Once, Twice, Three Times a Lady — Commodores
And now that we’ve come to the end of our rainbow
There’s something I must say out loud…
WHERE THE HELL IS MY POT OF GOLD?!
There was supposed to be a pot of gold here. At least that is what our third flipper thought. I have written on other occasions about the phenomenon of trading stucco boxes (Houses and Commodities Trading, and Houses Should Not Be a Commodity). People were buying properties, often not even living in them, waiting for a short time, and then selling them to another speculator who would do the same thing. It was a classic Ponzi Scheme dependent upon greater and greater levels of debt to perpetuate higher and higher prices. Today’s property is probably the finest example of this phenomenon I have encountered here in Irvine. Let’s take a closer look.
Asking Price: $549,000
Income Requirement: $174,750
Downpayment Needed: $139,800
Monthly Equity Burn: $5,825
Purchase Price: $680,000
Purchase Date: 5/4/2006
Address: 422 Quail Ridge, Irvine, CA 92603
| Beds: | 2 |
| Baths: | 2 |
| Sq. Ft.: | 1,654 |
| $/Sq. Ft.: | $332 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Mediterranean |
| Year Built: | 2005 |
| Stories: | 2 Levels |
| Floor: | 1 |
| Area: | Quail Hill |
| County: | Orange |
| MLS#: | S550663 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 4 days |
Hills home has the feel and look that will make your buyers feel proud
to say their home now! Quail Hills is a fantastic community nestled in
the rolling hills of west Irvine. With parks, community pools, tennis
courts and surrounded by beautifully landscape greenbelts, it s a
pleasure to call Quail Hills home. Just minutes to the 405, the 133,
shopping, three parks, lots of areas to walk and play ! Well worth your
time to check us out !
highly upgraded? What does this mean? Can a property be just “upgraded?” Can it be “lightly upgraded?” Can it be “highly, highly upgraded?” Where does it end?
nestled… I am developing an aversion for that word.
The sales and mortgage history of this property gets a bit involved, but bear with me, it tells a great story of greed gone wild.
Flipper #1
This property was first purchased from the builder on 9/30/2004 (just over 4 years ago) for $502,000. Flipper #1 used a $400,000 first mortgage, a $76,750 second mortgage, and a $25,250 downpayment. He waited two whole months before opening a HELOC for $120,000 on 11/22/2004 withdrawing his downpayment. On 5/5/2005, about 6 months later, he opened another HELOC for $200,000 and paid off the first. On 5/26/2005 he sold the property to flipper #2 for $610,000 netting him $63,400 after a 6% commission. Not a bad profit for holding property around 9 months.
Flipper #2
Flipper #2 paid $610,000 on 5/26/2005. He used a $496,000 first mortgage, and a $124,000 second mortgage. If these numbers are correct, he cashed out $10,000 at the closing. He then sold the property almost a year later to flipper #3 for $680,000. If he paid a 6% commission, he only made $29,200.
Flipper #3
Flipper #3 paid $680,000 on 5/4/2006. He used a $544,000 first mortgage, a $136,000 second mortgage, and a $0 downpayment. His rainbow had no pot of gold. He is now a short sale asking $540,000
Look at these three transactions. Only the first one had any kind of downpayment, and he only had that in the property for about 60 days. Every penny of the remaining transactions was borrowed money. Of all the painful lessons lenders learned during the bubble, giving out 100% financing to anyone with a pulse has to be the most painful. If leverage is very low (large downpayments or low CLTV limits,) then speculators have to use large amounts of their own money to capture what become relatively small price movements. If leverage is very high (small downpayments or high CLTV limits,) then speculators do not have to put up much money to capture what become relatively large price movements. The more leverage (debt) that can be applied to residential real estate, the greater the degree of speculative activity that market will see. Also, the smaller the amount of money required to speculate in a given market, the more people will be able to do so because more people will have the funds necessary to participate. When lenders began to offer 100% financing, it was an open invitation to rampant speculation. This makes the return on investment infinite because no investment is required by the speculator, and it eliminates all barriers to entry to the speculative market. Further, it passes all of the risk on to the lender as the speculator can simply refuse to pay the debt and allow the lender to foreclose on the property. 100% financing, coupled with negative amortization loans, caused our market prices to get inflated, and its elimination is one of the main reason prices are falling now.
