From a housing investment board (great insider reading!) - here's a post from a would-be flipper in Tucson. You know this is going on around the country (and perhaps the world). Thanks GF for the link.
I purchased a home in south Tucson (Vail) through Chris Szabo and closed on it 1 month ago. The market is flat and there is now competition and plenty of homes for sale in my neighborhood. I had planned to flip this right away but I have had NO offers and very FEW lookers. I'm feeling seriously burned and need out!
Here are the numbers:
Payments (all inclusive): $2500/mo first payment due 7/1
Loans (100% financing): $299k
Lowest competitor on mkt priced at $298k and not sold.
If I COULD sell it at $299 I would lose the RE commissions and closing costs estimated to be about $14K. Of course, the longer I hold it that $2500/mo starts to really add up. I want to prevent getting even deeper into this.
I need to either dump this asap and take a sickening loss or...? Should I contact the lender and tell them I can't make payments? What would foreclosure/ short payoff/ deed in lieu do to my credit? Given the way the market is going(looks flat) is it worth it to try and lease option? Can you think of any other options?
I acknowledge I have made a huge mistake so please no flames. I know there are great minds on this board so any help would be greatly appreciated.
and this follow-up
No exit strategy. Bought on speculation and made big mistake. Will never do this again! $1500/mo will kill me over a period of a few years. Reduction in price seems to be a reasonable strategy. Hope it works!
June 25, 2006
Feel some flipper panic - here's a real situation from Tucson, Arizona
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48 comments:
pain, panic, fear, greed, stupidity and ignorance all wrapped into one big taco
Stupid FB jumped from the 10th floor and tells us as he's passing the 8th; "So far so good!" He doesn't have a clue just how screwed he is.
Swimming without a suit he's worried because the water is no deeper than when he jumped in. He's never even seen a tide before. Near as I can tell he's losing about $200 a day and the best advice was to lose only $100 a day for years or roll it all up and lose another $20,000 now.
Get a big freakin' signature business line of credit and bring it to the closing. Same upfront hit as a short sale but no tax consequences.
Keith,
It just strikes me that as you ridicule flippers (granted I am not one of them and I am glad speculators are leaving the scene), that you did exactly the same.
Didn't you sell your house last year for a hefty profit and are now praying for a crash and looking at the best opportunity to get back into the market?
I think that qualifies as someone who just wants to get rich quick.
Don't you?
Hypocresy abounds.
"Hypocresy abounds"
So does poor spelling!
Advice: eat the loss monthly since you cant afford to sell it for 200k and eat a $115k loss right now. Put in a renter and lose $1500/month, and use the passive loss if you can.
Tucson is a dump. Run away from that armpit.
I thin Robert has the right idea. Dump it!
Tucson and Phoenix are both hot stinky ovens not worth living in if the prices were 1/4 what they are today, dump and move.
"NO EXIT STRATEGY"
This is the exact reason that RE is such a bad investment, it is not like a stock or ETF where you can put in a STOP LOSS, no one want's to look at it but your house value could go to zero, yes zero, houses were worth almost nothing in the GREAT DEPRESSION!
Homes across the country are worth 30-40% of what they are being offered for, if you can't get that kind of price, don't buy, invest in safe things like stocks, ETF's, CD's, investments where you can check your BALANCE!
Keith, what blog did you find this story on? I think we all want to pay it a vist and leave our 2cents. thanks, ptf.
....Hahahahaha... oh oh, too much laughing has cut off my breathing circulation! This nit wit just made my day!
Can anyone here picture this a-hole doing the Homer panic shuffle all the while mumbling in a high pitch voice and looking in all directions for a place to run??
Now imagine a million panicing dancing Homers!
The last one in are always hurt, be it homes, stocks, gold, whatever. The reason that RE is a good investment is because you can live in it until the markets comes back. And it always has.
One of the responses on that board was for the FB to take out a 15 year neg-am, interest-only so he can cashflow until appreciation catches up and bails him out.
That one response shows two things:
1. why prices aren't budging right now
2. how long this bust is going to last
Just a warning to all the vultures eager to jump on 20-30% price-cuts: This is going to last a long time and go deeper than you expect.
>>F@ck these "investors!" They can rot in hell for making housing unaffordable for regular folks.
More than the investors, I blame the silly types of loans available to people. That's what drove up the price of houses. A bunch of people buying way more house than they can afford.
more then likely, this will not be a national crash. The last one was about 1890 and all real estate is local. As I have stated before, the market in Md is still good. Not the craziness of last year, but still good
I agree that gloating over the market will solve nothing and getting what one wishes doesn't either. A melt down in prices, rising intererst rates and inflation, high unemployement and such affects everyone. Take Phoenix, if one out of three dollars is really generated through real estate we can watch to see what happens there to get a clue on every where else.
