How Big is the Shadow Inventory? 2750 N Seminary in Lincoln Park
This 2-bedroom duplex down at 2750 N. Seminary in North Lincoln Park just came on the market.
It has been bank owned for 11 months and, until its listing, was a part of the larger “shadow inventory.”
These are properties the banks own but have yet to re-list for sale.
The listing does not tell us anything about this property and there are no interior pictures. So we do not know if the kitchen and baths are intact.
What we do know is that both bedrooms appear to be on the lower level and the sale does not include parking.
Otherwise, the 1999 constructed condo has air conditioning and a washer/dryer hook-up in the unit.
It is also just 2 blocks from the Diversey El stop.
The unit is listed $111,000 under the 2001 purchase price.
Unit #2 in the building has also been on the market as a regular sale since April 2010.
It is priced $22,000 under the 2005 purchase price but also includes parking.
It is listed for $369,000. See the interior pictures here.
How much of an impact will the shadow market have on pricing?
Izora Hinton at Betts Realty Group has the listing. See the listing here (no interior pictures).
Unit #1: 2 bedrooms, 2 baths, 1200 square feet, duplex down
- Sold in May 2001 for $450,000
- Lis pendens in May 2008
- Bank owned in January 2010
- Recently listed for $338,900
- Assessments of $125 a month
- Taxes of $10,788
- Central Air
- Washer/Dryer hook-up in the unit
- No parking
- Bedroom #1: 18×11 (lower level)
- Bedroom #2: 12×10 (lower level)
- Living room: 17×15
- Dining room: 12×15
- Kitchen: 13×7
Shadow inventory is huge, and no – I’m not going to qualify or quantify my statement.
This one will probably get scooped up fairly quickly, but I expect similar units to probably be closer to $299 next fall as more of them become available.
Okay, I felt guilty just letting that hang there – this is why theres probably another 5-10% to come off housing prices until we reach bottom: http://www.ritholtz.com/blog/2010/10/shadow-inventory-an-avalanche-thats-coming-soon/
Always nice to kick the week off with a little “you can’t even give away condos in LP, and it’s only going to get worse” thread.
Can’t say what possessed folks to buy duplex-down two beds in not-so-hot locations in the $400-500’s a few years ago. Given what’s now on the market (aside from the ominous sounding “shadow” inv), it seems that a place like this shouldn’t go for more than $300ish. But there are indeed two beds (duplex and simplex) in the nicer sections of LP closing in the $400-500’s.
Maybe this post spurred a change in the listing, but it looks like parking is now included — a garage spot is mentioned in the details. If it’s intact, this looks like a deal to me.
I wonder what took the bank so long to list this. Bankers are losing the excuse that these things are due to a backlog in their processes due to lack of staffing: they have had ample time to ramp up their staffing to deal with these.
I hope this incompetent bank gets seized by the FDIC and their employees dismissed.
We have millions of homeless people in America and also millions of bank owned vacant housing units that comprise the shadow inventory sitting around collecting dust. Our society needs a rapid shrinking of our financial sector.
crwls and everyone else – sure there is shadow inventory of properties out there – but there is a huge shadow inventory of buyers as well. Couple this with an improving economy and you will see prices stabilize and start rising. Most people are not looking at housing as an appreciating asset/investment and are not as “negative” about housing as the people on this site. Most people have rather positive dispositions and will move when they find something they like and can afford. I SEE IT EVERYDAY. They want to get on with their lives and have 8 million other things going on to worry whether the house they paid 300k for is now 250k or 350k.
I think the shadow inventory might be comprised of fewer individuals than previously thought, but an interesting set nonetheless–aspiring former RE barons.
In viewing one short-sale listing I did indeed stumble across one with several downtown properties:
http://chicago.blockshopper.com/search?f=buyer&q=Ana%2BA%2BPesce
If 170 W Polk Unit 707 is going short sale what does that indicate about this aspiring RE baron’s other properties?
How many people are out there with 2+ properties that are all likely to hit distress?
“Couple this with an improving economy and you will see prices stabilize and start rising. ”
In my post after yours I showed how one short-sale listing led me to find a person who purchased six other properties. Imagine all of that artificial demand for housing by who knows how many of these people. I don’t think it bodes well for prices stabilizing any time soon.
