November King Co. SFH Closed Sales to Drop Below 1K?

Quick note:

According to a search of closed SFH sales in the last month on Redfin, just 763 homes have sold in King County during that time (as of 9:00 AM this morning). I assume a relatively large number of sales may be back-logged from the long holiday weekend, but even if two hundred homes close today and tomorrow, we’ll still be below 1,000 for the first time since the market went into a deep freeze in late 2008.

At this point, unless sales double from their current count, we’re pretty much guaranteed that this November will see the second-lowest volume of closed sales in the last 10 years (which is as far back as the reliable data goes).

Pretty much exactly as I predicted last year (before the credit was irresponsibly extended), very few new buyers were brought into the market by the tax credit. Instead, all the credit did was boost 2009 / early 2010’s numbers at the expense of late 2010 / early 2011.

If that isn’t $22 billion well-spent, then my name isn’t Marty McFly.

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

59 comments:

  1. 1
    Ben says:

    Good call, Tim.

    http://www.housingtracker.net/asking-prices/seattle-washington/

    HousingTracker points for lower prices still. The next few prints of CS (we get one tomorrow) should be baked in the cake. I’d say we are in the midst of a negative feedback loop.

  2. 2
    doug says:

    And my real estate agent told me sales had been slowly going up! I am greatly surprised and astounded.

    I just dealt with a short-sale wherein both the seller and the bank approved our offer. Then the underlying ‘investor’ (something we were told about at the 11th hour) wanted $40k more. The reasoning being, they ‘wanted’ X amount of profit.

    Everything is a short-sale or foreclosure now. After going through the process, I can’t see a large market of people clamoring to both invest $300k+, AND go through months of arduous negotiations with an unreasonable party that does not act in its best interest.

    If prices continue to stagnate, I think sales are going to be flat for a number of years.

  3. 3

    The Housing Market in Seattle Reminds Me of GM Automobiles Sales

    After the company cut product lines, pensions, pay and hours; the MSM pumps up the sudden up percentage of GM sales and profits after the severe butcher axing.

    Not a word is mentioned about the 70% drop in American auto sales to date the last few years….it’s like falling in a deep mud hole and you’ve scrambled up a foot to escape [but will slip right back down soon anyway].

    Hades, to get American managed and engineered car companies where they were years ago, we’d need to eliminate all foreign car sales [foreign managed and engineered, forget just assembled] in America….LOL

  4. 4
    Guest says:

    – One more home that didn’t sell this weekend –

    Yesterday, we came prepared to make an offer to a family whose home is for sale. The real estate agent tried to thwart our attempt to talk directly to the family (we don’t have a realtor). Then the real estate agent, already an aggressively rude, hostile and unfriendly person, began to mock us and try to portray us as lowball kooks, twisting even the most innocuous remarks into something sinister.

    Actually, we were ready to offer the family the assessed value for the property (pretty close to list price), with no other concessions, and just the usual contingencies – inspection, appraisal, etc.

    I went up to the seller who was sitting in her driveway, introduced myself, and said, thank you very much for letting us see your home. We were prepared to make a fair offer, have 20% to put down, and have a mortgage preapproval, and are ready to move out of our month to month rental, to close this transaction in a way that is mutually convenient and beneficial for all parties, but your real estate agent killed the deal because he is an obstreperous bully and refused to allow us to work with you directly even if he were allowed to keep his 6% commission (we don’t have a realtor).

    The seller was hurt and confused, and said, you don’t have a realtor? So do I still have to pay 6%? Or do I pay 3%? . . .the last buyer didn’t work out because they wanted us to pay their closing costs and we weren’t even sure how to do that and then we countered to many times and they wanted to close Dec 15. . .a lovely woman with an ill husband, getting bullied by a realtor. We felt terrible for her.

    We left our contact information, in the event the sellers at some point were no longer using that agent, and offered again to consider purchasing the property, if we had not bought a home in the meanwhile.

    Thank you Seattle Bubble and the Tim and all the contributors, for everything you have taught us.

    We look forward to continue reading your predictions and analysis.

  5. 5
    doug says:

    Yes, even if you do your research, and still feel comfortable buying a home, there are an awful lot of things that have to go right for a sale to go through in today’s market.

