This Ole House — Stuart Hamblen
Today’s property sets a new low standard in Irvine. This is the first property I have seen below $200/SF. Granted, it is a fixer-upper, but those properties will always be the low-price leader. I really did not think we would see price levels this low in 2008.
This is the kind of property that will interest me in a couple of
years. If you find a house in need of major cosmetic surgery (but
nothing structural), you can buy it with FHA financing and take what
would have been your 20% downpayment and renovate the property to your
taste. After the renovation, you can get the property reappraised, and
hopefully, you will have added enough value to be able to stop paying
private mortgage insurance. At that point, you are in a house finished
the way you want it for equal to or less than a “normal” property in
the community. Right now, it would just be a money pit, but when we are closer to the bottom…
Asking Price: $499,000
Income Requirement: $124,750
Downpayment Needed: $99,800
Monthly Equity Burn: $2,991
Purchase Price: $760,000
Purchase Date: 10/25/2005
Address: 4361 Sandburg Way, Irvine, CA 92612
| Beds: | 4 |
| Baths: | 3 |
| Sq. Ft.: | 2,682 |
| $/Sq. Ft.: | $186 |
| Lot Size: | 3,328
Sq. Ft. |
| Property Type: | Single Family Residence |
| Style: | English |
| Year Built: | 1967 |
| Stories: | 2 Levels |
| Area: | University Park |
| County: | Orange |
| MLS#: | P635582 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 12 days |
 Fixer-upper
|
|
work. Everything taken apart, and need to be replaced. Current owner
deosnt want to finish the work, so expect around 100-150K TLC
potencials, remodelling, deosnt?
Current owner
deosnt want to finish the work? Big surprise. We received an email from the producers of Flip This House a few days ago asking us if we knew of a flipper in trouble. Here he is.
.
.
As you might have guessed, the lenders, Countrywide and Washington Mutual, are getting hosed on this one. The property was purchased for $760,000 in October of 2005. There was a $608,000 first mortgage, a $76,000 second mortgage, and a $76,000 downpayment. In February of 2007, the borrower opened a HELOC for $80,000 and withdrew the rest of his money from the transaction. You have to wonder if this was a precursor for walking away from the property, but there is no way to know for sure. Washington Mutual was stupid enough to give him the money.
If this seller obtains his asking price and pays a 6% commission, the total loss on the property will be $294,940. Washington Mutual will lose $80,000, Countrywide will lose $214,940 and our flipper will walk away with $4,000 of lender cash. Who needs highway robbery when they will deliver it right to your home?
I hope you have enjoyed this week at the Irvine Housing Blog. Come back next week as we continue chronicling ‘the seventh circle of real estate hell.’ Have a great weekend.
😉
.
This ole house once knew his children
This ole house once knew his wife
This ole house was home and comfort
As they fought the storms of life
This old house once rang with laughter
This old house heard many shouts
Now he trembles in the darkness
When the lightnin’ walks about
CHORUS:
Ain’t a-gonna need this house no longer
Ain’t a-gonna need this house no more
Ain’t got time to fix the shingles
Ain’t got time to fix the floor
Ain’t got time to oil the hinges
Nor to mend the windowpane
Ain’t a-gonna need this house no longer
He’s a-gettin’ ready to meet the saints
This ole house is a-gettin’ shaky
This ole house is a-gettin’ old
This ole house lets in the rain
This ole house lets in the cold
On his knees I’m gettin’ chilly
But he feel no fear nor pain
‘Cause he see an angel peekin’
Through a broken windowpane
CHORUS
This ole house is afraid of thunder
This ole house is afraid of storms
This ole house just groans and trembles
When the night wind flings its arms
This ole house is gettin’ feeble
This old house is needin’ paint
Just like him it’s tuckered out
But he’s a-gettin’ ready to meet the saints
CHORUS
This ole house dog lies a-sleepin’
He don’t know I’m gonna leave
Else he’d wake up by the fireplace
And he’d sit there and howl and grieve
But my huntin’ days are over
Ain’t gonna hunt the coon no more
Gabriel done brought in my chariot
When the wind blew down the door
CHORUS
This Ole House — Stuart Hamblen
P.S. This guy is great: Mr Mortgage – HERE COMES THE ALT-A CRISIS
Mr. Mortgage is outstanding. thanks for the link.