{book}
Thanks for the times that you’ve given me
The memories are all in my mind
And now that we’ve come to the end of our rainbow
There’s something i must say out loud
You’re once, twice, three times a lady
And I love you…
Yes, you’re once, twice, three times a lady
And I love you… I love you…
When we are together the moments I cherish
With every beat of my heart
To touch you, to hold you
To feel you, to need you
There’s nothing to keep us apart
You’re once, twice, three times a lady
And I love you… I love you…
Once, Twice, Three Times a Lady — Commodore
That sales history does about sum this bubble up perfectly, doesn’t it?
The original 2004 price of $500,000 is and was an absurd amount to pay for a two-bedroom congested condo. I hope the Irvine company and the builders enjoyed the good times while they lasted.
Why does it say “Sold as is” under the building information?
The graphic gave me a good laugh! I won’t look at rainbows that my kids draw quite the same now, at least for a while…
Should someone clue in the listing agent that it’s “Quail Hill”, not “Quail Hills”? How do agents get listings for properties in locations that they obviously are unfamiliar with ?
Thank you! It’s not Quail Hills…must be an out-of-area agent.
P.S. This place is not worth $549k.
I’m sick over the bailout. It is sad to know that our Federal government is deliberately tying to keep home prices higher. How can John Mc. Cain call himself a republican after his housing proposal? He is speaking out for flippers and speculators but not us. He has lost my vote…
McCain made a similar proposal in the second debate. IMO, that is when his campaign went into its death spiral.
Last night, John McCain, a conservative, free-market Republican proposed a massive effort to artificially prop up home prices so renters and those forming new households will be permanently priced out of the market. It is his way of giving renters the bird while simultaneously abandoning all the core beliefs of his party.
Desperate politicians often pander for votes and take popular yet unwise positions. It is sad to see his campaign in such circumstances where he feels it is politically expedient to take this particularly foolish stance.
What are the core beliefs of the Republicans any more anyway?
Lots of pithy rethoric coupled with the biggest socialist programs since Johnson?
I knew what Reagan/Thatcher stood for, and I knew what Newt Gingrich and Co. stood for. These lemmings only stand to doublespeak.
Republican party core beliefs? BAHAHAAHA!
Lets see:
1. Give tax breaks to the rich and fool the middle class into believing that the tax breaks for the rich are actually for the middle class. (Lots of middle class republicans I know like to think they are rich but they’re nowhere close).
2. Deregulate the markets to the point where greed and a lack of controls create problems like the mess we’re in today.
3. Borrow, spend, and inflate the dollar.
The only republican I’m aware of that has any core beliefs is Ron Paul.
If I hear one more person say that the current mess was caused by “Republican deregulation” I am going to vomit. Obama sings a song and all his sycophants go around whistling it. Think for yourself:
1. Don’t you read this blog? Consumer overspending and rampant personal greed were not caused by deregulation of the financial industry.
2. Even if you do want to point to it the key deregulation/removal of Depression error controls was signed by President Clinton under pressure from Alan Greenspan (how can our separate banks and insurance companies compete against the European behemoths? remember the Travelers-Citi merger that was illegal at the time it was proposed?)
3. If you want to blame lax regulation of the GSE’s than your culprits are dems Barney Frank and Chris Dodd. They shot down any attempts to reign in Fannie and Freddie because 100% home ownership is a very popular political fantasy.
Look, I am not partisan. I highly concur with the criticism McCain is getting on several fronts. I don’t know who deserves our vote, although with the electoral college system voting against the Dems in national elections is futile anyway in California. Just please base your decision on reality, not ridiculous political blather.
Whoa. Somebody has been watching too much election coverage and is a little caught up in bipartisan politics.
Did I anywhere in my post mention Obama? Why label me as an Obama sycophant? Because I’m frustrated with the Republican administration?
Consumer overspending and rampant personal greed are inherent in every society with enough clever corporate brainwashing (read advertising). Like IR says, its part of our cultural pathology.
All I’m saying is that in my view, its the responsibility of the government to prevent the douche bags running the financial markets from pushing the financial drugs which profit the pushers and penalize the rest of society.
For example, why are credit default swaps not regulated like the insurance industry and therefore no capital reserves are required to sell them in case of defaults?
We have all been penalized (a trillion dollars) for the profit of the dealers, ie. AIG CEO takes 90 million in only a few years and then spend 1/2 million at the st. regis after news of a government bailout, participants like buyer #1 and buyer #2 of today’s featured property.