    The house we offered on will never sell at their desired price (25k above listing). It won’t sell for as much as we offered, either. It was broken into while we had our offer in, it’s been on the market for over 250 days, its Zestimate is in a 8-10k a month free-fall. Now they’ll have to go through the price of foreclosure, and at auction to someone who’ll probably pay $230k for it, since you can’t get it inspected at auction.

    So even if you’re a sober, serious homebuyer with a good real estate agent, you have to go through the seller, bank, and investor. Good luck is all I can say.

    On the plus side, I think people are wising up. They’re no longer going to purchase $300+ worth of home on $50-60k gross medium income.

    On the downside, I think it’s going to take a good long while for the banks and shadowy thrid-party ‘investors’ to realize their house is no longer worth $300k+. In the meantime, these perfectly good houses will fall into total disrepair. What a waste.

    Well, we’ll probably be back in the market come springtime. These winter months are going to be long ones for the RE community.

  6. 6
    ex-WA says:

    RE: doug @ 2
    Why would there be an “investor” involved in a short sale? Have you heard of “double escrow”, which is a form of fraud? That’s where some third party “investor” creep somehow makes a deal with the bank to buy the property at a price substantially below the listing price, while at the same time selling the property (via collusion with a realtor) to some sucker at a higher price while still maintaining the fiction to the buyer that they (the buyer) are dealing directly with the bank. Thus, two closings happen simultaneously – creep with bank, sucker with creep.

  7. 7

    RE: ex-WA @ 6 – I would agree it sounds suspicious, and in addition to suggesting possible fraud I’d add the words possibly criminal.

  8. 8
    doug says:

    RE: ex-WA @ 6

    Thanks Kary, Ex-WA.

    I’ve asked my RE agent that very question, and am waiting to hear back. It was quite the unpleasant shock, believe me. I’ll follow up when I know.

    Back to The Tim’s original post. I don’t know WHO thought trying to reinflate a burst bubble was a good idea, in extending the housing credit. Extending the tax credit indicates a fundamental misunderstanding of the what a bubble IS, or a denial that it existed. Would you offer free money to people buying .com stock to prolong the tech bubble?

    Look at Madoff, or the housing market, or in a year or two, look at gold. Nothing can return 10% on investment forever. Anything that claims to is a pyramid scheme. Higher education and health care are next. People are going to stop paying their medical bills and student loans, unless something changes.

  9. 9
    D. in Ballard says:

    RE: Kary L. Krismer @ 7 – And sometimes agents are very upfront about the fraud. Example:

    http://www.redfin.com/WA/Seattle/2400-E-Roy-St-98112/home/146900

    The price is a reflection of reduction below market values due entirely to a previous short sale on the home, and that reduction is now being passed on to you.

    Only there has been no recorded short sale. Just as Kary says both sales will occur in the same day with some poor sucker paying the higher price.

  10. 10
    Dave0 says:

    “I assume a relatively large number of sales may be back-logged from the long holiday weekend, but even if two hundred homes close today and tomorrow, we’ll still be below 1,000 for the first time since the market went into a deep freeze in late 2008.”

    According to your chart of KC closed sales at https://seattlebubble.com/blog/2010/11/04/nwmls-sales-still-down-big-yoy-prices-falling-too/ there were less than 1000 closed sales every month from Nov. 2008 through Mar. 2009. This doesn’t sound so record breaking after looking at that. Am I missing something here?

  11. 11
    Dave0 says:

    RE: Dave0 @ 10 – Oh… scratch that, you wrote “late 2008” where I read “Jan 2008.” That makes more sense.

  12. 12
    Scotsman says:

    When sales volumes fall, prices follow, although slowly- kicking and screaming all the way. Here comes the next leg down. The national consensus seems to be for another 20% or more. After all the discussion, it looks like CS and the power of revision to a 120 year mean will win in the end. Whoda thunk?

  13. 13
    Fran Tarkenton says:

    By D. in Ballard @ 9:

    RE: Kary L. Krismer @ 7 – And sometimes agents are very upfront about the fraud. Example:

    http://www.redfin.com/WA/Seattle/2400-E-Roy-St-98112/home/146900

    The price is a reflection of reduction below market values due entirely to a previous short sale on the home, and that reduction is now being passed on to you.

    Only there has been no recorded short sale. Just as Kary says both sales will occur in the same day with some poor sucker paying the higher price.