We have friends that own a Uni property like this one. Except theirs is not trashed. 😉
Is this just a flip gone south or did the dwellers remove everything?
*snort* SLOD!
SLOD! To the knife catcher with the bloody hand!
IR,
I have seen this listing floating around the last week. However, I don’t believe your assumptions are correct. You won’t get any financing on this deal because it is not livable. I am pretty sure FHA won’t even touch this one. You’ll have to come in all-cash if you want to pick it up.
Considering it’s a short sale basket case, this is the kind of property that screams knife-catch to most people.
I would recommend unless you’re in the trades and have lots of cash, stay away.
GLA
Chuck
“You won’t get any financing on this deal because it is not livable.”
I haven’t seen it. I didn’t realize it was that bad off. I wouldn’t buy this property now, but in the future, I could see buying a fixer-upper if I can get a 20% discount off its fixed-up value.
Sorry, I meant to add that you could probably get hard-money lenders to cover you on this, but that’s not a very attractive option either.
After you completed the fix-ups, you could refinance it then. So, you might need hard-money for 6 months or so.
Chuck Ponzi
Yeah, I would budget in 6 months of continued renting and interest carry during the renovation. If you can get a good estimate on the cost of renovation and other expenses, the property value becomes a residual calculation.
where’s Nanowest?, do we have to predicti lower than 200 per sf. 😯
on second thought, I’m sticking to 200$ for the nicer homes at the very bottom when ever that may be 😆
There is house behind that garage? I hear realtors always going on and on about curb appeal, is there enough money to make this house have curb appeal (short of razing it and starting over)?
There is probably no way to significantly alter the exterior appearance of this unit. The lot is very narrow, so the garage is going to consume the front elevation no matter what you do. The unit itself is quite large, and although I have not seen this unit, the properties in University Park tend to have larger rooms (you don’t feel like your living in a shoebox.)
On a separate note, I have been to the small park behind this unit many times. The corner unit on the left side of the park (per the aerial) has a very well landscaped back yard. The pride of ownership is apparent. Even though University Park is old, it is generally kept up well.
There is probably no way to significantly alter the exterior appearance of this unit.
Poppycock. A little granite and some clever staging could sell this baby pronto.
That’s a crack up….in more ways than one!
You had me at “SLOD”!
The only house on the block with a granite counter top driveway. Totally adds 100K to the value.
University Park (aka UP… “Ewuh Pee”) is actually a pretty nice place. It feels like lower density that the SFHs in most of TR, QH and everything built on the flats of Irvine since 86 (yep… Westpark too).
The homes are in essence townhomes with nice interiors, front and rear courtyards and most are grouped around culdesacs with plenty of guest parking. From a kid’s point of view that makes it an awesome place to play.
Most garages are stand alone and create a front patio between the garage and the house. I have noted many folks that have built second story balconies and I suppose you could even build a large bonus room over the garage if you wanted.
There are lots of parks everywhere, some pretty large (like the area around the library). The streets tend to meander around (Michelson most notably), the speed limits are low and there are lots of trees.
When UP was built, the Irvine Co. did not yet envision those three story condos in seas of concrete that they put together.
Mind you, I prefer TR, but UP is really not bad at all. As time passes and I see how the new developments in LA/OC are going REALLY tight, the nice rolling streets and relaxed layout of UP makes it more attractive. After all, in a place like that you don’t have to pay for a gardener.
All in all, from you opinion, it sounds to me like you have not been to UP. The pictures do not make it justice.
Today’s featured property is interesting to me in ways that I will lean many aspects of buying near the bottom that I know nothing about.
For anyone who knows the location and potential of this property as a “flip this house” candidate, please take it away and tell us how this may turn into a profitable purchase.
I grew up in a house a couple blocks away. I have excellent memories. It was a great place for a child to grow up. You can walk to the elementary school, walk to the community center and walk to the shopping center. There are lots of little playgrounds and tot lots. I guess it’s similar to the newer developments, but I just like the feel much better
Kids go to University Park Elementary, which has lower test schools than much of Irvine and Uni High, which, for some reason, is known as one of the top public high schools in California.
I like these houses a lot, but $500,000 still seems way out of line for a fixer-upper.