If there’s just a couple hundred people like that that would be enough to be a big deal for Chicago downtown RE.
Clio, as you have stated before, you walk with a different crowd then the rest of us. Your crowd would never buy a place like this. I can tell you that people that are in my crowd / age group that would love to purchase a place in this area are saddled with massive student loans, worthless college degrees (english, art, sociology, psychology, history, communications) that have them working part time at the local starbucks, and no career path job prospects. Its going to get ugly this winter for real estate.
And you’ve got two levels of shadow inventory: 1) bank owned properties that have not yet come on the market and 2) properties in foreclosure that have not yet become bank owned.
Clio, these people who would like to get on with their lives and would like to buy when they see something they like and can afford often confront a lot of difficulties when they set about making the purchase, that they would not have encountered in, say, 2000, and discover that the credit debacle and huge shadow inventory is affecting their ability to follow through. I think a lot of those people follow sites like this.
For example, the couple mentioned here on this site by one commenter a few weeks back- they had credit scores in the upper 700s and were set to make a 50% down payment on a South Loop condo they liked, but could not get written. Why? Because, obviously, potential lenders were think properties in that area have the potential to drop a lot more. Or they perceive a lot of risk left in the housing market in general, making it difficult for many qualified people, even those with ample incomes buying properties that are cheap relative to their incomes, to get financed.
Other macro-factors that are impacting qualified people who’d like to buy are the employment picture and the economic situation as a whole. While it may look to some like we are “recovering”, most middle-to-upper-middle income people in various types of jobs feel threatened and insecure and are hesitant to make major financial commitments, for jobs are still disappearing, and incomes stagnating or dropping.
All of your comments are absolutely true – it will be interesting to see what happens to these mid-range condos/houses 300-600k. My comments are primarily directed toward mid-upper end real estate (600k+). That is a totally different market. Most of those folk are professionals that make over 200k a year. THOSE people are the ones to target (if you want to make money in real estate). I totally agree with everyone here, though, that the smaller, less expensive units are going to suffer the most. I should be clearer in my post and not keep doing what everyone else here does (make blanket statements about all real estate).
How about blanket statements about what everyone else here does?
There is also a short term shadow inventory of all the bank owned listings that were on the market and put on hold when Bank of America and others had their robo-signing issue.
“Maybe this post spurred a change in the listing, but it looks like parking is now included — a garage spot is mentioned in the details.”
The listing I saw did NOT have the parking with it but I would be surprised if this unit did not have it (given the original 2001 sales price.) So you’re probably right and it does include the parking. The REO listing agents often get the details wrong (including room sizes, finishes etc.)
Bob,
We had one condo take a year in our building for two reasons: (1) had to get a renter tenant out (apparently it takes longer to get a renter out than the owner) and (2) it needed work and the bank chose to have it fixed up before sale (I was really surprised by this..)
I wonder what took the bank so long to list this. Bankers are losing the excuse that these things are due to a backlog in their processes due to lack of staffing: they have had ample time to ramp up their staffing to deal with these.
I hope this incompetent bank gets seized by the FDIC and their employees dismissed
3) properties 90+ late but not yet in foreclosure (2.1 milliom, equaol t the number of properties in foreclosure); 4) HAMP properties of which 80% will redefault or short sales. In the hundreds of thousands of properties.
Not sure why this really surprises anyone, though – look at the success DeBeers and the like have had suppressing the diamond supply.
Oldest trick in the book, reduce supply in the face of reduced demand to keep prices level.
“Not sure why this really surprises anyone, though – look at the success DeBeers and the like have had suppressing the diamond supply.
Oldest trick in the book, reduce supply in the face of reduced demand to keep prices level.”
Either people are stupid or they’re using the 2d oldest trick in the book: Ignore facts/more-likely-scenarios in order to flog their preferred version of reality.
“We had one condo take a year in our building for two reasons: (1) had to get a renter tenant out (apparently it takes longer to get a renter out than the owner) …
I wonder what took the bank so long to list this.”