    I think the listing is saying that the previous short sale fell through, but was approved at $555k, so any new buyer gets the advantage of starting with this pre-approved price.

  14. 14
    D. in Ballard says:

    RE: Fran Tarkenton @ 13 – Actually, a while back I contacted the agent and that is what I was told. Obviously, I wasn’t interested.

  15. 15
    biodieselchris says:

    RE: doug @ 5

    This is very true. My wife and I are basically just going to sit out the winter in our month-to-month rental and look around in the Spring.

  16. 16
    ray pepper says:

    Buyers if I may…………………Always look……….The next best thing to a Trustee Sale will always be an REO, short sales, then we fall into the severely distressed sellers, estate sales, and conventional sellers. Never take time off from looking and never listen to anyone about what you should or should not do with YOUR money.

    Remember when you decide to buy (and not rent) its ALWAYS an investment.

    The REO inventory continues to pile on week after week with shadow inventory growing in unyielding numbers. Patience Buyers, time is on your side and stay liquid.

  17. 17
    Sleepwalker says:

    So I’m actually close to making on offer on a property. It sold in Feb 2003 for $550k and since then, has had at least $100k of improvements(new roof, 3 remodeled bathrooms, 3 skylights, additional basement finishing, landscaping, etc, etc.). We’re planning on making an offer in the 580k range. It’s assessed in the 650k range. I’m surprised it’s still available, but it was listed in Nov, so I can’t imagine a ton of people are looking for homes right now.

    Anyway, my wife and I go look at it again yesterday and this lady comes up to us while walking her dog. We thought she was talking to her dog, but *I think* she was actually talking to us the whole time. “Have a good day sweeties. Good day sweeties. You have a good day sweeties” Followed by singing a song I’ve never heard with ultra religious lyrics. She literally sang religious lyrics at us for a minute or two. Anyway, I think it’s safe to say she had dementia or some other social ailment. Finally she left and walked into the house next door.

    Sigh.. I finally find a place and this lady throws me a huge curveball. I don’t *think* she’d stab me, but with most people, the thought doesn’t cross my mind.

    Maybe she’s some brilliant Ann Coulter loving retiree looking for a Limbaugh loving family next door, not the obvious liberal guilt laden Seattlite? She acts like a crazy religious person around volvo drivers, but not Cadillac drivers?

    I’ve been looking for around 11mo and this is the first one to meet all the criteria. Do I buy the house with the crazy lady or not?

    I propertysharked her address and the title on the house belongs to an asian couple. OMG!! She’s a dirty crazy renter too? I thought this neighborhood was too good for that?!

  18. 18
    ray pepper says:

    RE: Sleepwalker @ 17

    I’m concerned about your tax assessment of 650k and offering 500kish. Nearly everything I see come across my desk Buyers are scooping up at 1/2 the tax assessed value. Careful treading. The nutty lady maybe your sign from the heavens that your about to be a BAGHOLDER.

  19. 19
    Sleepwalker says:

    By ray pepper @ 18:

    RE: Sleepwalker @ 17

    I’m concerned about your tax assessment of 650k and offering 500kish. Nearly everything I see come across my desk Buyers are scooping up at 1/2 the tax assessed value. Careful treading. The nutty lady maybe your sign from the heavens that your about to be a BAGHOLDER.

    In this case, all the recent comps(within last year) are over 600k with few exceptions. This house has a 15kSF lot and the ones that came in under 600k all had <8000k lots.

    I'm unconcerned 580k is a bad price today. That said, I wouldn't be remotely shocked if that offer price becomes painful when prices erode another 20%(I don't think they will, but 10%+, sure).

    I honestly don't make much of the assessed value. I bought our house for 390k in 2005 and it's assessed value is 270k. We put about 50k into it over the last 5 years and it's current market value is somewhere between 370k and 410k. The "improvement" value of my home is now 20k with $250k in the 6000sf lot. I have no clue why this happened, but when it did, my property taxes dropped from 3900k a year to 2600k, so I haven't complained.

    All that said, yeah.. nutty lady could be just enough to prevent us from making a catastrophic financial decision.

  20. 20
    Scotsman says:

    RE: Sleepwalker @ 19

    God loves all his children, even the atheist liberal ones. Nutty lady is his way of telling you to wait a year or two and save $100K. When that happens, remember to give $10k to a decent charity.

