Posted: 04 Mar 2011 07:50 PM PST
It's easy to feel sorry for the multitudes losing their houses. However, each loss is someone else's gain.
Home Address ... 6820 ROLLING OAKS CT, LAS VEGAS, 89131
People get caught up in their empathy with those losing their family homes to foreclosure. Its easy to get sucked in to the emotional stories of victimhood and believe that perhaps we should stop foreclosures.
We all forget that the distressed debtor who rented money from the bank to occupy the house and appear on title will turn over the property to a new buyer who is not as indebted. This new buyer will be able to sustain ownership under stable, government-backed financing terms.
By Doug McKelway -- Published February 24, 2011
Buyers have enormous power when there is excessive supply, particularly in a declining market. In a declining market smart sellers are extra motivated because another buyer willing to pay that price really isn't going to come along. In an appreciating market, sellers can always trade money for time. If you want more money, you simply have to wait for the marke to come to you. In a declining market, sellers do not have that luxury.
The market hasn't hit bottom. It doesn't take a genius to read a chart and see that we are making new lows.
Buyers should be skiddish, but there is a price point where the savings versus rentiing is great enough to lure buyers to the market. Very few people are renting by choice in Las Vegas despite the dropping prices. Moving from renting to home ownership with either get you 40% more home or cost you 40% less money. That incentive pushes most off the fence, and Las Vegas's sales volumes have been above peak levels for quite some time.
It won't be welcome at all by the legions of appreciation buyers in Orange County.
Merry Christmas and happy new foreclosure
I bought this house on December 7, 2010. The above was the actual picture of the property I used to evaluate it as a potential flip taken the morning of the auction.
Do you see the carefully groomed landscape and the Christmas reindeer in the front?
These people liked this house, and they didn't want to lose it. I was buying it eight days before December 15th when the local constables who handle evictions stop all activities for the holidays.
Was I going to be Grinch this year?
I always prefer a negotiated settlement to eviction. It takes too much time to evict, and the occupants aren't too careful on their way out with their belongings.
These former owners have few tenant holdover rights. If i want them out, I can have them forcibly removed in short order. In Nevada, they get a 5-day notice to get out followed by a 3-day notice before the constable arrives to remove them by force if necessary. This is dangerous work, and they do carry weapons.
Technically, they owe me rent from the day of the foreclosure sale. The typical negotiation is to offer free rent for three weeks with cash incentives if they move out quicker. The cost of money dictates that i can offer up to $500 per week if they are out early, and it improves overall revenues and profits.
I wasn't about to expedite an eviction to see if I could kick this family out two weeks before Christmas. We negotiated a deal where they could stay until January 10th if they agreed to leave certain appliances, be careful when moving furniture, leave the fixtures and fans, basically leave the place undamaged so we can do preparations for sale quickly and with limited expense.
Sue for unlawful foreclosure
We needed to exchange written documents, and they avoided meetings until it became apparent to us that these occupants did not intend to follow through on their agreement. Just before Christmas, we received a lawsuit notification, and with the justice system basically shut down the last two weeks of the year, we had no options, and the holdover owner got one last peaceful Christmas in their former dream home. I truly hope they enjoyed it. Denial has its rewards.
On the 3rd of January, we filed suit to get them removed, and after some legal finagling, we got a 30-day notice filed with a calendar set to expire in early March. These owners genuinely believed they were somehow going to keep this house. After more than two years with no payments, their house was called to auction, and now they are no longer on title. Only their bodies and their possessions remain.
As the eviction clock is winding down, we get a communication from the owners asking us if our original cash-for-keys offer was still on the table. They would get out that weekend if I gave them $1,500. Of course, my first thought is, screw you, your willing to take my money after lying to me, suing me, and generally pissing me off. Go to hell! After a few moments to think rationally, I sent Jacki over with a big smile on her face to agree to their demands.
They got out in a weekend, I got the house in immaculate condition -- I knew any loan owner in foreclosure who bothers to put out decorations and maintains their yard that well probably maintained the inside well. They did. We got the house on the market the next weekend (last weekend) with minimal fix up expense.
A bitter pill to swallow
These former owners loved this home. Jacki told me they were very bitter about the entire situation, the failed appreciation, the failed dodgy loan, the failed loan modification, the failed attorney savior. Despite the anger and bitterness, after telling their story, they were polite to Jacki when she inspected the property and paid them off.
When I think about borrowers like these, I do wish it had turned out differently for them. This particular family were peak buyers. They paid $399,991 for a property I bought 5 years later at auction for $170,000. The comps have weakened since I bought this property, and I will likely have to discount it to move it. These owners owed double what this property is worth today. What were they supposed to do?
The new family that buys here will enjoy a substantially lower cost of ownership. instead of the $2,500+ monthly cost the former owners had, the new buyer will spend less than $1,200 a month to live in this place. These people won't have HELOC riches any time soon, but they will have a cost-of-living that leaves them enough spending money that the HELOCs aren't necessary.
What is the best resolution for properties like this one? Do we give every existing loan owner principal reduction to keep them in place? Forgive the Ponzis their debts at my expense? I wouldn't feel very good about that one. Would you?
Do we allow them to squat forever and deny the new family their home? Perhaps foreclosure is a good solution after all.
This property is in a real estate development known today as Silverstone Ranch. The golf course in this project was developed by Meadowbrook Golf Group from 1999-2000. As a young, single project manager, I was making periodic trips to Las Vegas to oversee the design and construction of the golf course and clubhouse. I used to time my trips to inspect on Thursdays and Fridays and stay through Sunday night and take the red-eye home. You have to imagine I had a good time....
Home Address ... 6820 ROLLING OAKS CT, LAS VEGAS, 89131
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