Hmmm. 11 months post-foreclosure til listing. Seems reasonably likely that the former owner leased it to someone, probably collected a deposit and a couple months rent while still not paying the mortgage and the Lender (wisely) let the tenant stay until the end of the lease. Lenders *can* evict tenants thru/post f/c, but if they can establish that the renter is a decent risk, it’s easier/cheaper to let them be, esp. given the desire to suppress inventory/”figure out the market”.
“Ignore facts/more-likely-scenarios in order to flog their preferred version of reality.”
The average mortgage delinquency rose to 495 days.
http://www.housingwire.com/2010/11/29/a-loan-in-foreclosure-492-days-%E2%80%94-and-growing
That’s a long time to foreclose. A very, very long time.
Err 492 days but you get the drift. That’s a whole lot of thumb-twiddling and sitting on that baby penguin egg waiting for Spring.
So, should having the 2 beds in the basement really give you a 30k discount? I am assuming there is more square footage in the duplex than in the simplex and some people (ok, me) might acutally be a fan if having seperate floors for bedrooms and living spaces.
“Err 492 days but you get the drift. That’s a whole lot of thumb-twiddling and sitting on that baby penguin egg waiting for Spring.”
Yeah, and that linked article goes on to explain *why*, and it ain’t because the lenders are negligently sitting on the f/c’s, it’s because the servicers aren’t inclined to generate huge losses for themselves to expedite the processing of the loans. Are you suggesting that the Feds should step in and *require* the servicers to incur losses? Or that the Feds should give them $$ to hire more staff (actually, that *might* be a decent idea, if you are trying to maximize the total +s from a jobs program)?
And, as far as funding the additional costs on the backs of the “lenders”, the RMBS just don’t have the type of special servicer provisions of CMBS which would permit the servicer to get paid extra for dealing with the issues and the RMBS are splintered enough that you have a collective action problem on getting an agreement to fund the extra costs.
“So, should having the 2 beds in the basement really give you a 30k discount?”
No, (assuming that the REO is intact and in good condition) the simplex is just optimistically priced and the REO is priced to attract a buyer.
It looks like (from aerial) the simplex is ~1200 sf and the REO is probably ~1100 above (assuming the typical lightwell to the lower near the windows) and 800-1000 below (assuming some common area utility/storage area), meaning the REO (assuming equivalent condition) *should* be about 30-40% more than the simplex–and I don’t think anyone (maybe clio) would claim that the REO is worth ~$500k.
1,200 sq feet over 2 floors is 600 sq ft per floor. These triple stacked brick doublewides usually have 1000 sq feet or more per floor. What gives?
And those taxes are INSANE. $10,000 for 1,2000 sq feet? Ridiculous.
maybe its a typo, supposed to be 2100sqft or 2200sqft?
either way, sucks for the people that are legitamately selling and decided to actually pay their mortgages
something doesnt add up with those taxes.
“And, as far as funding the additional costs on the backs of the “lenders”, the RMBS just don’t have the type of special servicer provisions”
Noone ever told the lenders that they had to package these up and slice them into securities. I am talking about a bank sitting on the sidelines not pursuing foreclosures.
“RMBS are splintered enough that you have a collective action problem on getting an agreement to fund the extra costs.”
You would think that if the extra costs are smaller than the incremental costs of sitting on REOs something could/would get done. These extra costs will just show up as additional haircuts to the RMBS holders.
“1,200 sq feet over 2 floors is 600 sq ft per floor. These triple stacked brick doublewides usually have 1000 sq feet or more per floor. What gives?”
I wondered about that too – they must be missing some of the rooms…no family room or den? Although, often those duplex downs lose half the basement floor to the building’s storage units.
ANATOMY OF A FORECLOSURE:
2001 purchase price: $450,000.00
2001 mortgage: $350,000.00
2001 Refi: $350,000.00
2004 Refi: $333,700.00
2004 HELOC: $116,300.00
2005 HELOC Refi: $150,000.00
2005 HELOC Refi: $177,500.00
Lis Pendens May 2008 on the 2004 Refi
Total mortgages: $333,700 + $177,500 = $511,200
“I am talking about a bank sitting on the sidelines not pursuing foreclosures.”
