Category Archives: House Flips

Duet Update 1

This was first posted on September 11, 2007. Now our desperate sellers are considering becoming floplords. They haven’t moved much on the price, but now they are offering the unit for rent at $2,395. If this is a fair rental rate (it probably is), then the property is worth about $382,300 with a gross rent multiplier of 160. The rent finance value would be $378,914 assuming a 6.5% interest rate. Basically, this unit is still overpriced by about $200,000. Perhaps they can hold on until about 2025 when a rent of $3,620 will justify their asking price.

You got to keep them separated

Come Out And Play — The Offspring

Have you ever stopped to contemplate why a detached home of similar size and character sells for a significant premium over attached product? It isn’t just the noise. In my opinion, there is a deeper psychological issue in play here. There is something about being able to clearly identify a specific object as “mine,” that you cannot obtain from an attached condo. Intellectually, you might know there are property lines at the walls, but when you look at an attached condo, you see one massive building you only own a part of. It is not as emotionally satisfying.

Today’s property is a detached condo. This kind of product obtains the highest possible density in a detached format. There are versions that get higher density than the property shown, but make no mistake, these properties are tightly packed.

New Asking Price: $579,000

Old Asking Price: $589,000

Income Requirement: $147,250

Downpayment Needed: $117,800

Purchase Price: $634,000

Purchase Date: 9/25/2006

Address: 40 Duet, Irvine, CA 92603

1st Loan $507,200
Downpayment $126,800

Beds: 2
Baths: 2.5
Sq. Ft.: 1,145
$/Sq. Ft.: $514
Lot Size: –
Type: Condominium
Style: French
Year Built: 2004
Stories: Two Levels
Area: Quail Hill
County: Orange
MLS#: S504277
Status: Active
On Redfin: 4 days

From Redfin, “QUAIL HILL BEAUTY IS TOP OF THE LINE!! If your clients are looking for style, here it is. Two SEPARATE MASTERS plus COMPUTER NICHE and roomy PRIVATE stone PATIO create a perfect retreat from the world. Walk to Starbucks, market, shops, three pools, tennis, parks, even a GYM. Tucked away just outside the gates to Shady Canyon and near the new Kaiser hospital, all major highways and nearby Laguna Canyon, the BEACH is just a latte away. Look at pix. This place has CLASS!”

Intermittent CAP lock PROBLEM…

Notice how roomy the roomy patio is? I guess if you get a 12′ x 12′ exterior space these days that is spacious. Sitting in a cavern surrounded by two story walls isn’t my ideal retreat from the world.

What are pix? Is it classier to say pix or pictures?

Do you think many families with household incomes close to $150,000 that have $117,800 in the bank will want to live in a cramped 2/2? IMO, this is the kind of property someone making close to the median income should be able to afford. You could probably rent this place for $2,400 to a stable renter, so the gross rent multiplier of 160 puts the value at $384,000 for an owner occupant. The income requirement would be $96,000.

Just for the record, this was not a particularly good investment. After one year of ownership, if the seller gets his asking price and pays a 6% commission, he stands to lose $80,340.

Since this post was on Duet, I thought I would share with you what is, in my opinion, one of the finest guitar duets ever performed: Boston — Hitch a Ride. The duet starts 2:30 into the video.

Link to Studio Version

I didn’t know Brad Delp died this year. 🙁

Day is night in new york city
Smoke, like water, runs inside
Steel idle trees to pity
Every living things thats died

Gonna hitch a ride
Head for the other side
Leave it all behind
Never change my mind
Gonna sail away
Sun lights another day
Freedom on my mind
Carry me away for the last time
Oh yeah

Life is like the coldest winter
People freeze the tears I cry
Words of hail their minds are into
Ive got to crack this ice and fly

Gonna hitch a ride
Head for the other side
Leave it all behind
Never change my mind
Gonna sail away
Sun lights another day
Freedom on my mind
Carry me away for the last time
Oh yeah

Lonetree

The heart is a bloom

Shoots up through the stony ground

There’s no room

No space to rent in this town

You’re out of luck

And the reason that you had to care

The traffic is stuck

And you’re not moving anywhere

Beautiful Day – U2

We are running out of land. There’s no room, no space to rent in this town. You’re priced out forever, you’re out of luck — or so you thought. The market is stuck and houses are not moving. Don’t worry, it’s a beautiful day…

When Zovall first started this blog, he profiled many attempted flips. As 2006 gave way to 2007, there were fewer and fewer people making the attempt. Today, we have one complete with a WTF asking price. But what do we know. The seller is a realtor, and realtors know more about housing than we ever will…

Asking Price: $729,000

Income Requirement: $182,250

Downpayment Needed: $145,800

Purchase Price: $639,000

Purchase Date: 1/17/2007

Address: 211 Lonetree, Irvine, CA 92603

First Mortgage $510,900 WTF

Downpayment $128,100

Beds: 2

Baths: 2

Sq. Ft.: 1,500

$/Sq. Ft.: $486

Lot Size: 1 sq. ft.