  21. 21
    Ron Nelson says:

    Personally I can’t Understand Why People are so Caught up with Purchasing In Seattle.

    How many here have looked elsewhere for what to had Outside of the Seattle Area?
    Seriously…. I Purchased a House in Boise Idaho, Rental House

    2,500 Feet 4 Bedroom 1/4 Acre Couple Blocks from the Golf Course, Almost Brand New Home.. 160,000. put down large enough downpayment, 750.00 dollars a Month rental Value 1,200. (includes Taxes Insurance 750.00)
    This house Fully Landscaped/ with roughly 20,000 in Upgrades.. Same House Seattle easily 550,000.+ — Im not sure if you get the Same Lot here.. Boise is Far Nicer area there as far as I’m concerned. Only reason Im not there is my Job Is Here, If I had the Option to go there with the Same Job, I would Jump ship in a Moments Notice.

    There Market Crashed 50% — Patience will possibly Pay off the Same Here.
    I would be interested If Seattle’s Market Took the Same Dive… If not Im moving in about 10 years. I just wanted my Money Working For Me- and if things don’t pan out here I don’t want to be a “Dept Slave.

  22. 22
    S-Crow says:

    RE: Scotsman @ 20 – as a man of faith, you crack me up.

  23. 23
    Ron Nelson says:

    I Swore Off Drugs…
    After Driving Around the Country and Looking Elsewhere…
    No Im Not Talking San Francisco (There Still Taking Heavy Drugs)

    There Is A Lot of Opportunity in Other Parts of The Country… Its Just Not Here.

    If Most here Looked Around— And Quit Staring So Hard at What the Seattle Area Has To Offer.. Maybe more would come to there Senses.

    I remember My Friend Purchasing a House in Bellevue in 1994 ( 2,800 feet house for 140,000. ) He was a Software Engineer that made 90,000, He was renting Out Rooms because He was worried he couldn’t afford the Payments.
    Whats Happened to people where all of a Sudden they Think They Can afford that 450,000. dollar house on a Husband making 75,000. dollars a year, Wife bringing in 40,000. — “this is for a house in Kent~!!
    I Know interest rates are Low, However it still doesn’t really Justify the Price Increase. Wages where I work at have Only Gone Up 50%
    “So why do people THINK that 400,000. is Cheap? Is it just Because the Price for that house according to Zillow was nearly 600,000. during the Peak?? Now all of a Sudden 400,000. for a House in Kent is Justified? When it was that Same Person That Couldn’t imagine paying 140,000. in 1994.

    WAGES HAVE INCREASED HOW MUCH???

  24. 24

    RE: Sleepwalker @ 17
    Do you buy the house with the crazy lady or not?
    It depends. If you can convince her to mow the lawn, as an act of service to the lord, it might not be a bad idea.
    Otherwise, you can request in your purchase and sale agreement that the seller ” deal with” the crazy lady, whether that means hiring some goons to fit her with cement overshoes or buying her a one way bus ticket to New York City

  25. 25
    EconE says:

    RE: Ron Nelson @ 23

    What’s with the randomly capitalized words?

    Are you Pffts alter ego?

    ;^)

  26. 26
    David Losh says:

    RE: Guest @ 4

    Are you really a buyer? We’ll see.

    Here’s what you do. You write the offer according to your terms, and present it to the seller. Put it in writing. Get a letter from your lender. Open escrow. Put money in the deal, and get the place appraised.

    Otherwise it’s just talk.

    You have the right to present your own offer, you can walk up to any one and make a written offer on a home if you are a ready, willing, and able buyer.

    So nothing really happened other than you talked to a bunch of people.

  27. 27
    David Losh says:

    RE: Ira Sacharoff @ 24

    I’ll never buy next to a crazy person again. The yard can be the best in the neighborhood, but never again.

    The story should tell you exactly what happens when you go to sell.

  28. 28
    Scotsman says:

    RE: David Losh @ 27

    Hey, I thought we worked that out? I’m not that crazy, and my lawn is well kept. We would have gotten along fine except for that vicious cat of yours. Well, that and the pink pony you kept in the back.

    Ok, tell us the story. . .

  29. 29
    Hugh Dominic says:

    By Kary L. Krismer @ 7:

    RE: ex-WA @ 6 – I would agree it sounds suspicious, and in addition to suggesting possible fraud I’d add the words possibly criminal.