I'm scared so I slow my spending, one less coffee, one less meal at a resturant, one less weekend trip out of town, multiply by millions and who many jobs will be lost? Then what? Take all those millions without jobs and then those with jobs pay more to support the unemployed in taxes and then they have fewer dollars to spend leading to more unemployed etc.
Like it or not the modern economy is built on consumption. When we run out of room for expansion that will only lead to a war to mop up excess capacity (bomb a few cities to the ground and start over) or a Great Depression, social unrest, dictatorships and war (WWI< WWII). Those who think they are safe by not owning? How? Do you have your $100,000 in cash? Banks don't have the cash to cover their deposits. During the depression the first wave lost their inflated assests, the second wave lost their jobs, their homes, their savings.
Those bloggers on this site who glee in the misfortune of others and think an economic meltdown will provide them with great opportunities (at the expense of the losers) are deluded. Either you'll be unemployed as well, or loose your cash with the collapsing banks, or you'll be no better than the investors who were looking to make it big flipping houses, where is the moral difference?
Also for those who like to some how pick a person's comments (like above) about spelling, this is a blog, not a school paper, people don't worry about typos, we worry about content and viable discussions on what the market is doing, what people are doing, what solutions we have to protect our assets. I would think most of the people on this site are not investors or flippers but normal working class people who just want a descent, affordable place to live.
Here's something to look out for next month. In California, Southern Cal. Edison is getting ready to place a five level Killawatt charge on every customer.
This means that depending on how much electicity you use each month you pay a higher cost per killowatt. the highest rate is about 50 cents per.
For those of you in SoCal who bought those 3500/5500 square foot homes in the inland empire, you are screwed! people who have to cool this homes will start paying double in July.
A lot of these people will start getting bills approaching $1,000 soon.
Now, how will this effect California home prices in Riverside and San Bernardino Counties??????
Stay tuned and watch the housing numbers for Aug. Sept.
foxwoodlief you are keyboard comado type of guy. probably don't have any life beside this blog. why don't go and do something to yourself. RE in USA is doomed.
"Keith,
It just strikes me that as you ridicule flippers "
I bought a house to LIVE in it. I loved my loft. But when things got crazy, I got out in July 2005. Why? Because I knew for certain my place would be worth less down the road than it was that day and didn't want to sleep in a place "costing" me paper wealth every night
plus I knew I could rent for pennies on the dollar.
I'm not a flipper. I'm a bubble sitter.
I love when he asks how walking away from a $300,000 loan without making a payment will affect his credit.
This guy is probably maxed out on credit cards, auto loan etc.
I'm starting to notice more conversations at work and other places involving people being stressed out about how much they have to pay for everything every month.
When I was a kid my father got laid off from his job and although he was only out of work 7 weeks the stress and anxiety that went through my house is something that affected me very much then and is still an unpleasant memory today.
I hope Mr Flipper doesen't have kids because the're parents under intense stress affects them more than doing without the latest toy.
Vail houses rent for around $900-$1000/month. A year or two from now he'll be lucky to get $200K for his house. He'd better sell quick. But he won't, he can only maximize his own pain. Oh well.
It’s hot here in most of California. That new electricity charge structure is going to screw us. My business has lower returns every month, my expenses are skyrocketing, I am cutting back to make ends meet.
My business has lower returns every month, my expenses are skyrocketing, I am cutting back to make ends meet.
I have a solution: Raise taxes. It works always (at least in Hollywood movies). In general, taxes in CA are too low. Besides, if you lower taxes there is a big danger that the tax revenue increases (this is happening now in federal level - yes the Bush tax cuts are increasing tax revenue).
Rob Reiner, where are you?
>>>Most of you flaming this guy aren't looking at the big picture. He's a little guy trying to make a buck not a big fish who caused all this.
No, him, and others like him caused this. This bubble has been driven by every real estate agent owning 5 houses, and bartenders and waitresses flipping houses. I know a few software engineers who spend more time on RE deals than writing code....
This bubble is one by the little guy....
I don't care if I do lose my job when the greed culture collapses. It will be worth it to see the people hunt down and kill the republicans who promote it.
What will happen to local goverments as property goes down? Will people that own there property see a rebate or will states raise taxes to cover loss taxes?