It has a library in the neighborhood and a unique play area called the Adventure Playground:
http://www.ci.irvine.ca.us/depts/cs/commparks/specialfac/adventure_playground.asp
It is also within walking distance to a traditional Jewish Temple – you will see the congregation in their traditional clothing walking down to Temple on Saturday mornings.
They also have a very good swim team with regulation pool, so they participate in the Irvine Swim League every summer.
IMO this is one of the top neighborhoods to raise a family in Irvine.
If my kid can “walk” to school and everywhere else, when will I get to show my neighbors how important and rich I am by driving the kids to places in my gas-guzzling SUV? I’m entitled to that adulation you know!
Kidding aside, sounds like a great place to grow up.
Just a note on mortgage insurance on FHA loans. Unlike a non-FHA loan where once you pass 20% LTV, you can get it dropped, with an FHA loan, you pay mortgage insurance for 7 years, regardless of any increase in value. Of course, I should probably throw out a disclaimer being that I am no expert on mortgages, but between my own experience, and my reading of Robert Bruss, that is my understanding.
Thank you. I didn’t know that.
[b]My Offer[/b]
After giving this property a thorough look, my offer today is [size=+1]$210,000.00[/size]. I believe this is what this property is worth.
I believe if this were fully renovated, it would fetch $3000 a month in rent. At a 160 GRM, it would be worth $480,000 at the bottom. Subtract off needed repairs and upgrades, and that is what I would pay for it. If the realtor’s estimate of $100K to $150K are correct, I would pay between $330,000 and $380,000 for this property.
Subtract another 25%-35% for hassle, carry costs, and ‘profit’. That puts you in the $215K-$285K range. Make no mistake about it, if the realtor says $100-$150K of work, it’s probably easily $150K of work.
Or look at it from an investor standpoint since this will take an investor. GRM in the 100-120 range. Yeah that’s low, typically 120-140 but it’s a fixer which drives a lower GRM. That’s $300K-$360K less improvements. Which easily drops it back to the sub $200K to $250K range.
The market still has knife catchers, but my gut tells me sellers of fixers are going to get a rude awakening on price premium. For seven years they’ve been able to float garbage and have the market absorb it with little deduction. That is changing.
Just curious as to when the last time SFRs in Irvine rented for 160 GRM and how long did that last for? I keep seeing this figure all over this blog, and I find it hard to believe that homes would rent for 160 GRM for an extended period of time. BTW, I think this would make a great blog topic (show a graph over time with 160 GRM – or whatever the equivalent value is, factoring in inflation, etc.) as compared to actual sales prices and actual rent prices. It would also be interesting to see how Irvine compared to the rest of OC.
What happens to your taxes when you do a purchase like this? Do they reassess once you’ve done the work or do you get lucky and your taxes are always based on your original purchase price?
As long as you do not make structural changes that require permits, you will retain the lower basis.
You can check with the assessor’s office if you’re interested.
Chuck
We just finished (two months ago) an extensive remodel and had all the permits pulled. Electrical, interior/exterior finish, gas, water, the whole lot. We hired a pretty good contractor and he wouldn’t do the work without full permits.
But — as long as you don’t add square footage, it’s a “like for like” remodel and there’s no tax reassessment (at least that’s what we were told).
Are most of the houses in the area full of college students?
I surprised that this crappy ’60s houses went for 760K since the median home price for new single family residences was 760K at the height of bubble in OC.
I don’t care how great the elementary school or playgrounds are. I grew up in Capistrano Beach right next to a wonderful elementary school, sure it didn’t have the notoriety of Irvine, but it was a great place to grow up. I think many of us have grown in great places in Orange County. Does that make 760K used or 500K for a trashed run down beater vintage stucco house worth it?
Finally, Irvine Renter has said that this house is a bargain at $186/sq foot, yet the MLS says this house needs 100-150K in work. Well, that means this $500K house is going to cost $650K after months and months of renovation (during which you’ll likely need to rent elsewhere), which puts the sq.ft. at $242, and you’re still left with a termite infested 40 year old house that smells like its infested with aging hippies.
[img]src=”http://img179.imageshack.us/img179/6136/cartmanhippieua6.jpg”>[/img]
“Finally, Irvine Renter has said that this house is a bargain at $186/sq foot,”
I didn’t say it was a bargain, I said it was the lowest priced house I have seen so far. Given the cost of completion for the renovation, it is still overpriced.
and it’s off the market….