    Back-to-back short sales are not illegal.

  30. 30

    By Hugh Dominic @ 29:

    By Kary L. Krismer @ 7:

    RE: ex-WA @ 6 – I would agree it sounds suspicious, and in addition to suggesting possible fraud I’d add the words possibly criminal.

    Back-to-back short sales are not illegal.

    Well first, you wouldn’t have back to back short sales. You’d have a short sale followed by a normal sale.

    Second, it would be fraudulent and/or criminal if you already have the second sale arranged before the first closes and someone connected to the first besides the buyer (listing agent, coordinator) is involved with the second sale. Basically the seller, listing agent and coordinator are all asking the bank to release for less than what’s owed, asserting that price is what the property is worth, when based on the second sale they know that is false.

    Oh, and the second sale needs to be for more money.

    http://www.businessweek.com/news/2010-06-10/banks-face-short-sale-fraud-as-home-flopping-rises-update2-.html

  31. 31
    One Eyed Man says:

    RE: Sleepwalker @ 17

    Sounds like she’s a disciple of the Powerhouse Church of the Presumptuous Assumption of the Blinding Light. Was this the hymn she sang?

    Oh blinding light,
    Oh light that blinds,
    I cannot see,
    Look out for me.

    (From “Don’t Crush That Dwarf, Hand Me the Plyers” by The Firesign theatre)

  32. 32
    HappyRenter says:

    By doug @ 8:

    RE: ex-WA @ 6

    Look at Madoff, or the housing market, or in a year or two, look at gold.

    I agree with most of your post. However, I’m not sure that you can equate gold to the housing bubble. The housing bubble burst because people could not afford it any more to pay the mortgage. With gold you have no mortgage and, most importantly, no maintenance costs. You simply own it. You can say that at a certain point, it might maybe lose its appeal and people might start selling it. But the reasons why the price of gold might go down (probably in the very far future, if it at all, given the current economic uncertainties and desperate fed’s money printing) will be different than for the housing bubble.

  33. 33

    RE: HappyRenter @ 32 – Not entirely. Both real estate and gold get pushed higher by buyer frenzy type activity. Once the frenzy evaporates, so does the price. And the thing about gold is, few people ever need to buy it, although it does have some industrial uses.

  34. 34
    David S says:

    RE: Sleepwalker @ 17 – A good point to be made here is that you say $100k of improvements. I think we all need to be aware that this may have actually been $100k of maintenance. There is a difference, a big one. $100k of maintenance does not increase value and $100k improvement returns fractional amounts.

  35. 35
    Lo Ball Jones says:

    Thought. Here’s a 60K condo in Kent:

    http://www.redfin.com/WA/Kent/26215-116th-Ave-SE-98030/unit-102/home/2074779

    Wouldn’t it make sense, rather than being an apartment dweller, to buy this outright or pay off fast, then live basically rent free and save all your money until the right one comes along? If you can wait out a $60,000 price drop you’ve made your money back.

  36. 36
    Macro Investor says:

    By Scotsman @ 12:

    When sales volumes fall, prices follow, although slowly- kicking and screaming all the way. Here comes the next leg down. The national consensus seems to be for another 20% or more. After all the discussion, it looks like CS and the power of revision to a 120 year mean will win in the end. Whoda thunk?

    Just look at the altos chart on Tim’s home page. Median in a free fall since July, down another $10k the last few weeks. And that’s for Seattle — the strongest sub market in the region.

  37. 37
    sleepwalker says:

    By David S @ 34:

    RE: Sleepwalker @ 17 – A good point to be made here is that you say $100k of improvements. I think we all need to be aware that this may have actually been $100k of maintenance. There is a difference, a big one. $100k of maintenance does not increase value and $100k improvement returns fractional amounts.

    They paid $550k 7 years ago and it had 60 year old plumbing, a 60 year old roof, and 3 60 year old bathrooms. Now it’s got 7 year old plumbing throughout, a 7 year old roof, and 3 7 year old bathrooms.

    Excepting the skylights and some other stuff; yeah, you could call them maintainence items, not improvements. Assuming they paid 100k, you’re not going to get that back, but it absolutely does add a monetary value to the home. I’m willing to buy a house with original plumbing, but I’d be making a much lower offer.

