Realtors have developed their own language and sales techniques to manipulate buyers. The practice is so widespread that most accept this indoctrination as being the way real estate is sold. Does it have to be that way?

Asking Price: $440,000

Address: 8 Chardonnay #16, Irvine, CA 92614

Try Again — Aaliya feat. Timbaland

What would you do?
To get to me
What would you say?
To have your way
Would you give up?
Or try again

If any of you have every perused a typical realtor website, they attempt educate and inform like the IHB does. The main difference is they are not attempting to elucidate the truth, they are attempting to indoctrinate people into the nonsensical tenets of realtorspeak and kool aid intoxication. Realtors attend sales seminars and learn from other agents how to manipulate buyers through emotional appeals. The art and science of real estate sales is largely a study in the psychology of exploitation. Those that master these techniques make more money than those who do not.

During the bubble, buyers got caught up in the crazy fantasies of kool aid intoxication. Buyers wanted to believe the nonsense; they demanded it. A realtor or mortgage broker who attempted to talk a buyer out of overpaying for a particular property would lose the business to someone selling the fantasy. Making a living telling the truth and behaving morally is more difficult in financial manias. There is no reward for being realistic when nobody wants to live in reality.

The dynamics of a financial mania tend to drive good people out of the business. What you end up with are those who prospered during the mania by manipulating buyers and behaving in a completely self-centered manner. Is it surprising to see these same people call the bottom every few months? They don’t care about buyers, they only care about their next commission. That leaves us where we are today with an entire industry so completely imbued with bullshit that few recognize the truth any longer and even fewer speak it.

Realtorspeak must die. The general public is waking up to the fact that they have been lied to for far too long. If people desired duplicity, the websites and blogs of realtors would be getting much more traffic. Instead, people come to the IHB to experience an alternate reality; the truth.

Everyone was worried last week that the solitary voice of truth and reason was lost. Nothing has been lost. We would rather stick to our principles and fail than change who we are. Judging by the popularity of the IHB, now that the bubble has popped, the world is ready for a change of direction. We will lead it.

Asking Price: $440,000

Income Requirement: $110,000

Downpayment Needed: $88,000

Monthly Equity Burn: $3,666

Purchase Price: $unknown

Purchase Date: 9/29/1995

Address: 8 Chardonnay #16, Irvine, CA 92614

One of the reasons I chose this property today was because of the well-written description above. The realtor described the property accurately, featured its positive qualities, and used a minimum of flowery adjectives. There are no exaggerations, the punctuation is generally correct (There are sentence fragments), the words are spelled right, and it doesn’t employ any of the cheezy sales techniques I ridicule daily. It is possible to write a good property description without using realtorspeak; this description proves it.

I don’t know what is going on with this floorplan. Is there really only 1 bedroom and 3 baths? I think that is a mistake, but I don’t know.

Is it just me, or does anyone else think that mural is really tacky?

The owners of this property bought in 1995, but the final sales prices is not in my database. Here is what I do know:

• On 6/16/1997 they opened a stand-alone second for $40,000.
• On 11/3/1999 they refinanced their first mortgage for $201,000.
• On 8/23/2000 they opened a HELOC for $20,000.
• On 11/4/2002 they refinanced with a $234,000 first mortgage and a $10,000 second mortgage.
• On 5/22/2003 they opened a HELOC for $40,000.
• On 10/1/2004 they refinanced with a $325,000 Option ARM with a 1% teaser rate.
• On 10/1/2004 they opened a HELOC for $50,000.
• On 7/8/2005 they opened a stand-alone second for $77,000.
• On 2/10/2006 they opened a stand-alone second for $135,000.
• Total property debt is $460,000 ($325,000 + 135,000) plus negative amortization.
• Total mortgage equity withdrawal is about $250,000. I can’t be sure of the amount.

These were typical Irvine homeowners who doubled their debt and now cannot afford their properties. It is a story we have seen dozens of times, and we will see it dozens more. If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $46,400.

{book6}

What would you do?
To get to me
What would you say?
To have your way
Would you give up?
Or try again
If I hesitated
To let you in
Now would you be yourself
Or play your role
Tell all the boys
I keep you low
If I saw no
Would you turn away?
Or play me off
Or would you stay, oh, oh

Try Again — Aaliya feat. Timbaland

When Woodbury started selling, few imagined there would ever be properties available for under $300,000. In fact most imagined that there would be no properties under a million by the time it was built out. It hasn’t worked out that way.

Asking Price: $299,000

Address: 37 Regal, Irvine, CA 92620

{book6}

Over the Hills and Far Away — Led Zeppelin

Many times I’ve lied and many times I’ve listened,
many times I’ve wondered how much there is to know.

Many dreams come true and some have silver linings
I live for my dream and a pocketful of gold.

Many of us who watched the housing bubble inflate with horror knew there would be an inevitable crash. We rented; we were “short” real estate when everyone else went “long.” Most of us are still short. I will not exit my short position until it is cheaper to own than it is to rent. At that point, it no longer pays to be short. There will be a silver lining to this disaster. Those of us who wait will have an affordable home, and the economy will improve as well. California’s economy is crippled by all the debt service payments from people’s income going out-of-state. If it costs people less to own their homes, it frees up more money to be spent in our local economy, and everyone benefits.

The housing bubble has been a fascinating study in human nature. We witnessed how the perception of free money causes people to behave in irresponsible ways and take on ridiculous beliefs and attitudes. Now that the bust is upon us, we also get to witness how people adjust to the loss of this free money and all the sad fantasies it created.