Type: Condominium

Year Built: 2004

Stories: Three or More Levels

View(s): City Lights, Hills, Mountain, Has View

Area: Turtle Ridge

County: Orange

MLS#: L25056

Status: Active

On Redfin: 18 days

From Redfin, “Beautiful Dramtic Corner Town Home! No One Lives Below or Above, Double High Ceiling! Lots of Windows, Light, Warm Open Floor Plan, Highly Upgraded, Gorgeous Hardwood & Slate Floors & Seagrass Carpet, Slate Fireplace Surround, Designer Paints, Fabulous Designer Kitchen, Stainless Kitchen Aid Appliances, Concrete Counters! Loft Landing Office Area With Mountain, City Lights View. Master Suite With Walk In Closet Wth Mirrored Door. Enchanting Ceiling Fan, High Ceiling Master Bath. Covered Patio Off The Living Room. Laundry Room, Double Car Attached Garage with Built in Closets( Not Tandem) Community Pool, Spa, BBQ. Across Street, Park with Tennis Courts, Many Sports Fields and Activities.”

What Is The Deal With Title Case Writing? I guess it is more Dramtic.

What is Seagrass Carpet? Do you eat it, mow it, or smoke it?

Concrete Counters? Do you prepare your food on the sidewalk?

I guess we should not be too surprised. Turtle Ridge is the last place in Irvine where the kool aid is free flowing. Apparently, this seller has not seen the recent developments in Newport Coast. The high end is not immune, and people are simply not willing to pay ridiculous prices for Irvine tract homes. This seller wants over $700K for a 2 bedroom condo. WTF! I guess it is under $500 / SF, so it must be a bargain, right? If she gets her sales price and pays a 3% commission (she would make the other 3% as listing agent), she stands to make $68,130.

This will be a real test of your sales abilities. Good luck with that selling price, you are going to need it. Feel free to contact us if you succeed. I will post an update.

BTW, Trooper posted this hilarious video in our forums. Enjoy…

Seron Aid

Did you see the lights

As they fell all around you

Did you hear the music

A serenade from the stars

Wake up, wake up

Wake up and look around you

We’re lost in space

And the time is our own

Did you feel the wind

As it blew all around you

Did you feel the love

That was in the air

The sun comes up

And it shines all around you

You’re lost in space

And the earth is your own

Serenade — Steve Miller Band

Wake up, hear the music, open the wondows and blinds, see the sun, feel the winds of change hitting the housing market. It’s a new year, and sellers are still lost in space, but some have come down to earth, and they are bringing prices down with them.

Asking Price: $524,900

Income Requirement: $131,225

Downpayment Needed: $104,980

Purchase Price: $690,000

Purchase Date: 3/22/2007

Address: 14571 Seron Ave, Irvine, CA 92606

First Mortgage $552,000

Second Mortgage $138,000

Downpayment $0

Beds: 3

Baths: 2

Sq. Ft.: 1,430

$/Sq. Ft.: $367

Lot Size: 5,000 sq. ft.

Type: Single Family Residence

Style: Traditional

Year Built: 1974

Stories: One Level

Area: Walnut

County: Orange

MLS#: S516510

Status: Active

On Redfin: 4 days

From Redfin, “Great College Park home. Fantastic Location. Newer furnace and A/C, recessed lighting, newer kitchen counter, sink and faucet. Scraped ceilings, upgraded baseboards, wood trim, berber carpeting, 16 inch tile floors, ceiling fan, Newer Milgard double paned windows/slider, newer roof, remodeled master bath, and MUCH MORE. A MUST SEE FOR THE PRICE.”

What does it mean that certain features are “newer?” Newer than what? Does that mean it is too old to call it new, but new enough that they want to get some credit for it?

Upgraded baseboards? Give me a break.