    I was just informed that an offer has been made on the house. I’m still mulling whether or not it makes sense to offer. Crazy lady is certainly not a draw and the house is bigger than we need. I got the utility bills, it’s lower than my 1400sf bungalow, so not so worried about the size.

    If I buy this house and find my cat crucified to the carport; I’ll be very disappointed.

  38. 38
    Scotsman says:

    RE: Lo Ball Jones @ 35

    Ah, condos- they are never “rent free.” Even when you’ve paid it off you’re looking at $400/mo for dues and taxes, not to mention that nasty new assessment for the roof and repairs to the pool and parking lot. But you’re right- as some point it must make sense. But I’d rather look at cheap homes than condos where you never really control your “investment.”

  39. 39
    ray pepper says:

    RE: Scotsman @ 38

    agree 100%..your dues will be going up sharply to cover for all the vacant foreclosed units its just a matter of time. then you add taxes/insurance and your 50k investment was just a waste of cabbage.

    the amount of condos coming back will be astounding. you would almost have to pay me to take one (take on all the fees) and then I would have to rent this glorified apt.

  40. 40

    RE: Scotsman @ 38 – The cost of a roof for a condo is typically pretty minor because you spread it across so many units. A bigger concern is structural issues, like was brought up again yesterday, where say the entire complex needs to be re-sided due to poor workmanship.

    As to Ray’s comments in the next post, I think they have some validity, but not to all condos. I’d be particularly concerned about condos that were either built after maybe 2004 or had a lot of turnover after 2004. You’ll be dealing with a lot of other owners who have high condo payments and little or no equity. If it’s in a high enough price range that might not matter much as to the stability of the complex, but it will probably mean the building will be dealing with short sales for quite some time.

  41. 41
    David Losh says:

    RE: Scotsman @ 28

    OK, I’m talking about another house, not the one next to yours.

    When we looked at the house the yard of the house next door was scorched. I asked a neighbor who said some kid with a careless cigarette had caught the lawn on fire. OK, odd, but plausible.

    What the neighbor didn’t say is that the fire department had made the owner clear out his yard because of the fire hazard. For the previous year the city had been making weekly, and monthly visits to the home to make sure the owner was in code compliance. The house did look cared for.

    We moved in and had our first conversations with the guy next door that seemed fine. He was from Egypt, worked as an electrician, was divorced, with two kids who lived in New York with the mother.

    Then one Saturday morning at about 7AM he started mowing his yard. OK, fine, my wife mentioned to him later in the day that 7AM was a little early for us, and we were off and running.

    We’re all against him. All the neighbors are trying to control his life. We’re the reason he’s losing his government job. Fine.

    The kids come to visit and it’s weird. He has them in the back yard riding a little motorized scooter one day. The woman across the street with kids about the same age comes over to talk with the kids. He freaks out, starts yelling at her to stay away from his children.

    All this happens within six months of buying the house. In twelve years we never see the kids again, I hope that’s a good thing, and he accumulates stuff in the house, and yard. Within a year we get the full ambiance of why the city, and fire department were at the guy’s house. The yard is packed with stuff, he has built structures out in the yard, and he is having garage sales every other week end.

    We tried to sell the house twice in that time, and each time the neighbor would wait in his living room until some one came to see the house. He wanted to chose his next neighbor.

    Twelve years later the city comes back around. There have been enough complaints, and they give him months, then weeks, then days to clean up his yard. He gets agitated and threatens another neighbor, the police arrest him, and he’s out in a day.

    Well we see the chance, start work on the house, to get it ready for sale. By the time we’re done the city has the yard cleared out, a priest is making daily visits to the guy, and we get the house sold. The neighbor on the other side gets their house sold. Maybe the next owner will have better luck, so far, so good.

  42. 42
    Aaron Smothers says:

    RE: ex-WA @ 6

    Maybe I am missing the obvious, but help me understand this:

    Some shadowy “investor” inserts himself as an intermediate, invisible buyer in a prospective short sale and (effectively) rips off the hapless houseowner who sells the house for less than what the investor sells the same house for.

    But, as noted elsewhere in this blog, (correct me if I am wrong), the house owner has to find a prospective buyer first before getting the bank involved in the transaction.

    So how does the “investor” come to know of the short sale prospect coming up in the first place? Does the bank somehow orchestrate the involvement of this investor?

