In a falling market, there are always those who believe the correction is temporary. In trading it is called “buying the dip.” In a market rally, it is a good strategy. In a market decline, it is a sure way to become a bagholder and lose a great deal of money. Lately, I have been feeling a certain satisfaction from finding flips like these because I know the fate that awaits them. I suppose each one helps empty my Reservoir of Schadenfreude.
Today’s seller has had a visit from the Kool-Aid Man. To believe you can flip a property for a $200,000 profit in this market you either have to be crazy or intoxicated with kool aid.
Asking Price: $814,900
Purchase Price: $615,526
Purchase Date: 2/2/2007
Address: 5 Bottle Tree, Irvine, CA 92618
Beds: 4
Baths: 2.5
Sq. Ft.: 2,018
$/Sq. Ft.: $404
Lot Size: –
Year Built: 2000
Stories: 2
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: P564630
Status: Active
On Redfin: 123 days
Unsold in 90+ days
From Redfin, “Nice open floor plan in prime Cul De Sac location of Cypress/ Oak Creek. 4 bedrooms, 2.5 baths. Open kitchen overlooks family room with fireplace and backyard. Freshly painted and and new carpet make this home a pleasure.”
A concise description with no typos: I am speechless.
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I can’t give this seller a WTF award as this is merely a wishing price. The $404 SF price is near enough the current market to be plausible; although, after 123 days on the market, it clearly is above the market. I will give this flipper credit for finding a good buy (you make money in real estate when you buy, when you sell you merely convert to cash), but this property needs updating, and this flipper is going to have to reduce his price to sell this place.
Since this flipper’s purchase helped set the neighborhood comps at $305 SF for similar properties, the two underwater neighbors who are holding out for $400 SF can’t be too pleased.
Asking Price: $959,000
Purchase Price: $960,000
Purchase Date: 3/30/2006
Address: 45 Commonwealth, Irvine, CA 92618
Beds: 3
Baths: 2.5
Sq. Ft.: 2,400
$/Sq. Ft.: $400
Lot Size: –
Year Built: 2001
Stories: 2
Type: Single Family Residence
View: Hills
County: Orange
Neighborhood: Oak Creek
MLS#: C101239
Status: Active
On Redfin: 25 days
From Redfin, “Premium Cul-De-Sac location home in Oak Creek. 3 large bedrooms with 4th room used as master retreat/office upgrades includes: Travertine floors, designer carpet, custom paint, crown molding, base molding, plantation shutters, stainless steel appliances call owner to show.”
This makes two reasonably well-written MLS descriptions. Do you think we are shaming realtors into checking their copy?
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Another seller holding out for a breakeven price. Of course they will still lose about $58,540 after commissions, but there is a psychological aspect to trying to get out at breakeven. Too bad it probably won’t happen.
They are doing better than a nearby rollback…
Asking Price: $700,000
Purchase Price: $725,000
Purchase Date: 10/7/2005
Address: 2 Pearleaf, Irvine, CA 92618
Beds: 3
Baths: 3
Sq. Ft.: 1,750
$/Sq. Ft.: $400
Lot Size: –
Year Built: 2000
Type: Condominium
County: Orange
Neighborhood: Oak Creek
MLS#: S485590
Status: Active
On Redfin: 72 days
From Redfin, “Spacious 3 bd/3ba DETACHED Home w/ Private Backyard in Gated Oak Creek! Elegant Upgrades include Cherry Wood Laminate Flooring * Upgraded Carpet * Custom Built-Ins * Designer Paint * California Closests in all Bedrooms * Recessed Lighting Package * Security System & Integrated Surround Sound Speakers throughout the entire Home! Gourmet Kitchen has Granite Counters & Stainless Steel Appliances! Enjoy the beautiful Resort Style Amenties of Oak Creek!”
Two misspellings and several exclamation points: that is more like it.
I can’t help thinking this seller overpaid when he bought back in 2005, but why not? Real estate only goes up, right? This property is also going to have to cut price significantly to find a buyer, but if they were to get asking price, they would lose $67,000 after a 6% commission.
You can clearly see the behavior of a commodities market at work here (and Houses Should Not Be a Commodity). First we have a “dip buyer” gambling that the recent price decline is temporary. The final two properties are your classic “weak hands” who are the first to dump their holdings as they go underwater. As the weakest holders are wiped out and forced to sell, it drives prices down further. At some point, our intrepid flipper realizes he was wrong and adds another property to the falling market: which, of course, pushes it down even more. The downward spiral becomes obvious, predictable and inevitable.
I hope you are enjoying the show.
These properties are actually not very desirable. The MLS description does not mention they are few feet away from the 405. I used to live there and know the constant humming noise from the FWY.
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The 5 Bottle Tree listing actually did have an error — the word “and” repeated twice at the end.
Thanks for your great work!
They bought and put it back on the market 30 days later with a 30% price increase?
Did they do any work? From the looks of the photos, I can’t see anything that was done. I see a dead grass by the patio with dead trellis vines, blanco cabinets from home depot with a white generic range, white ceramic tile counter top circa 1980 (how is that possible in a house built in 2000?), I see smudges on the generic white “freshly painted” walls, some junk in the middle of the wood flooring, “new” carpet that already looks to be showing wear, two generic white bathrooms with corian countertops and no idea whats on the floor.