There is a morbid fascination with this event. It is something between a Shakespearean Tragedy and a train wreck; it has elements of both. Whatever our reasons for paying attention, it is hard not to watch. I hope everyone has learned lessons about investment, financial management, and the virtue of living a simple life free of attachments because those themes are woven in to all these stories; although, like everyone else, I keep watching because the schadenfreude keeps me wondering, “have we seen every form of idiocy the housing bubble has to offer?” Every week there is something new.

{book2}

Asking Price: $299,000

Income Requirement: $74,750

Downpayment Needed: $59,800

Monthly Equity Burn: $2,491

Purchase Price: $443,500

Purchase Date: 3/27/2006

Address: 37 Regal, Irvine, CA 92620

I was going to comment that this is not a bad description, but then the realtor lapsed into excessive exclamation points at the end and blew it.

I need a photoshop expert to tell me if the window in this picture has been altered. Why is there an unusual break in the horizon line? and why does the tree on the right look flat?

At least the bed will protect you from mosquitoes. I think I saw one here in California once. I may be mistaken.

This property was purchased on 3/27/2006 for $443,500. The owner used a $354,600 Option ARM first mortgage with a 1% teaser rate, a $44,000 HELOC, and a $44,900 downpayment. I wonder if she was worried about a deteriorating housing market in August of 2007 when she took out an $83,000 second with Countrywide? She did manage to recover her downpayment with that one.

This certainly looks like a flip, and it has not worked out as planned. The option ARM payments have gone up, and it is probably near its mandatory recast at 110% of original value. I would estimate the actual debt on the property is close to $475,000 based on the negative amortization of the first mortgage, the second mortgage and the missed payments.

If this property sells for asking price, and if a 6% commission is paid, the total loss will be $162,440; although, the actual lender loss will be much higher.

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.

🙂

{book7}

Hey, lady, you got the love I need,
Maybe more than enough.
Oh, Darlin’, Darlin’, Darlin’, walk a while with me,
Oh, you got so much, so much, so much.

Many have I loved, and many times been bitten,
many times I’ve gazed along the open road.

Many is a word that only leaves you guessin’,
Guessin’ ’bout a thing you really ought to know.
You really ought to know.
I really ought to know.

Over the Hills and Far Away — Led Zeppelin

The rich are facing hard times; their prospects for the future are bleak. Asset deflation, taxation and future inflation are going to continue to eat away at their wealth.

Today’s featured property is a very high-end property being offered for 20% off.

Asking Price: $2,750,000

Address: 12 Prairie Grass, Irvine, CA 92603

Rich Girl — Gwen Stefani

Think what that money could bring
I’d buy everything
Clean out Vivienne Westwood
In my Galliano gown
No, wouldn’t just have one hood
A Hollywood mansion if I could
Please book me first class to my fancy house in London town

The wealthy prospered since 1980 and particularly since 2000. Just like populist cries caused the government to confiscate the AIG bonuses, the wealthy are going to suffer at the hands of a populist mob over the next several years. Much of the wealth will be taken either directly by taxation or indirectly by inflation. It is not a good time to be rich.

During our Ponzi Scheme economy of the last 25 years, taxes on the wealthiest Americans declined from over 50% to less than 35%. One of the biggest tax breaks given to the wealthy was the elimination of the inheritance tax. Rich people who die in 2010 will pay no inheritance tax; those that die in 2011 will face a 45% tax rate on amounts over $3.5 million. It seems very unlikely that the tax breaks for the wealthy passed under the previous presidential administration will survive. The inheritance tax will come back, and income tax rates will go up.

The more pernicious tax the rich will likely face is the erosion in the value of their wealth through inflation. As I mentioned in yesterday’s post, it seems likely that the FED will allow inflation to remain at elevated levels once this crisis has past. The wealthy are made less wealthy by inflation.

The affluent are out-of-favor politically, and it appears tax policy and monetary policy will not be in their favor. We can debate the wisdom and morality of these policies in the comments if you wish, but the reality is inescapable.

Asking Price: $2,750,000

Income Requirement: $687,500

Downpayment Needed: $550,000

Monthly Equity Burn: $22,916

Purchase Price: $3,200,000

Purchase Date: 5/3/2006

Address: 12 Prairie Grass, Irvine, CA 92603

Beds:	3
Baths:	4
Sq. Ft.:	4,097
$/Sq. Ft.:	$671
Lot Size:	0.35 Acres
Property Type:	Single Family Residence
Style:	Mediterranean, Spanish
Year Built:	2003
Stories:	1
Area:	Turtle Rock
County:	Orange
MLS#:	U8003594
Source:	SoCalMLS
Status:	Active
On Redfin:	223 days
Unsold in 90+ days

nestled–this word grates on my nerves when I see it in a property description.

This property was purchased on 5/3/2006 for $3,200,000. The owner used a $2,240,000 first mortgage, a $750,000 second mortgage, and a $210,000 downpayment… It still amazes me when I see tiny downpayments on houses in this price range. Prices are going to crash hard because of all this debt.

If this property sells for its asking price, and if a 6% commission is paid, the total loss on the property will be $615,000.

Most wealthy people have already lost half or more of their fortunes with the collapse of asset prices across the investment spectrum. When house prices cut in half, those who are leveraged will lose much more.

It is not a great time to be rich.

{book4}

If I was a Rich Girl
See, I’d have all the money in the world, if I was a wealthy girl
No man could test me, impress me, my cash flow would never ever end
Cause I’d have all the money in the world, if I was a wealthy girl

Think what that money could bring
I’d buy everything
Clean out Vivienne Westwood
In my Galliano gown
No, wouldn’t just have one hood
A Hollywood mansion if I could
Please book me first class to my fancy house in London town

Rich Girl — Gwen Stefani