Show me a bank, holding mortgages for its own account, sitting on the sidelines not pursuing foreclosures in any meaningful way which cannot be explained largely by “not wanting to compete with its other REO sales”. This is *overwhelmingly* a servicer/agency/cost driven issue.
“Noone ever told the lenders that they had to package these up and slice them into securities.”
“Wall Street” did. Or do you not think that management responds in stupid ways to what their competitors do, in a short-sighted effort to maintain stock valuation?
“which cannot be explained largely by “not wanting to compete with its other REO sales”.”
This was the meat of my argument. By not wanting to compete with its other REO sales the bank is engaging in what could be called intentional market manipulation or even outright fraud.
“This was the meat of my argument. By not wanting to compete with its other REO sales the bank is engaging in what could be called intentional market manipulation or even outright fraud.”
No, it can’t. Hell, it *could* decide to sit on all of them, forever. Or dump them into a newco sub that rented all of them out. Or market the good ones and hold the others to sell in bulk to a 3d party operator (this is actually something I think could work, if they work out the RMBS authority issues, esp as a JV b/t the big banks–done right, that’s a potentially viable public reit).
Or would you contend that, if the bank has a PE arm and two similar-ish businesses to take to IPO, by choosing to only bring one to IPO this year, it is engaging in fraud?
“Or would you contend that, if the bank has a PE arm and two similar-ish businesses to take to IPO, by choosing to only bring one to IPO this year, it is engaging in fraud?”
Its a deceptive business practice to only selectively list a trickle of REOs for fear that putting all of them on the market may impact the overall market and force valuations lower, IMO.
Back to this place… Pat’s Pizza down the street — best thin crust in the city!
thin crust is for girls or small children
and I was not impressed when I had pats
“Its a deceptive business practice to only selectively list a trickle of REOs for fear that putting all of them on the market may impact the overall market and force valuations lower, IMO.”
Well, it’s good for capitalism that your opinion isn’t remotely close to the law.
So, when Goldman is prop trading, that they don’t offer for sale *all* of their holdings, every day, is a deceptive business practice. Got it.
“So, when Goldman is prop trading, that they don’t offer for sale *all* of their holdings, every day, is a deceptive business practice. Got it.”
Its not my understanding that Goldman is delinquent on many of the carrying costs of not offering the securities for sale. Also when you go to a car dealership they typically have whats for sale available to see. They don’t show you a side lot where only a few of the available cars are shown.
Its good though our government is complicit in helping these bankers keep the market at a standstill, however, via the GSEs and the various bank bailouts.
“Its not my understanding that Goldman is delinquent on many of the carrying costs of not offering the securities for sale. ”
Completely irrelevant to “deceptive trade practice”.
Yes Bob but the trickle out theory of foreclosures is clearly failing; it’s failing worse than they could have ever thought possible. Just when you think things can’t get any worse, they do. Prices are beginning to plummet, again, volume has dropped to a level below that of late 2008; and foreclosures don’t have the desirability that they used to. The banks will eventually change course, release a ton of properties at rock bottom prices and then volume will rise, significantly.
“#Bob on December 6th, 2010 at 10:09 am
“Or would you contend that, if the bank has a PE arm and two similar-ish businesses to take to IPO, by choosing to only bring one to IPO this year, it is engaging in fraud?”
Its a deceptive business practice to only selectively list a trickle of REOs for fear that putting all of them on the market may impact the overall market and force valuations lower, IMO.”
“The banks will eventually change course, release a ton of properties at rock bottom prices and then volume will rise, significantly. ”
I really don’t want any more bailouts going to bankers, especially one’s who incorrectly calculated on the “trickle out” strategy regarding their REOs.
“something doesnt add up with those taxes.”
If it’s been shadow inventory for a long time, then there is no homeowner exemption. And the bank probably wasn’t paying enough attention to the assessed valuation and has been overpaying the taxes. Or at least I hope Cook County was smart enough to inflate the value of bank-owned properties in the hopes that they wouldn’t fight.
“Or at least I hope Cook County was smart enough to inflate the value of bank-owned properties in the hopes that they wouldn’t fight.”