Lastly, its the job of the current administration to prevent problems like the mess we’re in today. I don’t care who you want to blame, if the party in office has 8 years to prevent a mess and sits on their thumbs, they have only themselves to blame. They weren’t elected to sit idly while the financial industry runs itself into a hole that only the tax payers can dig them out of.
Well said. No fan of McCain here, but blaming the mess on deregulation is oversimplification and most likely just some group-think chanting of the democratic mantra that ‘regulation is good’.
I would suggest it is you, Priced_out_it_guy acting a bit too partisan. Do you listen to or view a lot of political programs?
I say this because, unlike Woodbury Renter, who has views that address both sides — if you actually read to the end of his post — you present a viewpoint clearly from one side.
No political party has the right answer to everything or else we would all be voting for it and there would not be any discussion.
Better to remember every action by every leader has an effect and every decision a cost.
Am I happy with the choices our government has taken? Absolutely not. Do I think voting for either major political party is going to prevent these types of things from happening again? No way.
You want better government? You’ve got to make it happen. Americans are currently obsessed with choosing the lesser of two evils. They should be concerned with addressing the evils of the political parties.
For example, it appears a candidate must be either a Republican or a Democrat to get elected. Why? Because we have too many sheeple. If voters were actually responsible and sized up the strengths and beliefs of each candidate, we might find we don’t need these political parties at all.
Let’s tone down the inside the beltway partisan posturing you people are engaging in. It’s time for a new approach. We have to reach across the isle (sic) and come to bipartisan agreement on what to do about this election.
Listen, I would never question any American’s patriotism. I think that is beneath the dignity of someone like myself. But, when someone is offered the opportunity to elect a war hero that suffered immensely in a P.O.W. camp and that person casts their vote for another, are they being patriotic?
Ask yourself this question and be honest with your answer.
Um, while I’m sure we all appreciate McCain’s suffering in the P.O.W. camp, I think we should be basing our decisions on who is likely to do the best job in the office, not who suffered the most for the country in the past.
While I never had the honor to serve in the armed forces, I speak for every veteran out there when I say that your comment is offensive and denigrates the sacrifice of those who defend your freedoms.
Um, I’m pretty sure you don’t speak for “every veteran out there”, dude. And if you think I was denigrating veterans’ sacrifices rather than just putting them in the proper perspective in the context of a run for office, well, there’s really no point in continuing to discuss this with you.
I would expect nothing more from a cut and run liberal. Your partisanship and negativity are exactly what America doesn’t need right now. One only needs to look beyond your eloquent words to see the underlying meaning of your comments and your attitude towards America. I have a history of reaching across the aisle and bringing people together. I’ll stand by that record any day my friends.
Who said they are veterans? They are merely retired mercenaries.
These so-called veterans are merely mercenaries. They don’t defend America’s freedom or liberty. They were sent out there because the ones who wanted you to bail out their trillion-dollar investment losses wanted to. They are the bitches of these elites.
The only veterans that I have any respect for are the ones who fought in the Revolutionary war and the war of 1812.
You claim you are not partisan and yet you cite the same BS peddled on Faux Noise. All you missed was the bogus ‘the darkies did it!’ excuse. Oh and you forgot to call him “Barney Fag”. You’re slipping, maybe you didn’t drink enough kool-aid this morning.
Mandatory deregulation of the CDS market is what ‘leveraged’ this bursting bubble into the greatest economic disaster since the Depression. Who was behind that? Phil Gramm.
Did Democrats aid and abet it? Sure. But this was, above all, the result of the GOP laissez-faire free market orthodoxy we’ve lived under the last 28 years. Just let the market do whatever the hell it wants, the invisible hand will make everything right. Well, the invisible hand just fisted us and boy does it hurt.
The polls should tell you all you need to know; the general public knows who is at fault for the current economic crisis.
I’m sure that you also voted for John Kerry in 2004, because his opponent was a cowardly military deserter.
Oh, what’s that? You voted for Bush?
Gee I guess that makes you a hypocrite.
I have a history of reaching across the aisle and bringing people together.
hahahahahaha what an asshole you are. FOAD.
It really says something about the state of our country when someone like me comes in here to try and calm things down and they get attacked mercilessly by the liberal anti-housing mob.
Deregulation did not cause this problem, it was a lack of oversight by the government. We need strong oversight of the financial industry and we need government to get out of the way of the financial innovators that drive this economy.
While I hate John McCain more than Jesus hated prostitutes, the fact is that he is very old and will likely vacate the presidency. Then Sarah Palin can step in and fix our country’s woes.