Now before we all get too excited, this is a 100% financing deal gone bad — probably fraud, and the bank will not want to sell for less than the amount of the first mortgage of $552,000. I wish I knew more about the circumstances of this property. It may be a first-payment default fraud, or it may the dumbest flipper on the planet. This house was purchased as the implosion of subprime was front page news. If this was purchased as a flip, we can all feel the schadenfreude.

This price is 24% off its 2007 purchase price. If the seller gets their asking price and pays a 6% commission, the total loss will be $196,594. Wow! The second mortgage will be completely wiped out, and the first mortgage will lose $58,594.

Do you think this seller put up a very low price to catch the attention of the IHB and get some free publicity? If so, it was a good plan.

Serissa – Why pay more here when you can get a brand new home (exact floorplan) in Woodbury for less

Originally posted January 27, 2006

Address: 52 Tea Garden, Irvine, CA 92620 (Northwood)

Plan: 1600 sq ft – 3/3.5

MLS: S442227 DOM: 246

Sale History: 11/27/2004: $754,000

Price Reduced: 06/13/06 — $899,000 to $859,000

Price Reduced: 06/24/06 — $859,000 to $848,000

Price Reduced: 07/17/06 — $848,000 to $819,000

Current Price: $819,000

First, we’ll look at the flip. Here we’ve got a Plan 1 in the Serissa tract built by Lennar in the Village of Northwood. I believe this particular area of Northwood is called Northwood II and it consists of 4 neighborhood tracts that were built around 2003-2005 or so. This home was purchased from the builder for $754,000 in November 2004 (Phase 5). The private remarks on that listing were “This is a model leaseback opportunity. Rare to buy new home on the Irvine Ranch with no owner occupancy requirement. Builder will cover monthly PITI&HOA until the end of June 2005. 2% referral fee paid for escrow that closes no later than November 30, 2004. Please call with any questions, or come and see our beautiful models. Thank you!” I find it strange that the builder was advertising this on MLS at that time.

Lennar found a buyer who came up with a 20% down payment and took out a mortgage for 80%. This buyer purchased the home as an investment property. Perhaps he leased it back to Lennar for a few months. Then he found a new tenant (MLS S397784) to rent it for $2900/month starting in May 2005. I don’t know how $2900/month would cover a $600k mortgage + taxes + HOA. But those were good times and the property probably saw some huge appreciation (on paper).

Anyways, a year later (after the 12 month lease was up), this investor placed the home for sale in May 2006 (just in time for the peak summer buying season). The initial asking price was $899,000. That would give him a nice $150k profit (excluding commissions). Unfortunately for him, the market did not like that price. After a few price reductions during the summer (the investor knew he needed to find a GF that summer), the price stabilized at $819,000. Soo.. for the last 6 months the price hasn’t changed. Why not? Maybe he doesn’t want to lose money on the sale. Perhaps he thinks he’ll wait out the downturn and in the meanwhile just bleed a little money since the unit is rented out.

The private remarks on the current listing state: “VEry VEry MOtivated SELLER!!! REduCEd THe PRICE , REduCed And REduCEd, Now offering 3.5%, yes 3.5% to the buyers’ agent. SHOWS like a model!. MOTIVATED agents.” If sold at the $819,000 asking price and assuming 7% in selling costs, this investor stands to make a whopping $7,000 profit!

Here’s the competition in the Serissa tract:

48 Bamboo – Plan 1 – $798,000

37 Wonderland – Plan 1 – $789,000 (Thanks EvaLSeraphim!)

45 Bamboo – Plan 2 – $819,000

47 Secret Garden – Plan 2 – $849,800

43 Secret Garden – Plan 2 – $849,000

68 Shadowplay – Plan 2 – $869,000

62 Shadowplay – Plan 2 – $879,000

Unless there’s a considerable difference in upgrades or location, our seller will have to adjust the price at least once more. It gets better (or worse)… Thanks to IRVINITEEE, I learned that the Serissa tract is pretty much the same as the La Casella tract in Woodbury. La Casella has just started to sell their homes and from what has been gathered in the thread, the Plan 1’s that just sold started around $690k. That is $130,000 LESS than what our featured seller is trying to unload 52 Tea Garden for.

How will the La Casella sales affect the appraisal values for Serissa? Anyone hear the sounds of instant equity evaporation?! Lennar has priced Phase 1 of La Casella in Woodbury (a full Village with a ton of amenities) in January 2007 to be lower than Phase 5 of Serissa in Northwood II which was sold in November 2004! (I am comparing $690k to $754k) As has been stated before, the builders are going to do whatever it takes to move their product.