I hope not, because anything that provides a slam dunk future appeal will end up shifting the future burden to me.
That said, the assessment does not include a HO *ever* apparently and the current AV is 75,200–implying a market value of $752,000. Yikes!!
#2, with a HO, has an AV of 39,098, implying a MV of $390,980–which is pretty close to their asking price.
Imagine taking a packed brownline train to work everyday, being boxed in on both sides – shoulder to shoulder (thanks to the new New York styled seating arrangements).
Then you come home to your duplex that is sandwiched between the neighbors’ houses, with barely any air circulation on either side.
I’m an urban fellow, and am not adverse to crowds. However, I do believe in good design (whether homes or train cars) and giving proper consideration to orientation, spacing, etc.
Homedelete, how did you get all that detailed mortgage information. I am trying to find out similar information for a short sale im looking at.
“I am trying to find out similar information for a short sale im looking at.”
HD is an attorney. Hire an attorney.
“I am trying to find out similar information for a short sale im looking at.”
“HD is an attorney. Hire an attorney.”
I’m all in favor of the HD full employment act, but isn’t that stuff all on ccrd.info (can search by PIN). Sometimes HD posts not readily available info, but I don’t think this is that.
Funny observation of the day …. replace “attorney” with “realtor”. Pay up to get access to *exclusive* information that should be made available to all.
Gescob –
It’s pretty easy to pull up most of this information on the internet as it’s all public record.
If you do not have the PIN number, go to the Cook County Assessor’s website and search by address to retrieve the PIN:
http://www.cookcountyassessor.com/Property_Search/Property_Search.aspx
Then go to the Cook County Recorder of Deeds website and do a PIN search:
http://www.ccrd.info/CCRD/controller
This will pull up all the deeds, mortgages, liens, lis pendens, etc.
The “warranty deed” items will give you the sales prices over the years.
Gescob –
I tried to post links for you, but my comment got stuck in moderation…
It’s pretty easy to pull up most of this information on the internet as it’s all public record.
If you do not have the PIN number, go to the Cook County Assessor’s website and search by “Address” to retrieve the PIN.
Then go to the Cook County Recorder of Deeds website and do a “PIN Search”.
This will pull up all the deeds, mortgages, liens, lis pendens, etc.
The “warranty deed” items will give you the sales prices over the years.
As a side note, many states do not need nor require an attorney to close a real estate deal. For instance, California’s real estate closings are rarely handled by attorneys.
“If you do not have the PIN number, go to the Cook County Assessor’s website and search by “Address” to retrieve the PIN.”
Redfin, which I find easier to search, gives PINs.
“As a side note, many states do not need nor require an attorney to close a real estate deal. For instance, California’s real estate closings are rarely handled by attorneys.”
Don’t “need” one in Illinois either, but it is the custom.
Cali has everything handled by the primary leaches, which may be a little cheaper, but isn’t necessarily an improvement.
“As a side note, many states do not need nor require an attorney to close a real estate deal.”
I was a licensed real estate broker for two years, managed condo associations for four years, and began my legal career practicing in the real estate group of a top firm. The $500 I spent on an attorney for our purchase a couple of months ago was worth every penny (compared to, say, what the seller’s broker did relative to compensation).
The most important individuals in a residential RE transaction, at least from a buyer’s perspective: mortgage broker, lawyer and home inspector. None are “required” and the cost for all three combined is but a fraction of what a broker gets.
anon(tfo) – thank you for once again pointing out the *most* accurate way to explain the gist of many comments made here.
Of course you are right, one does not *need* an attorney in Illinois, and that most people use them in our state. That was the point, please put away your red marking pen for at least a day! (I do appreciate the time and effort you place in correcting many assumptions and assertions on this site however) You may have missed your calling as a 6th grade English teacher j/k 🙂
Who are the primary leaches you allude to in California? Our closing was mainly handled by the escrow/title company.
I believe one MUST retain an attorney for Illinois/Crook county closings….they are worth every penny.
