SoCal Real Estate Market

[vfire]

There hasn't been one of these threads in a while... it seems that home prices will continue to go down for the rest of the year but what's the deal with foreclosed properties in Irvine, Mission Viejo and other nice places going for only a few thousand dollars. How is that possible? I know there may be tax liens and massive home repairs necessary on these places but could they really amount to hundreds of thousands of dollars for a home in such a nice neighborhood? It beggars belief but I imagine some knowledgeable Micechatters will have answers.

[PrincessY]

The house 2 doors down from me just sold this week for $400,000. It is a 4 BR/3 BA, 3 car garage, in a cul de sac probably close to 2000 sq. ft. In Oceanside.

[Villains Fan]

I just sold my townhouse and bought another one within a month. But, I was verrrrry lucky. Contrary to popular belief, it is not an easy market to buy in right now, unless you are not in a hurry.

Yes, there are a ton of cheap houses for sale, but most of them are short-sells (houses owned by the bank, where more is owed to the bank than what the house is now worth). On these, you have to submit a bid (mostly more than the posted selling price), and then the bids are submitted to the bank sometime in the future (my guess is when they have a reasonable amount of bids). The bank then sits on these bids for months before approving the highest amount. My realtor told me this can take at a minimum 2 months, but most likely more. Now, I am not a realtor, just a buyer in this market. I'm sure someone with more knowledge can add to/correct this.

I was lucky, the bank had approved the selling price on the townhouse I saw, earlier that day, but the person who had bid on it months ago had already bought something else. I had to bid on this place within 2 days, or the bank was going to remove the approval and put it back on the market for more (and the waiting process would start again).

I looked at at-least 20 places, and out of those 20, probably 15 of them were trashed or needed a lot of work...a couple were downright gross.

Now, there are a few deals out there, but to be honest, it takes some diligence and some settling it what you might require in a new home or a lot of work to fix up. Anyone who is looking, I wish good luck to...it's tough out there!

[OldSchoolMickey]

Originally Posted by vfire

what's the deal with foreclosed properties in Irvine, Mission Viejo and other nice places going for only a few thousand dollars. How is that possible?

What you are probably hearing about is like what is offered on late night TV infomercials.

For a few thousand bucks, you are not buying a house, just more than likely a tax lien on the house at a reduced amount. The holder of the lien will sell it at a discount to get out from under it. Five bucks today, versus ten bucks sometime in the future.

When/if the house sells or transfers, then the lien is paid off for the full amount of the lien.

If you were the one to pay five bucks and then were able to get ten bucks when the place sold, you profited by five bucks. (obviously the amounts of 5 and 10 bucks are just examples to keep it simple)

Also, by "owning" the lien, you are in line to take over the house if you pay off the other amounts owed.

As in life, there is no free lunch.

And no "few thousand dollar" homes...

[I Heart Disneyland]

If it sounds too good to be true.....it normally is.

[vfire]

Actually I first noticed the thousand dollar OC homes on Yahoo! Real Estate, and then there are scores of them on realtytrac.com. I didn't think those two were entirely disreputable sites but the prices certainly fall into the 'too good to be true' category.
How is it they can sell the lien and not the house? It seems in the listings that they're selling the latter. And how can the lien be so high when CA's property tax rate is capped so low by law?

[whitealexander]

i really love your sig princessy..

[OldSchoolMickey]

Liens can come about from various sources, not just property taxes.

Lawsuits, fines, HOA dues, etc...

Liens are bought and sold everyday. Just like mortgages.

A lien can be sold without the mortgage being affected because a lien is secondary to the mortgage and a mortgage can be sold without disrupting a lien, but the title cannot be transferred/cleared until ALL contingencies have been taken care of.

[vfire]

So the idea is that you buy the lien first, pay back all the dues, and then you go for the house? And the whole time the bank is still owning the house waiting for you to pay the lien? Could someone else swoop in while you're paying the lien, thus making one's lien payment a waste?

[vfire]

If only Detroit had a Disneyland nearby...

http://www.nytimes.com/2009/03/08/opinion/08barlow.html

[OldSchoolMickey]

Originally Posted by vfire

So the idea is that you buy the lien first, pay back all the dues, and then you go for the house? And the whole time the bank is still owning the house waiting for you to pay the lien? Could someone else swoop in while you're paying the lien, thus making one's lien payment a waste?

When you purchase a lien, you are doing so at a discount from its original amount. By purchasing the lien, you are not cancelling it, you "own" it.

The bank (mortgage holder) is not waiting for you to pay off the lien. The lien is satisfied through closing when a transfer occurs. You are the one that is owed money (the amount of the lien).

Yes, someone could purchase the property while you own the lien. That is the idea. Your lien will be satisfied (you will be paid the amount of the lien) when the property transfers. You will be out nothing, in fact, going back to my first example, if you purchased it for $5 and it was satisfied for $10, you made $5.

Some folks make a living out of just buying liens at a discount and then waiting for them to be paid off.

By "owning" the lien, you are considered having an interest in the property up to the lien amount. If you want to take over the entire property, then you would have to satisfy the existing mortgage(s) and any other liens before you would own it outright. In MOST cases, especially today, the existing mortgages far exceed what the property is worth.

Again, by being a lien-holder, you are entitled to the lien amount when the property transfers title. That could be in 30 days or 30 years...

[SCUBAbe]

If back taxes are owed a mortgage company will usually pay them to keep the lien. The mortgage company does not and usually will not give up their interest in the home.

[twobluestripes]

If people are interested in buying a condo or something, there's a few recently foreclosed places in my complex, La Veta Monterrey in Orange. My parents and I bought one a few months ago, actually, and it was a really good deal compared to the other condos and houses in town, even foreclosures.