Let’s all put aside our differences and come together to support this great woman… a hockey mom just like you or me… our Truman.
The only way the general public could see who is to blame for this financial crisis is to look in a mirror.
OMG!!! Is ACORN standing behind me?
Agreed.
I threw in the towel for Mr. Maverick after his proposal to use 300B of the bailout to buy votes from underwater home-owners. It was obvious pandering and a middle-finger to fiscally conservative voters.
The thing that gets me is how his supposed “base” of “conservatives” are still going to vote for him just because he declares himself as a Republican.
But then again, perhaps that explains why lately his rallies have been drawing out all the racists and angry kooks as the intellectually honest Republicans stay home knowing in their hearts that the GOP is going to have to retreat to fight another day.
McCain had his best chance by calling for the return to fiscal responsibility among government and citizens. He could have gotten out there and said that people need to start living within their means get out of debt and let house prices come back down to reality so that people will be able to save more and have extra cash to buy toys with rather than spend it all on the house.
He could have motivated a lot of people by going that route and he would have drastically set himself apart from Obama. At present, both of them are proposing fantasy pie-in-the-sky programs that are not tenable under the current economic conditions. They are both putting out the same lines and doing the usual “he will raise your taxes I will make you richer” malarky.
If you watched the debate last night, it was obvious that McCain is desperate; sarcastically and cynically throwing whatever he can at the wall to see what sticks. Obama was pretty good at not taking the bait, keeping his cool, and giving good believable responses while McCain nervously shook and twitched with every word doodling on his scratch pad like a child with Attention Deficit Disorder.
I did get some good laughs listening to the Republican commenters hailing McCains performance as “his best” and loyally toting the water. They were apparantly watching some other debate than the rest of the country.
Obama is going to be the next president. That’s just the reality. He is an intelligent man and will certainly be better for the country and the moronic fool we have had for the last 8 years.
We can only hope that his plans come back down to reality once the chase for the White House is over and it is time to get some actual work done.
Was McCain pitching about no-bail out a few months ago? What an idiot. Well, he lost my vote now. Who are other choices besides Obama?
A vote for Bob Barr might send a nice big middle finger to the Republican party. And if enough people vote for him, they might realize they went the wrong route.
Nice post AZ.
Thanks for the laugh with the ADD comment. I thought the same thing watching the debate last night.
Agreed,
McCain is showing his colors as a wishy washy guy that will say whatever, to whomever to get a vote.
He should say something like…….
There are 275 million responsible Americans that pay rents and mortgages on time and live within their means. We need to protect them first. The folks that screwed up and can’t afford their homes are in trouble. The government will provide them shelter for 6 months after they are thrown out of the homes they never should have owned(or occupied).
We need to get you on the ballot.
Although Ron Paul is my #1 choice, writing in Ron Paul looks like a waste of vote. The following website shows the parties on the ballot.
http://www.ballot-access.org/ballot-chart.html
Ron Paul has endorsed Buck Baldwin. He is the candidate for the constituion party. Thus, writing in Chuck Baldwin mabe the last hope we all have. We need to unite on this one.
Thanks.
Thanks for the interesting link. Who knew the Prohibition Party still existed…? Craziness.
Great post, AZDavid. Well said.
Well said, AZDave.
(But “toting the water”? What’s that? Only 24 hits on Google and most are talking about literally toting water.)
Google “The Waterboy”
John McCain never really was a conservative, but trying to out ‘big gov’ the dems was a losing proposition. Trading independents for your entire base ? He never had my vote, but as a fiscal conservative, I find his shameless pandering reprehensible.
Repubs deserve to lose and spend time in the woods. Maybe after 4 years of an Obama, Pelosi and Reid monopoly, coupled with the worst economic pain since the great depression, conservative economic values will become important to people again.
God help us.
You guys are all speaking the truth about McCain. I was utterly sickened by his $300B plan. And I agree with AZ that his opportunity to claim the fiscally responsible mantle was lost the moment he went back to Washington and fought for the bailout. If he rallied against it and spoke out against propping up housing along with the general principle of fiscal and personal responsibility, I believe he could have a real shot at winning.
Instead he took the low road. What I don’t understand is do the majority of responsible homeowners want to stop foreclosures at all costs? Would they really vote against the guy who stands up and says “sorry guys, housing prices need to fall further and the government is not going to be in the business of propping them up”? The candidates polling must tell them that, but everyone I talk to (owners and non-owners) are against propping them up. I continue to scratch my head on this subject…
It certainly seems to defy common sense, doesn’t it?