So what did they do? Slop a coat of generic white on all the walls and put in cheap beige carpet and up the price $200K? Are they kidding me? Do they think we’re stupid? My RE agent can have a couple guys in to do that for $5000 in three days after I buy it.
Enjoying the show?
I certainly am, thanks!
We are just in Act I of a very long show, but I wish we could fast-forward to the end. However, I know the intervening acts will be a pleasure to watch too.
“I suppose each one helps empty my Reservoir of Schadenfreude.” – IR
I am officially proclaiming your reservoir to be deep and abrasive enough to qualify as an an “Endless Ocean of Schadenfreude.”
IR – You make renting imminently bearable! Thanks!
FYI: The property at 5 Bottle Brush is a foreclosure, currently owned by HSBC Mortgage Services Inc. I think that would explain the dead grass and the lack of updating.
My 14-year-old stepson must have visited.
Do you need some popcorn? We have extra.
Yes, I would like some popcorn AND some kleenex please – to wipe away the tears…OF LAUGHTER!!!
Thanks for that info. Being a foreclosure, that might explain what looks like indoor “road-kill” on the wood floor near the fire place.
I am surprised they did not continually lower the price until it sold. I have seen many REOs come on the market at the high price and then they lower it a few days later and claim that there has been a huge price reduction.
I just went to the HSBC Mortgage Services Inc. web site, but I couldn’t find a link for “Employment Opportunities”.
I wonder why?
On the Commonwealth ad, the last sentence is actually three sentences without punctuation. There should be a new sentence starting with the word upgrades (which, of course, should be capitalized) and another sentence starting with call owner.
No misspelled words but the grammar needs work – along with the price.
Does anyone else get a happy feeling looking at the Kool-Aid man? He just cheered me up.
When did it becomes a foreclosure? Was that the February sale the bank Repo?
If the Bank took it bank at $615K why would they put it on the market at $815K?
Don’t all realtors and most Irvine homeowners know that we can get access to what they bought it for a couple months ago? What realtor could possibly allow the sellers to list at that price.
The only explanation would be if the borrowers bought the home for 615k and the appraisal at the time of purchase was 815k. They must have thought…”What an awesome deal!!”
Newsflash people, the house is only worth what someone is willing to pay for it, NOT what it appraises for.
“Newsflash people, the house is only worth what someone is willing to pay for it, NOT what it appraises for.”
Actually, I’d like to add to that — the home is only worth what a third-party lending institution is willing to loan a motivated buyer.
Pass the popcorn down here. 🙂
Can you tell what the occupation of the buyer is? I’m hoping it is a realtor so they can get two helpings of Schadenfreude!!!!!!!
“If the Bank took it bank at $615K why would they put it on the market at $815K?”
Because the bank is still drinking the Kool-Aid. They are in utter chaos in the foreclosure department. I know of two foreclosures in Ladera by the same bank and the same floor plan with the same upgrades. One property has been reduced down to $470k and the other is still at $550k. They have no clue what is going on.
I imagine the genius (sarcasm intended) who wrote their loss mitigation procedures told them to start out at the total cost of all outstanding loans plus any foreclosure costs. This was probably a 100% financing deal, so the bank is in for $615K x 1.25 = $768K plus foreclosure costs. So they start at 815K and chase the market down.
If they lower it quickly enough, the might find a buyer / GF at $675K.
Did you see this post?
Whiner, Whiner, Whiner
It was a realtor who got burned as a flipper.
If a realtor bought the home than I guaran-damn-tee you there was slim shady cash exchanged between buyer and seller. The RE agent that made the purchase probably receive a good portion of the commissions. In addition they probably received 103% financing that some crazy banks are still offering, which gives the buyers cash at closing.
Carlton Sheets?? LOL
The HSBC bank mortage Service branch tried to make some quick bucks so that they bought it from RECONTRUST which was servicing the forclosure on this house in Feb. They must think it was really a bargain.
It is if it sold. It is a business decision so your popcorn can get cold on this. I expect it will be on the market for a long time. In Feb, I think it was a insider deal or bulk deal.
Yeah, I just did a quick walk through on the Countrywide REO list. Ladera Ranch, Coto de Casa, Huntington Beach, Irvine, Laguna Hills, all have for sale prices higher than the listed sale a couple of months ago where the bank took it back.
Actually, ReconTrust was the servicing agent but HSBC was on the hook for it as they were the mortgage (bag) holder. And IR is correct – when it goes to foreclosure the “sale” price is the price of the first, which is what the “no cash” bid by HSBC was. The second is squeezed out. BUT – if HSBC was the high bid at $615k, then NOBODY wanted the place for more than $615,526. And trust me, lots and lots and lots of people watch these foreclosures and go to the foreclosure sales. But not one of them wanted the place for even $1.00 more than the 1st TD. So what is the open market saying about the real value of this place – “It’s not worth $615k” And what is the market saying to those poor neighbors trying to sell for so much more — “Suckers!”
I do.
However, I get an even happier feeling when I see those Happy Face Rollback signs.
They are the best!
“We are rolling back prices!” LOL!!!
Well i’m in the market in Oak Creek and I’ve seen the pearleaf property. To me the pear leaf property is worth $650k at most, but another home with exact same plan (corner lot with view of a drainage canal) had just sold for $730k.
I made an offer of $660k for a $695k home with similar floor plan and it was declined.
Maybe I’ll make an offer of $675k on the HSBC foreclosure property and let you guys know!