Yeah anon, there aren't other political "greed" parties besides the Republicans..........you need somebody to give you a brain transplant and maybe you will figure out the Robber Baron's stabb deep and twisted.
The Bush "Tax Cuts" are not raising Federal revenue, Federal Revenue is raising because the Recession ended. Guess what anon? Federal Revenue for 2007 is going to fall in the crapper. Adjusted for inflation, Federal Tax revenue is STILL off 150b from the dot.com peek in 2000.
Your a "Laffer" dweeb.
I can't want to see it stuck to these flippers that come from vulturfornia and swarm to all these nice, low-cost cities in Oregon, Idaho, and Arizona and ruin it for the people there.
Well i m fine. lost all my money shorting the homebuilders a year to early. I know what pain is. I saved ever since i was young got out of college last year and shorted the crap out of the builders and lost 90%. I made it all back in Gold Calls on GFI.
Think of what is happening to GM. That is what the home sellers are going to have to do. 0 down and 0% rate with a free year of gas. They still cann't sell and for GM it only gets worse. When people send back the keys to the house they are going to send back the keys to the car to. There's going to be killer deals on both in just a year or so.
I respect the Tuscon dude asking for advice, the problem is that he just isn't listening. I feel sorry for all those who are swimming against the tide, but my motto is "The Trend is Your Friend" meaning you have bad news now, and worse news is coming. The dot.com panic in real estate is knocking at the door. Take a 20% reduction in price, suck up the $60,000 loss as an education expense and move on. Bet Tuscon dude is just not listening cuase he knows better than 25 years experience in real estate
Great post FOXWOODLIEF!!
The "We buy houses" people are looking for deals in which there is equity they can get their hands on. Even in a declining market, if there is 30% equity, they can make money if they get the deal done fast enough.
So FB's and flippers are out of luck when they are underwater. If the transaction is non-economic for them, and for a normal buyer, then it is for a distressed property investor. They are not magic, just people who try and do rapid transactions to snatch houses with equity from the jaws of the bank. This is why they are not interested, can't get blood from a stone.
Of course I am discussing legitimate distressed property buyers, and not the many scams in which they will buy the underwater house and stick an inflated appraisal and mortgage on a non-credit worthy customer in order to do a mortgage fraud. If you read the blog where this is posted, someone offered a scheme for doing that.
RE: Underwater flippers selling their SUV's:
I am waiting and hoping. My wife needs a new Tahoe (here is 9 years old, runs well, but I want stability control), and hope to get a clean 2-3 year old one for 50% of a new one. But underwater buyers with 5-6 year loans or leases will not be able to sell....
I am sure most of these douches are driving Escalades, which I will not touch with a 10 ft pole because of the rap/drug dealer/criminal/gangsta/trailer park mentality of a lot of the vehicles customers. I don't want my wife being car jacked with my kids because she is driving the number 1 vehicle of drug dealers and criminals....
If this collapses I can't wait for the NRA to hunt down and kill as many greedy SOB DemoRats as possible
>>>don't care if I do lose my job when the greed culture collapses. It will be worth it to see the people hunt down and kill the republicans who promote it.
Retard. Republicans own guns, and have spent most of their lives learning how to use them, and may even be ex-military....
Any day my friend, any day...
"I Feel the Need....the Need for Greed" and " ..You've LOST that Loving Feeling" Come to Mind here TOP GUN. CRASH and BURN !
My neighbor here in Riverside, CA just busted out an H2 Hummer. 2 months ago it was a used Mercedes. I drove by this morning and saw her opening up windows in her McMansion. She drives over 100k in cars but cant afford to turn on the AC at her home. LMAO!!! This is what we will be seeing more and more of. It's been pretty hot and humid here in SoCal and at the stop light I see the guy next to me in the blinged Escalade with all the windows down. Conserving gas you think? Dumbe mother F-ers.
Anon 4:53 = Sore Loserman
Greenspan's actions of reducing the FFR to 1% are Greenspan's actions. Greenspan has sat in that chair through how many administration's now? And yet somehow it's Bush's fault. Just like everything else in your life I imagine.
The NRA? Fat slobby people hunting down what? Give me a break.
Anyways, what comes dies.
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I will gloat all I want. It is foul that houses, the things people need to provide shelter and living space have been commoditized. A house is simply not worth the outrageous prices people are asking for. I live in Tucson and I can rent for much, much cheaper that owning. I wish I could buy, but all the greedy flippers have put paid to that idea. I urge everyone to simply walk away from the housing market. Let the crash happen, and then pick up a bargain from the ashes. Maybe this time, all the lazy, get rich quickers will learn the meaning of work.
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