How can the people be in a majority against the bailout while the politicians support it?
It’s because the politicians don’t want to bite the hands that feed them.
The politicians are merely an appendage of the people running the corporations.
The priority right now is for them to make sure that their business partners at the banks never lost a penny. In the meantime they are going to show us their crocodile tears and feign outrage while telling us that they are saving the equity of homeowners and as McCain refers to it “putting a floor under” it all.
It’s not going to fix the problem, the banks will get all their money back at the expense of the tax payers. The promises will be broken, but short memories will forget quickly.
We get the government we deserve, unfortunately.
Maureen – I am right there with you. I basically watched the entire debate with my jaw dropped. I cannot believe that McCain is supposed to be the conservative candidate. I will be writing in Dr. Paul on election day.
McCain committed political suicide last night with his “health” comment regarding abortion. Ironic that one of the stances he kept consistent with the whole time will be his undoing, rather than all of the pandering.
I’m not sure what to do with my vote. Obama will win CA in a landslide, so I guess either vote for Barr or write in Ron Paul. Or Mary Carey… Rawr.
I think that 100% financing can be very helpful for some people for their first homes. My wife and I used this with a 15y-fixed + 20% floating rate. After about 2.5 yrs we re-fi’d into a 85% 30y-fixed. We could have rented for 2 years to save a DP, but after having 7 apartments through college/grad school I was looking forward to a little stability.
I think some criteria make 100% financing reasonable:
-has to be owner occupied primary residence
-pay a higher payment than a trad 30y-fixed would be so that you develop ‘paid-in’ equity
-have lower dti (we were around 15%)
Those are summed up by high underwriting standards, which had disappeared and seem to be coming back.
That is the essence of the FHA first-time buyer programs. They allow a low downpayment (3.5%), they mandate a low DTI (31% front, 41% back), it must be owner-occupied, and it is a 30-year fixed. Also, you buy FHA insurance. The lower DTI and additional insurance costs puts buyers using this program at a competitive disadvantage to those using more aggressive financing terms, but this program also have very low default rates.
Since it is a single-source program, it is very difficult to lie and say you have multiple primary residences. During the bubble, people were buying multiple properties using different lenders and stating each of them was their primary residence.
Unfortunately, for people like yourself who succeeded using 100% financing, the program will no longer be available. The default rates for 100% financing are 4 times higher than those with even a minimal downpayment. That is why the FHA has recently stopped the downpayment assistance programs used heavily by the builders.
I understand that default rates are higher for no-down, but what is the correlation to DTI? I would bet that the correlation default to DTI would be higher than down-payment percent, up to a point.
I just checked the HUD website and they estimated affordability at 2x the loan we originally took out. Going from a DTI of 15% to a DTI of 30% will have a much bigger impact than a 0-20% dp. Then there are areas like Miami that was cruising at 50%. DTI gets extremely misleading when calculated against a teaser rate, and I don’t understand why lenders would do that.
If you want stability and your renting, I suggest:
Don’t move
100% financing may look good to you, but it is a tragedy of the commons; everyone wanting what is in their own best interest. Wanting something and wanting it right now.
When you allow first time buyers to finance 100%, all that money they would have had to save for the down payment will just be moved into the payment schedule.
As a result, the house prices will rise to whatever the first time borrowers can borrow. In other words – it inflates housing prices artificially because a large group of people are spending a lot of money that they do not actually have (demand created by credit rather than cash).
We have to understand that we are members of a society and what is always in our own best interest is not the appropriate aggregare path for society as a whole.
What is in everyone’s best interest is to have low affordable housing that is not propped up artificially by social programs.
The market prices will lower to affordable levels and people will have more money in their pockets to buy ipods with and they won’t have to use their credit cards to do it.
These social programs are nothing more than a buy-in to a scheme being promoted by the government for the benefit of big business and to keep you a slave to your house for 30 years so that you will be too busy worrying about making your payment that you will not have time to march in the streets and protest the actions of your big brother.
AZ is making a lot of sense today.
We have to understand that we are members of a society and what is always in our own best interest is not the appropriate aggregare path for society as a whole.
Wow… you sound like a bleeding-heart liberal, AZDavidPhx!!! I say this kind of thing a lot when I am talking about Wall Street greed or the broken health care system.
You underscore something I have believed for a long, long time: most Americans actually hold liberal values, but the GOP has successfully brainwashed them.