I believe they are “leeches” anon 😉
“Who are the primary leaches you allude to in California? ”
broker/realtor/agent.
ps: You’re welcome. But there are *many, many* (did I mention many) people who think you “by law” must have an attorney for a real estate closing. And I am unaware of any state that actually requires that, and don’t like to (1) leave potentially-relied-upon not-quite-trues alone, as I believe that we have some lurkers who do put some weight on some things posted here, or (2) have the thread devolve into “but it’s not required in [state x]”, which often happens.
“I believe they are “leeches” anon”
Yeah. But maybe I meant that they were like heavy metals leaching out of a landfill.
But I guess that would be leachates, which does get a squiggle.
touche! “I believe they are “leeches” anon ;)”
In CA and TX they go ‘in escrow’ and I’m not quite sure what that means but my understanding is that the title company handles everything, liens, title, etc, and then they call you up when the deal is done. I’ve only had one property close in TX and it took 40 days and then in the end they say “deal closed escrow. have a nice day.”
HD, if you see that someone’s mortgage has been “released” earlier this year, and that their place is up for sale, does that mean no mortgage outstanding? I’m getting this from CCRD. The “prior document” indicated a mortgage with an amount of 235k.
Also, if I look up a PIN but see no mortgage associated with it, just a release at time of last sale from the selling party, does that mean the current owner paid cash?
Or perhaps descendants of the notable Robin Leach?
Or perhaps descendants of the notable Robin Leach?”
Well, they do have Champagne* wishes and caviar dreams.
*not Champaign. nor Urbana.
“HD, if you see that someone’s mortgage has been “released” earlier this year, and that their place is up for sale, does that mean no mortgage outstanding? I’m getting this from CCRD. The “prior document” indicated a mortgage with an amount of 235k. ”
***********Banks often fail to file timely release of mortgages, so generally, and they usually only do so after a refi, and sometimes can take months (sometimes years) to do so after a sale. CCRD isn’t perfect, you need to go to Chicago title to get a title abstract and then pay for title insurance to be totally sure. Unless you think that the owner paid off his $235k mortgage just before putting his property up for sale…I’m thinking you probably missed something. It can be difficult to match releases and liens especially when for serial refinancers.
“Also, if I look up a PIN but see no mortgage associated with it, just a release at time of last sale from the selling party, does that mean the current owner paid cash?”
***************Maybe. CCRD is up to three weeks behind on recording at any given time; often the banks are very slow recording mortgages; and you can usually tell when a house is bought with all cash. The crapshacks are investor cash only and the rich people in fancy neighborhoods will sometimes pay cash. Few regular homes are sold cash only and especially not in this environment.
Joe, most likely answers are yes and yes. Keep in mind that if the release was recent, it could have just beat the new mortgage to recording. Also, keypunch errors do occur. You can check for these by searching by the name of the grantor/grantee that you question (to see if it is recorded to an incorrect PIN.) Not foolproof, but at least offers additional assurance.
If a home is for sale as a foreclosure or straight up sale in TODAY’S market, what does it matter what the former owner or current owner paid or how they paid for it? Or, where the owner is now? None of that will get you a better deal. We have people come into showings with obviously no real interest when we ask them, but want to know about the owners situation… will this really make you like a place or get a better “deal”?
The concern should be about affordability, condition, best use, future use, tax liens, violations etc… of the property. Or, do you even like the place? Many pass on properties that others ultimately make a nice home or make money on because they know what they’re doing, what they want and what they need without regard to “what did they pay?”.
The only reason to know what someone paid is to get a gist if they can likely afford to sell at market value. But you don’t know this either because some people write $50-$100K checks to close a place while others can’t lose $10K without shorting. You won’t know until it’s officially an approved short sale or foreclosure.
If the listing price looks high, the first thing we’ll ask is “can they sell it?” not “what did they pay?”.
As for lawyers why would anyone making good money with a busy life want to save $500.00 by not using a good closing attorney when buying property in Illinois? They do all the closing paperwork, help negotiate, find closing statement errors, give opinion of title, help collect information from the county etc…
And, for the obligatory defense of weak shots taken at Realtors, plenty of people want a consultant for many reasons when buying real estate or whatever, even though some types of information is readily available and public for the most part. (I’ve been there, done that speech).
Plenty of haters show themselves to desperately need and want free consultation, information and assurances but dis. I don’t get it.
