I have a hard time believing that the property won’t cash flow. What property doesn’t rent for it’s tax payment?

    I think it’s common knowledge that any sensible investor would be interested in determining if a house is cash flow positive or not, in the traditional sense of the term, regardless of how much money one will be putting down.

    I disagree. First, if they’re going to flip it, all they care about is what they can sell it for. Second, if they’re going to rent it, and pay cash, perhaps they view the rent as their return on the money. If you buy a house for $250,000 and can rent it for $1,000 (net of real estate taxes and other expenses), that will earn you $12,000 a year. That’s almost a 5% return, ignoring the depreciation deduction.

    As to your wealthy woman comment, the return of the money would come when the house is sold, and that would be either a gain or a loss, but totally different than the scenario you described.

    So again, there’s no reason at all some investor in a house that pays cash would care if it cash flowed.

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  72. 72
    sp6859ch says:

    kary i couldn’t of respnded better.. Who wrote the book or came up with the cash flow basis based on 20% down and a 30 year mortgage?? The bankers?? I just love it, its like the people in their office crunching the numbers to get the fundamentals and by the time the fundamentals of the PAST have been figured out we are into the present and future and fundamentals have changed.. Can anyone really say they want to make investment decisions based at all on the past? This is a new reality and for the people in the trenches it provides a great timeline to profit until the mainstream realizes pro-forma has changed.. The 20% down cashflow makes as much sense to me as the people that bought homes as an investment, but didn’t want to flip them because of the short term capital gains… Theres no capital gains tax if ya don’t have a gain!!!!!!!!!!!!! But no there were tons of pseudo investors that let that little hiccup take em to the cleaners. Its the new normal, fast pace. Adults have an average of 7 jobs, not the one job at G.E for 30 years that encouraged home ownership, it is about mobility and a younger generation that refuses to be debt slaves like their parents. All of this will have profound changes on Real Estate. Again just my opinion based on my thoughts, no graphs, phd, etc.

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  73. 73
    GrizzlyBear says:

    So, in essence, Kary Krismer is saying that real estate is ALWAYS a good investment if one is paying cash. Cap rates, etc. do not matter. Interesting. You a REALTOR, Kary?

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  74. 74
    David Losh says:

    RE: GrizzlyBear @ 73

    It’s the rule of 10. 10% down with 10% interest, is it a positive cash flow?

    If it is positive it’s a good purchase, if not, it’s not.

    Of course many other factors are considered, like condition.

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  75. 75
    David Losh says:

    RE: ChrisM @ 67

    You always assume the worst. It’s a gut job. You can drive the property, and yes it’s a full time job, and yes you need to know that you can fix it, no matter what the problem is.

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  76. 76

    By GrizzlyBear @ 73:

    So, in essence, Kary Krismer is saying that real estate is ALWAYS a good investment if one is paying cash. Cap rates, etc. do not matter. Interesting. You a REALTOR, Kary?

    There are a number of things you don’t seem to understand, including the fact that I don’t deal with investment property.

    Again, cap rates don’t mean a thing to a flipper. It’s what they can get out of the project for a few months down the road.

    Also even though I don’t deal in investment property I was the one pointing out even prior to the peak that the cap rates on multi-family were only making sense if you assumed there was going to be further appreciation of the asset or if they put a ton of money down to try to capture the rental income. I don’t think many investors did the latter, and many were led to ruin by using some sort of a cap rate analysis that made no sense. Many investors.

    I guess what doesn’t make any sense about your analysis is that you want to pigeonhole every investor into one mold. Should AMD make its investments in plant and equipment based on the yield experiences of Intel? That too would lead them to ruin.

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  77. 77
    GrizzlyBear says:

    Let me refresh your memory, Kary, that my original post was in response to the gentleman who said “…just buy as many at a time that you can handle turning into rentals.. Lake Tapps waterfront, Wollochet bay you name it…”

    This, to me, was an incredibly foolish statement given current prices vs. rents in those areas. I was never talking about “flipping” per se, which, in my opinion, is nothing more than gambling at this point in time insofar as the greater Seattle area is concerned. I guess we value real estate, and investments in general, in completely different terms.

    Cap rates on commercial real estate have been out of whack for a long time- I agree with you on that. The condition of the building is a huge factor as well. The old timers I know who have made a fortune in CRE, typically won’t touch anything below 15%. They simply sat back in horror, selling a few buildings, as they watched what was going on around them during the bubble.

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  78. 78
    sp6859ch says:

    Once again i think to use any kind of past predictor on the future is well………. history!.. I believe Grizzly has great points Kary has great points, there are so so many factors to take into play. But i woud NOT NOT NOT base any future predictors of the economy home prices etc based on any of the past ups, downs, recessions, recoveries etc. I am playing this as the great reset. So for people that use the 10-10-10 rule or 20% down cashflow rule. It may pencil now, but may really really pencil later. It may not pencil but you can flip it and make money. There is no blanket b.s that works anymore.. My folks held rentals for 15 years and make squat in regards to returns, the boom hit and they about doubled, they kept them thinking of course long term long term now they have reset lower than what they were before the boom. I HAVE to think for myself and filter the noise.