UPDATE #1 – February 2, 2007

Thanks to a tip from EvaLSeraphim in the comments, I’ve learned that this property has been relisted.

MLS #: S473840

The asking price is now $799,000. With 6% in selling costs, the seller will be about $3,000 in the hole. Will a $20k reduction in price help sell this place? I doubt it. But only time will tell.

UPDATE #2 – December 28, 2007

52 Tea Garden is still on the market (it’s been on the market under various MLS listings since May 2006). Here’s the latest listing: S494270

The new asking price is $759,000 which is about the same as what the investor purchased it from the builder for in November 2004. It’s yet another example of a seller chasing the market down. Had this property been priced at $759k in May 2006 it probably would have been sold.

Here’s what happened to the other properties in the original post:

48 Bamboo – Plan 1 – Sold for $746,500 on 4/24/2007

37 Wonderland – Plan 1 – Reduced to $749,000 and then the listing expired

45 Bamboo – Plan 2 – Sold for $800,000 on 4/3/2007

47 Secret Garden – Plan 2 – Sold for $792,000 on 8/7/2007

43 Secret Garden – Plan 2 – Sold for $800,000 on 7/20/2007

68 Shadowplay – Plan 2 – Asking price is now $800,000

62 Shadowplay – Plan 2 – Reduced to $814,900 and then off the market

And here are a few other properties that are on the market in the Serissa tract:

20 Shadowplay – Plan 2 – $838,880

60 Shadowplay – Plan 3 – $875,000

35 Secret Garden – Plan 2 – $849,000

27 Wonderland – Plan 2 – $675,000

61 Wonderland – Plan 1 – $699,900

27 Wonderland (short sale) and 61 Wonderland are definitely going to make it harder for the rest of the sellers in the tract.

Silver and Gold

Silver and gold, silver and gold
Ev’ryone wishes for silver and gold
How do you measure its worth?
Just by the pleasure it gives here on earth

Silver and gold, silver and gold
Mean so much more when I see
Silver and gold decorations
On ev’ry Christmas tree

Silver and Gold — Burl Ives

It has been a while since I have come across a truly jaw-dropping WTF listing price. When someone in Turtle Ridge prices that way, it can be written off as a mass delusion from the free-flowing kool aid dispensed in the area, but when someone lists at a ridiculous price in the midst of foreclosures and declining prices… well, that takes a special kind of greed and foolishness. Perhaps the silver and gold they were looking for in Rudolph the Red-Nosed Reindeer is buried in the back yard?

Asking Price: $1,059,000

Income Requirement: $264,750

Downpayment Needed: $211,800

Purchase Price: $479,000

Purchase Date: 10/16/2002

Address: 337 Tall Oak, Irvine, CA 92603

1st Loan $401,100
Downpayment $77,900 WTF

Beds: 2
Baths: 2.5
Sq. Ft.: 1,800
$/Sq. Ft.: $588
Lot Size: –
Type: Condominium
Style: Spanish
Year Built: 2003
Stories: Three or More Levels
View(s): City Lights, Hills, Mountain, Panoramic, Has View
Area: Quail Hill
County: Orange
MLS#: S512657
Status: Active
On Redfin: 6 days

From Redfin, “This superbly appointed single detached home was customized by a senior exec. w/ the homebuilder. Every detail was considered w/ the goal of making this home not just a notch above the rest, but THE BEST. An entertainer’s delight, this designer-inspired home has commanding views, and an innovative flr plan that has every bldr & seller upgrade imaginable, incl. a 2nd fl. deck w/ custom blt-in furniture, stainless Viking BBQ, fully mature garden–the largest in the Ivy Wreath–spa, fountain, & fire ring! “

So let’s put this in context: Quail Hill is getting killed. We have documented REOs (here, here), a group of three bedroom condos priced $350K to $400K less racing to the bottom, and more rollbacks than I can bother to link to (look here), and yet this place has more than doubled in value. Pricing in Quail Hill is falling below the $400 / SF mark and trending lower, but this property is supposed to be worth $588 / SF?

WTF?

I can’t fathom the metric they used to come up with this price. It clearly isn’t based on comps. Perhaps it is an ego listing, or perhaps they commissioned their realtor for a special rectal extraction.

In fact, that is my challenge for you today: please tell me how someone could possibly arrive at this asking price.

The winner gets a free pitcher of kool aid.

Perhaps it is the $500K view of Quail Hill Boulevard and the apartment lights?

Irvine Housing Blog

Established September 2006