“And, for the obligatory defense of weak shots taken at Realtors, plenty of people want a consultant for many reasons when buying real estate or whatever, even though some types of information is readily available and public for the most part. (I’ve been there, done that speech). ”
Didn’t think I needed the present company excepted disclaimer.
And I come by my distaste primarily from dealings with CRE brokers, primarily in the Pacific time zone. They *all* pretend to be your friend until they get their check and then they’re vapor.
@ Eric Rojas–Well, one reason buyers looking at foreclosures may want to know this information is to ensure that the foreclosure was proper as to all other lienholders on the property. It’s important to know what was actually foreclosed (ex: first mortgage, second mortgage, mechanic’s lien, etc.). Also important to make sure that all possible interests are extinguished before buying. This is why there is inherent risk in purchasing a foreclosure in the first place, because you can get screwed if the foreclosure did not list all the necessary parties and find that your property is still subject to multiple liens.
“If a home is for sale as a foreclosure or straight up sale in TODAY’S market, what does it matter what the former owner or current owner paid or how they paid for it? Or, where the owner is now? None of that will get you a better deal. We have people come into showings with obviously no real interest when we ask them, but want to know about the owners situation… will this really make you like a place or get a better “deal”? “
“This is why there is inherent risk in purchasing a foreclosure in the first place, because you can get screwed if the foreclosure did not list all the necessary parties and find that your property is still subject to multiple liens.”
Are REO lenders really not paying for owner’s title insurance?
And, of course, knowing what the bank’s loss is going to be gives some idea of whether or not lowballing them is a complete waste of time. Also, of course, (in Cook/DuPage) not just looking up the info yourself is just plain lazy.
HD, some states (like CA) are “dry” states and other states like IL are “wet” states. Wet states fund immediately on the day of the closing. In dry states, the closing happens over several days or weeks.
For instance, here in IL, if the closing is on X date, that is when I know I need the mortgage funds ready. In a state like CA, I would need everything done a week or so earlier because of how they conduct the escrow there over several days.
There are dry closings here in IL (mostly if something goes wrong) where the parties sign the documents, but for whatevr reason, the funds can not be dispersed to the interested parties. These usually happen when you have a late in the day closing and a disagreement about something occurs and it doesn’t leave enough time for the funds to be dispersed by the end of day
Eric Rojas on December 6th, 2010 at 3:28 pm
If a home is for sale as a foreclosure or straight up sale in TODAY’S market, what does it matter what the former owner or current owner paid or how they paid for it? Or, where the owner is now? None of that will get you a better deal. We have people come into showings with obviously no real interest when we ask them, but want to know about the owners situation… will this really make you like a place or get a better “deal”?
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It’s relevant to know the seller’s situation to understand how much room they have, how quickly they can close, whether they have a gun to their head with two mortgages, etc. I put in an offer on a short sale, got yanked around for a few weeks and said never again. I had a buddy try to buy something for what was clearly a reasonable price, but the sellers couldn’t come to the table with the cash necessary to satisfy the second mortgage and tried extracting another $15k out of him (after accepting his offer) due to their inability to close.
After my short sale experience I checked the CCRD site before I spent my time and the selling realtor’s time in going to a showing because I didn’t want to be in a spot where I wanted to make a reasonable offer only to be told that, while it was reasonable, it was below what the seller could take because of their mortgage situation.
“If a home is for sale as a foreclosure or straight up sale in TODAY’S market, what does it matter what the former owner or current owner paid or how they paid for it?”
Eric – I have often said this same thing time and time again.
While the others make good points of why it is important to know, I think you and me both know that most people use this knowledge to try UNSUCCESSFULLY to get a better deal. Often, in the past, when someone would low ball me on one of my properties they would follow up the offer by saying that they knew I had room to move b/c I didn’t have a mortgage!! It used to INFURIATE me – like I was being punished b/c I paid off the mortgage. Then I realized that I didn’t need to cave in to the pressure and just stick to my price. If they don’t meet MY price, screw them. This has worked out very well for me – believe me, for every 10 cheapskates, there is always 1 person willing to pay the price to live in a place (especially if that is a desireable place in a desireable location).