    AS

  43. 43

    RE: Aaron Smothers @ 42 – Here’s how I’ve heard it explained, but I’m sure there are other schemes out there. I’ve never actually seen it, so this explanation might be wrong.

    The agent lists the house with a short sale coordinator in mind. That coordinator has an investor, who in maybe two weeks will make a lowball offer on the house that the owner accepts. The house gets moved to “Pending-Backup” and the agent continues to review offers that come in, but doesn’t tell the bank about them. If one is sufficiently high, that offer will be accepted with the investor pocketing the difference. The owner may or may not know about the scheme, but the agent might actually use it as a sales pitch (“We can find you a buyer in two weeks!”) If the owner knows, then they too are involved in the fraud on the bank.

  44. 44
    Aaron Smothers says:

    RE: Kary L. Krismer @ 43

    That sounds plausible to me.

    Boy, this is kind of like day trading stocks, isn’t it?!

    In the world of stock trading, the buyer and seller are (in general) ‘anonymous’ to each other. It’s not considered illegal to sell stocks on the same day as buying them– except those that are restricted in some way, like certain options exercised by an employee.

    So maybe a holding period of some kind must be required on houses being bought and sold I guess- to sift out those that buy a house to dwell in from those that are extreme flippers ??

    AS

  45. 45
    David Losh says:

    RE: Kary L. Krismer @ 43RE: Aaron Smothers @ 44

    Actually the way I’ve seen it done is for the hard money lender to make an offer directly to the bank. They pay cash.

    The agent has a buyer from a seminar, or little ad. The agent may have a list of buyers looking for a bargain.

    The hard money lender closes, then sells.

    It used to be that some one would simply assign the contract to another party for a fee.

    In theory the hard money lender is putting the funds to work, and depending on how quickly the transactions churn the invested cash grows.

    The agent may “invest” the commission dollars into the churn.

    In 2008, even 2009 that was a growing operation, but I think, or from what I see, that market has cooled.

  46. 46

    RE: David Losh @ 45 – If you’re talking REO, I think it would be hard to make a claim of fraud dealing with the bank directly. You’re simply negotiating a price. If the price is low, that’s their problem.

    Now if there was an agent representing the bank, and they knew of the subsequent sale, that would be different.

  47. 47
    Lo Ball Jones says:

    RE: Kary L. Krismer @ 40

    I keep thinking that at some point consolidation of property may be the answer…in order to support prices.

    So, two adjacent for the price of one.

    Or, take the vacant home that doesn’t sell next store, plow it down and group the property together with a house for sale or sell to the existing owner as a “bigger backyard”.

    Thus, you get sparsification as a way to pump up prices…given the lack of owners, existing owners may wish to simply buy “the land” back.

  48. 48
    David Losh says:

    RE: Kary L. Krismer @ 46

    The home owner is the one who starts the process by contacting the hard money person to sell the property short. The home owner is usually behind on the payments, few options, and a cash buyer may look good to the bank.

    The agent with the investor pool of buyers, maybe using the same advertising as the hard money guy. The agent is advertising for investors and people with distressed sales may get the idea this may be a good resource.

    It’s like the We Buy Ugly Houses people.

  49. 49
    ex-WA says:

    RE: David Losh @ 48
    No that’s not the “double escrow” scenario.
    The bank gets a short sale offer from the “investor”, and is led to believe (by the agent that’s colluding in the fraud) that that’s the best offer they’ll get. Meanwhile another higher offer is procured from a buyer who’s unaware of the hidden “investor”. At closing, the buyer doesn’t read the paperwork carefully, and doesn’t see that he’s really buying from the “investor”. The bank is similarly unaware of the actual buyer and the second simultaneous closing taking place at a higher price. It’s clearly a con game, not just a very fast “flip” of the property.

  50. 50
    Scotsman says:

    RE: David Losh @ 41

    The stress caused by a bad neighbor is some of the worst. If you can’t relax in your own house, what’s left? I’ve been lucky to end up with good neighbors as friends with very few exceptions. I’m glad you were able to get out and find something better.

  51. 51
    David Losh says:

    RE: ex-WA @ 6

    Oh, you are talking about something else that isn’t related to the comment of doug at comment 2.

    The investor doug is talking about is the holder of the Note. My mortgage is held by an actual investor. Some mortgages are, some are bundled, and sold.