Image Shack is lame.
Priced_Out_IT_Guy, I put your image on my server. You can hotlink it all you want.
http://www.crackthecode.us/images/cartmanhippieua6.jpg
Why do people keep using “stucco” as a derogatory term here?
That’s because true luxury houses tile the exterior in granite.
Oh wait sorry that’s Indonesia
because that’s what irvine is – a vast sea of plain ol’ overpriced, vanilla stucco homes. IMO. i’m sure there’s an architecturally stimulating home somewhere in irvine, but after living here for close to 21 years, i haven’t found it. when i lived in l.a. i used to drive around on the weekends just looking at the different areas and architecture, i don’t do that here. at least there’s santa ana, orange, north tustin, etc.
Long Beach has a huge variety of housing and architecture to see.
I grew up in Southern California. Stucco homes is all I knew. Everything looked fine to me. When I got older I spent times in other parts of the country (Utah, Colorado, New York), and discovered stucco was rare. All the houses there seemed old and dirty because of it.
I think stuccoed homes look nice.
I dunno about everyone else, but for me it is important to remember a house is just wood and stucco on a piece of dirt. This helps during negotiation.
The whole astute observation thing is a bit intimidating. I would feel much more comfortable if my ramblings were tagged, “inane attempts at wit.”
You are right, it will sell over $400K because there are still a lot of knife catchers out there. It could also sell well over $5M, that’s when a loaf of bread in the good old US will be $500.
In todays market with the current value of the dollar, I put a price of [b]$210,000.00[/b].
I’m happy you aren’t making my investment decisions picflight…
It seems like Washington Mutual and Countrywide are the two lenders taking the biggest losses in Irvine.
Does anyone have any data that shows which lenders are most exposed to Irvine (or OC/LA/California) real estate?
With Fannie Mae only requiring 3%, $15,000 down will put you in this. On if they look the other direction on income requirements, will we be back to the old days? I have saved up a huge down payment and have a good job and I am currently renting. I a hoping for a lower bottom, but with Fannie Mae doing this kinda stuff, are we getting close to a bottom here?
WASHINGTON – Fannie Mae says it is doing away with higher minimum downpayment requirements for borrowers in distressed real estate markets.
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The government-sponsored mortgage financier said Friday it will require minimum downpayments of between 3 percent and 5 percent for all loans that it guarantees.
That replaces a December policy that required a higher minimum if the loan was for a home in a market with declining real estate prices.
Washington-based Fannie says the move is part of its effort to help resuscitate the flagging mortgage market.
Its shares fell 81 cents, or 2.7 percent, to $29.42 in morning trading Friday.
[quote]I a hoping for a lower bottom, but with Fannie Mae doing this kinda stuff, are we getting close to a bottom here? [/quote]
No, we have a long way to go for the bottom.
If the inside is indeed torn out, Fannie and Freddie would reject this appraisal or accept it with a cost-to-cure addendum attached. they’d require an escrow hold back of the cost of repairs.
See this deception?
http://www.smartmoney.com/breaking-news/smw/index.cfm?story=20080516091322
Angry they may be, but the people behind AngryRenter.com are certainly not renters. Though it purports to be a spontaneous uprising, AngryRenter.com is actually a product of an inside-the-Beltway conservative advocacy organization led by Dick Armey, the former House majority leader, and publishing magnate Steve Forbes, a fellow Republican. It’s a fake grass-roots effort — what politicos call an AstroTurf campaign — that provides a window into the sleight-of-hand ways of Washington.
Kind of like the coincidence of all the media articles highlighting the racism Obama supporters face right as Obama heads into the final primaries where he’s getting dusted.
Lord – the site is doing a good thing for all of us. Most people on this blog agree that a bailout is totally unfair and only props up the artifical pricing. I can care less who contributed to the foundation behind the site or who created it. If the goal of the site is to get congress to oppose any bailouts, then I am all for it.
OH MY!