You know what I’m always wondering about you Clio? Is why are you letting emotions even come anywhere near business transactions. You talk constantly about being angry, pissed off and infuriated when someone DARES to use what they think is leverage in a business deal.
I mean, why get angry? Laugh in their face, tell them have a nice day, and don’t let the door hit them on the ass on the way out. Emotions, especially the negative ones you constantly espouse, are a waste of energy when it comes to business. Yet it seems you’re constantly indulging yourself in emotional responses.
“Emotions, especially the negative ones you constantly espouse, are a waste of energy when it comes to business. Yet it seems you’re constantly indulging yourself in emotional responses”
This is great advice – but easier said than done. We are who we are – I’m a very sensitive person who probably shouldn’t be in business at all – but I’ve done ok…. just have to remember to keep those emotions in check.. oh, and also have a great outlet to vent.
@ Kevin and Permabear, (anon…ha)
Thanks for the comments and I see what you are getting at… if they paid “X” and now can’t afford to sell or the place has violations etc…, than it’s not worth going or offering.
But I think you miss my several points:
First, “what does it matter what the former owner or current owner paid or how they paid for it? “…or where they are now?”.
It doesn’t matter what they paid or where they are now especially for a foreclosure (the old owner is GONE). The above has nothing to do with due dilligence concerning price, condition, ability to sell, violations, liens etc… Those are separate and sometimes legal issues from how much that owner paid. If an owner is in NYC sitting on a property in Chicago, the deal you get does not depend on him being in NYC or Chicago. That was my point. He may owe 100K more than property is worth but can still sell it. Or he may have a ton of equity and not negotiate.
Secondly, I also make your points about why to get public information in my rant… that the reason to check information on a property is for “ability to sell” which is not always dependent on what they paid. The available public information may get you half the story at times as has been noted above by some legal and lending experts.
And I qoute me:
“The concern FOR THE BUYER should be about affordability, condition, best use, future use, tax liens, violations etc… of the property. Or, do you even like the place? Many pass on properties that others ultimately make a nice home or make money on because they know what they’re doing, what they want and what they need without regard to “WHAT DID THEY PAY?”
Getting a deal done as a buyer and “what did the sellers pay?”, “where are the sellers?” are mutually exclusive if the owner has the ability and want to sell or if the bank now owns it.
A long time ago, I had gone to a listing appointment with all the public records, knowing what the owners paid, their public mortgage info and knowing what we really could sell for in the market. From the info I had, I felt they should be able to sell if they were serious.
Then, it turns out the clients have a second mortgage not recorded in public records and BAM, no ability to sell. These days I usually get all that information on the phone before going to the home so we can start creating a plan and getting sellers in touch with the proper resources.
So, yes, there are many ways to preform due dilligence. Most good agents in my market can give you the whole scoop in a simple phone call. Most well priced foreclosures go FAST, so the buyer is willing to take the risk and reward even with some issues. But, you may never get an “REO” agent on the line for the scoop (as I have not a few times with large inventory agents in Logan Square, Avondale properties for example) so it’s buyers beware and it’s up to you to get help from a buyers agent or legal advice if needed.
There are listings that hit that actually are a decent price and things seem to check out with the seller and they really want to sell. But it may turn out the seller can’t sell anyway due to any number of unfortunate and sudden reasons.
However, knowing what the seller paid for the place or “where they are”, to my point, is irrelevant to the current market value and putting a deal together. Sorry, it’s annoying to take two hours of a day to show a property, ready to answer questions about the property and neighborhood only to get a weird attitude and questions about the seller (from someone acting as if they have no interest in the property or neighborhood anyway).
What will get a deal done is a written offer and negotiations that deal with the interests of each party and the facts, not assumptions about the sellers and arbitrary positions.
Permabear, In a perfect world, sellers would not accept a deal they can’t close, but it’s gonna happen in our world even with the best intentions. It may even happen when experienced buyers ask all the right questions.
And Kevin, a decent RE attorney will give opinion of clean title and to anon’s point, you won’t get screwed by “unkown liens” if the title is insurable (and opinion was given prior to that).
This is a deal, no matter what the nay-sayers say. This will be bought pretty quickly.