Facts: Social Security and Medicare are socialism. The VA health system is socialized medicine. Yet, no politician – not even Bush at his most popular – could radically change SS. No politician could take away Medicare.
Margaret Thatcher, as close to an arch-conservative as the UK has seen in modern history and tremendously popular for much of her reign as PM, never dared to touch the public health system.
National health care would be a boon for this country and Americans would come to regard it as untouchable. Yet we are constantly brainwashed into fearing it by Republicans whose financial interests lie in perpetuating the same bloated, inefficient system we have today.
it’s time we put the public good ahead of personal greed; we’ll all be better off for it.
IrvineRenter, I think the realtor meant “high-graded” instead of “highly upgraded”. Judging by the breakdown you offered on the previous sale history, “high-graded” (a term used in palaeontology to describe a fossil site where someone came in and stripped out the valuable or rare fossils, leaving the mess for someone else to clean up) definitely makes more sense.
If you look at the pictures on Redfin, you will find it interesting that there are sinks, baths, carpets, and countertop! What are poeple thinking to put up things like this? Why not show the layout of the home better? There’s not even a picture of the bedroom.
Given all these flippers, I’m wondering if they’re showing off how spotless the place is (most likely because nobody ever lived here)
Many people are now paying the price for dabbling in areas where they lacked expertise.
Couple that with most banking institutions who were willing (in an effort to pad their bottom line to whatever extent they possibly could) and you have the right recipe for today’s housing market conditions.
The extremes are always were we seem to find ourselves. When times are good, the American people get drunk with greed. When times are bad, we wonder how things could have gotten to this point.
As always, the truly educated investors will be rewarded handsomely as these type of markets create endless opportunities.
After so much exuberance, for so long, there are no longer any simple fixes or easy answers.
Thank you, IR, for posting this. To see an actual example of the speculation during the bubble really puts bubble prices in perspective. I think most homeowners are used to their home appreciation being due to normal economic forces, and I’m sure they continue to feel (even if a part of them knows otherwise) that the increase in their home’s price is real. This really shows that a major contributing factor in the rise in home prices that has nothing to do with reality. I wish our political leaders…oops, I mean followers, could be tied to chairs and forced to read this blog.
If this was a direct from builder purchase, the contract was likely signed and price set earlier in 2004. The 1st flipper had time on their side.
Oooooh cool CG/manga drawings in the YT video!
2/2 in QH for $549k? I don’t think so.
Yeah, I’m not a big fan of that song, but the illustrations were lovely.
“Uns, tice, fee times a mady…”
The book is now available on Amazon.
[url=http://www.amazon.com/gp/product/0615226930?ie=UTF8&tag=thegrehoubub-20&linkCode=as2&camp=1789&creative=9325&creativeASIN=0615226930]The Great Housing Bubble[/url]
IR — How do I get an autographed copy? Are you doing direct to the public sales?
IR, will you ever “come out?”
Come on: If the author of “Confessions of an Economic Hit Man,” John Perkins (A great book, by the way) could come out for sure so can you.
He already did, at least on the book jacket and at http://www.thegreathousingbubble.com/author/ .
Oh my bad. Maybe I should look before commenting. Thanks!
I think the pot of gold at the end of the rainbow is obvious. It’s right there in front of everybody but we’ve be conditioned to think it’s normal.
It’s the commissions.
Bought it front the builder, buyer agent probably made $15,000 or more to bring the lamb in for a half million dollar 2/2.
Sold it 60 days later, the RE agents split $36,600. A little more than half of what the owner made for having no skin or obligation in the game.
Flipper #2 sold it a year later, making $29,000 after RE Agent fees, which btw, ranked in around $40,800. The RE agents made as much as the owner, again, no risk, no skin, no obligation.
Flipper #3 is losing his ass. If the RE agent sells it for $500,000; the agents will split (maybe) $30,000. Maybe less if the bank is stingy on the short sale. The bank or owner is looking to lose $200,000. The RE Agents, another $30,000… if they can sell it.
and like an infomercial, but wait… there’s more.
It doesn’t matter if they sell it or not. The bank will take it back and still pay the RE agents between $20,000-$30,000 to find a buyer for the REO…
Isn’t the pot of gold obvious? This little condo has been popping out $30,000 in commissions annual like a puppy mill.
Very scary that the money used by flippers 2 and 3 was 100% borrowed! I just hope the hard lessons many people have recently learned aren’t soon forgotten as soon as things pick up again.