Irvine ~ 92602 ~ $602,000 ~ -14.9%
Irvine ~ 92603 ~ $795,000 ~ -25.0%
Irvine ~ 92604 ~ $650,000 ~ +13.0%
Irvine ~ 92606 ~ $547,500 ~ -22.9%
Irvine ~ 92612 ~ $490,000 ~ -19.7%
Irvine ~ 92614 ~ $685,000 ~ +15.1%
Irvine ~ 92618 ~ $465,000 ~ -7.0%
Irvine ~ 92620 ~ $700,000 ~ -3.4%
why in the world did any of them go up? Are they still in that stage of no movement on the low end skewing the median? Or is zipcode just too small of a an area for sufficient volume to make these numbers individually significant?
I see this property was pulled from the market sometime before 10:30 AM today 5-16-2008
One of my first real jobs was (cart boy) at the Rancho San Joaquin golf course near this place in 1978 or so.
There seems to be a problem with some of the more “astute” commenters.
picfight went so far as to even bold his comment to imply that he was stating what HE (not others) would be willing to pay for today’s featured house.
Cal’s Caddy immediately changes the subject and introduces a cliche Worth is what the market will bear and goes so far as to offer a wager to what he thinks the house is going to sell for.
Note that picfight never made any statement about what he predicted the house would sell for; he merely said what he thought it was worth.
And then Ipoplaya jumps in for a quick piece of the action.
Only a moron would borrow 400K to buy this place. It will happen, but it does not change the idiocy of the buyer.
Worth/value is determined by transactions in the marketplace. A house is worth what it sells for… It might be worth less in the future, it might be worth more.
This is wrong:
“In todays market with the current value of the dollar, I put a price of $210,000.00”
In today’s market this house is worth what it would sell for and that is much greater than $210K.
Hmmm. Did the remodel thing once. I told myself never again. Nothing like the joy of making a huge mortgage payment for the pleasure of living in a construction zone. But I suppose at this point I might consider it again if: 1. The exterior looked (or could be made to look nice)2. It had a decent sized yard and 3. I didn’t need to knock down walls or replace any plumbing\electrical.
This home screams crappy\ugly 70’s home (I guess it was before its time in 67) and it has what appears to be a very small yard
“Who needs highway robbery when they will deliver it right to your home?”
LOL!!!
I watched Mr. Mortgage and am suprised (but probably shouldn’t be) at the amount of subprime/Alt-A people that were savv enough to pull cash out of their homes. I imagine any bailout will not include these folks, which is about half (for CA) if I understood correctly.
Well, I called the agent on this listing to since I had an investor that was interested. They alreday have 10 offers and 2 of them are cash. In this case onky cash offers can go through since you cant get a loan on a house under construction most of the time. The comps in the area for homes not remodeled are showing $300-330 per sq foot. This means that even at the current market you can make $100-150k on this property. If you dont have cash though dont bother.
You must be kidding Alex.
Picflight and ole AZ Dave think this place is worth $200K. What kind of crazy lunatic person would pay $400-500K cash for this?!
It will probably take AZ his entire lifetime to save up that much cash so it must be a princely sum indeed. Surely all 10 of those offer-makers are idiots and far worse judges of value, investment potential, etc. than our favorite apartment-renting, AZ-dwelling expert on the topic!
It would take most people their lifetime to save up that much cash. That being said, anyone that sold in the last few years probably have a substantial nest egg if they didn’t reinvest in another property. They probably think this is a good deal and can rent while it gets remodeled. That is what I would do. How long would it take you to save 500k without using equity and still paying your house payment, health premiums, groceries, car, car insurance, life, organized sports, phone, cable, electric, gas, gasoline, gifts, church, charities, school functions, entertainment,internet, clothes, underwear, socks, diapers? Be honest! If I really tried and denied myself most I could save 15,000.00 a year not including my 401k. That’s it and I live very conservatively. A lot of people depend on their income tax returns as their saving account. I pay a little every year so that fortunately is not a dependent option.
Can’t remember who said this, it was probably one of my finance professors, “in a public auction, the winner pays just a little bit more than the next biggest fool.”
See how they roll in the OC.
Someone grab that car a snorkel. Better yet I think the whole of OC better grab a snorkel!
OH MY GLOD!!! SLOD!
Little places go for $1000 per sq ft in my neighborhood, 94301. I don’t have a clue as to why.
The $2000 per sq ft place is going no where and the owner could care less she is off building her next project with daddy’s money.
At $200 psqft you guys had better buy before you are priced out forever.