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  79. 79

    RE: GrizzlyBear @ 73 – One other explanation might help.

    Let’s say you have an investor offering to buy a $1M building for 30% down. In that case the investor is saying they are going to take $300k of their money, and pay the bank maybe $4000 a month in interest (assuming a 7% rate), to earn whatever income the building earns. The bank is saying they’ll give the investor $700k in return to earn about $4000 a month.

    If instead you have a cash investor buying the same building for $1M, they are saying that they would pay the same amount as the other investor, but in addition to earning whatever return they would earn off the rents if they leveraged, they would also effectively earn $4,000 a month off their $700k (ignoring tax considerations on both sides). Their are effectively two components to their investment, and it’s possible that they might not think either one was good by itself (e.g. loaning the other investor $700k at 7% or buying the building with 30% down).

    Finally, I would say that an investor who is betting on inflation is more likely to want to be leveraged, so to some extent the discussion is off topic.

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  80. 80

    By GrizzlyBear @ 56:

    By sp6859ch @ 55:
    Like i say i wouldn’t be playing unless it was with your own cash and just buy as many at a time that you can handle turning into rentals.. Lake Tapps waterfront, Wollochet bay you name it pick your area tax star some high end sales in 06-08 then wait to grab it. If you were a great investor you got away with using leverage during the peak got out and now are conservative

    Those homes won’t cash flow at current rental rates (which are bound to fall). I don’t understand how you are making money buying properties which don’t offer positive cash flow. Just because you don’t have a mortgage doesn’t mean you ignore the fundamentals.

    Just to refresh your recollection. This is the entire post I was responding to, and the discussion of those properties was in the context of playing “with your own cash.” I took that to mean no mortgage, and asked what property wouldn’t cash flow the tax payments.

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  81. 81
    GrizzlyBear says:

    PS- My 15% should have read 10%.

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  82. 82

    By Jonness @ 64:

    By David Losh @ 52:
    Be careful, Real Estate has a value, and banks are very much in tune with what to sell at auctions, and what to sell REO.

    What is the strategy they are using to choose what to sell at auction and what to sell REO? Does the crap get sold at auction, and the cream get sold REO? Or is it something else?

    Maybe I’m confused, but aren’t REO houses first available at the foreclosure auction?
    A lot of times, the opening bid at the foreclosure auction is too high and nobody bids on it, so it reverts back to the lender. When you borrow money to buy a house in this state, it is most often with a deed of trust, and if it gets foreclosed on, it becomes temporary property of the trustee ( rather than the lender) until the foreclosure auction. Am I missing something?

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  83. 83
    GrizzlyBear says:

    I understand what you’re saying, Kary, but my point is that there has to be a metric to value the actual property, and if that metric shows the price is too high, it just doesn’t pencil out even if you’re paying cash. Why? Nobody lives forever, and typically there comes a time when the property needs to be sold. When it was purchased at an inflated price, and is sold for a loss, then one could argue that a better “investment” would have been to have the money sitting in a bank account for .25% interest, drawing out $1200 per month for “cash flow.”

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  84. 84
    sp6859ch says:

    This is funny, i guess i need to use proper grammer, periods, good sentencing, paragraphing.. I believe the context of the post that you are referring to MEANT…. If you are buying at the trustees sales your exit strategy should be to just buy or HAVE in your pipeline paying cash as many as you can handle turning into rentals, the plan is buying them to flip, One or two at a time Thus if you are flipping, and you end up making a mistake or got stuck with one or two, you do NOT have hard money loans out, you have no loans and then you can atleast get a minimum 5% return on you funds used. This is an out, not a goal, a cut your losses and then add these to your portfolio, Not a chance to go back to the auction and gamble more, You did it and you crapped out… You were right Grizzly in saying that return is not there yet, So if you get stuck with two rentals when the plan was to be a flipper you then are DONE!!, your out is turning it into a rental. Then totally different topic, I then talked about pick the area the house you always dreamed of ( whole different topic. Lake tapps Wollochet bay etc and when it comes up buy it..Maybe you guys are on a different tangent. But i am outta here it was a great short sweet time period on the bubble blog, I will say hi to ya Ray when i see ya this Friday at the Pierce County Trustees sale. RE: GrizzlyBear @ 83 -

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  85. 85

    RE: GrizzlyBear @ 83 – I don’t have a problem with that. For one thing it would sort of be like the comment OEM made in another thread–an argument for a valuation you could use to get the seller to accept your offer, even if it’s not the valuation the particular buyer is using.

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  86. 86
    Haybaler says:

    RE: GrizzlyBear @ 83 – The term for that is called “Opportunity Cost”. …What am i giving up by making this expenditure? ….

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  87. 87
    David says:

    RE: Kary L. Krismer @ 50

    I agree with Kary, be very wary of using a company like Vestus especially if it is Vestus. Also be wary of hard money lenders. Make sure you read all of the fine print. They have a habit of doubling the hard money interest from 12 to 24 percent after 4 or 6 months.

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