    The bank is usually just the servicer of the account. They don’t have the loan. Loss Mitigation at the bank may negotiate the terms of the short sale, but they literally have to get the terms approved by, yes, an investor, or investor group.

    In doug’s case he is saying he thought he had a deal then as they got closer to closing the phantom investor wants $40K more. It may be true or just a trick. It just happens from time to time.

  52. 52
    David Losh says:

    RE: Scotsman @ 50

    The neighbor on the other side of him told me one night they were having company over for dinner. It’s dark, night time, and our mutual neighbor’s house was dark inside and out.

    Sure enough a car is making a turn in the street or into a driveway and they can see our neighbor sitting there in the dark watching them.

    I had the place rented a couple of times and would get the phone call from the renters to come talk with the neighbor. Fortunately I had the place rented to some one nuttier than him at one point who cooled him right out.

    She would just march over to his house and scream at him. I got a call from another neighbor about that. She was in his front yard screaming at him and calling him names.

    After that if he was acting up I’d say Diana, the woman’s name, was coming back. He’d just go back into the house without another word.

  53. 53
    One Eyed Man says:

    RE: Scotsman @ 50

    I don’t have any problem with my neighbors either. My wife says its because I’m the crazy SOB that everybody else probably wants to move away from.

  54. 54
    doug says:

    From the seller’s RE Agent:

    “All mortgages have investors. A lot of times it’s Fannie Mae or Freddie Mac. We are forbidden to communicate with the investors. Most of the time we don’t even know who they are. The Bank is the servicer. The are contracted to handle the mortgage. Yes, I know the whole thing is ridiculous, but that is the way it is set up. The bank knows the investors guidelines and negotiates on their behalf. The bank sends the package, complete with negotiated deal, to the investor. The investor usually ok’s the deal.

    The bottom line is yes the process is stupid. No we can’t talk to the investor,. And the reason you weren’t informed of the investor is because frankly it is common knowledge that all mortgages are owned by someone.”

    So, yeah. Either way, no house for now.

  55. 55
    David Losh says:

    RE: doug @ 54

    Well, you can always say no, and resubmit the offer.

    The process is stupid and has gotten to be more stupid as time went on. Pricing has gone up, and down so much that in my opinion a lot of lenders, and seller are expecting a miracle to happen.

    Out in South Everett where prices should be dropping like a rock some new construction sells for asking price with multiple offers. Some short sales get multiple offers.

    What I think is that there are a lot of Real Estate agents out there just desperate to make a deal to get a commission.

    Wait, I got off track. The investor can ask for what ever they want. Many agents just cave in and say OK. No one wants to start the whole process over again. So you just tell them to think about it while you keep looking. You are allowed to have an offer outstanding while you look.

  56. 56
    doug says:

    RE: David Losh @ 55

    That’s exactly what we did :-)
    We’re going to take a month off of house-hunting (we’re a month away from a self-financed wedding, after all!) and then we’ll be back in the hunt in January.

    Thanks for all the advice, everyone!

  57. 57

    RE: ex-WA @ 49 – BTW, the Fannie Mae form for REOs has an optional clause that prevents the buyer from selling for 90 (????) days. I’ve never seen them actually select that box though, so maybe it depends on the property and price.

  58. 58

    By Scotsman @ 50:

    RE: David Losh @ 41

    The stress caused by a bad neighbor is some of the worst. If you can’t relax in your own house, what’s left? I’ve been lucky to end up with good neighbors as friends with very few exceptions. I’m glad you were able to get out and find something better.

    That’s why I just responded to OEM in another thread about why I like HOAs. Local government can’t do as much to control jerks as an active HOA.

  59. 59
    zipzippygc says:

    RE: Lo Ball Jones @ 35 – HOAs are nearing bankruptcy and in disarray. Special assesments that most can’t pay can add 10% cost in a blink.

    Don’t forget about all the silent owners who cannot be found and don’t pay the assesments in weak HOAs, who have no contingencies to pursue such.

    Condos are all blinking yellow and several I know about are on red alert; we will see bank ‘rescues’ at 10cents to the dollar, forced conversions to apts, and wholesale loss of equity — once again, ‘the good’, those who always paid on time and trusted their neighbors were of similar ethics, will be shafted.

    More press needs to look at HOA disarray.

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