Purchased for $825,000 in September of 2006, it appears that the bank bought 1570 Underwood Avenue for $697,471 in August of 2007. And while the home was back on the market for two weeks at $779,700, the list price has now been cut to $445,000 (plus “the bank will credit $10,000 towards closing costs and [pay] a $3,000 bonus to [the] selling agent”).
And while it’s entirely possible that this was simply a sale to someone who couldn’t actually afford the payments in the first place, what happens to those who can afford their payments and relied on this sale as a friendly neighborhood “comp” not too long ago?
UPDATE: And the inside scoop from the plugged-in Realtor:
Yes it sold for $825,000 in September 2006. 100% financing. Had other inflated comps at the time to support the appraisal. Buyers probably could not afford it and were put into a loan product that was too good to be true. It went into foreclosure, the lender for the 2nd lost everything, the 1st lender took back the property for the value of their original loan plus legal costs and lost interest..and property taxes that will be collected through escrow on the sale. I saw the house and actually live about 5 blocks away. It is beaten up and shows very poorly. The bank needs to dump it to get the nonperforming asset off of its books. Thus the $435K asking price. My guess is that it will sell for around $400,000. But as a long-term buy and hold, it is THE time to buy. Things will come around, part of the economic cycles. But it very well could go lower in the shorter term. Impossible to time the bottom of any market.
[UPDATE (2/26): 1570 Underwood Avenue closed escrow on 2/22/08 with a reported contract price of $445,000 (not including the $10,000 credit towards closing costs).
∙ Listing: 1570 Underwood Avenue (3/2) – $445,000 [MLS]
The market is NOT down. This guy just overpaid by 89.66% (at an assumed selling price of $445K-$10K credit).
$435K is still too much, but given the potential for tax free cash income from the unwarranted inlaw (so, $/sq ft. around $225?), maybe it will spark a bidding war among wanna be real estate tycoons? SF real estate never goes down you know…..
It must be pretty gloomy on Underwood today. Everyone was thinking they were “California Millionaires”, and now they are just back to living on a ordinary street in an ordinary house at an ordinary price. It will be interesting to see how this works through the economy when dreamers understand that they are not going to be able to retire and buy a bigger place in another state.
Durn those banks, don’t they know that SF is special?
LOL! It looks like the property was purchased by an “investor” – wanna be SF real estate tycoon. Check out the address where the tax bill is sent (it’s tax defaulted of course, never paid a dime according to the public records):
“10790 RANACHO BERNARDO DRIV
SAM DIEGO CA 92127”
https://services.sfgov.org/ptx/PropertyDetail.asp?ID=TQEIQRUARUINQCPYLJANMOAYQNEFSXHPANEOPUZDOEEPZPXBVW
Sorry guys – did some more checking. It looks like that is an address for Chase Home Financing, so I guess it’s the bank that is the tax scofflaw. Is this standard for banks to not pay their tax bills on REO properties?
There’s a credit crunch going on, the banks need every penny they can save. So I would expect that it’s common for taxes to go unpaid and probably why we’re beginning to see fire sales.
The banks were holding REOs on the books at inflated values hoping that a miracle would come along and save them. Now they need cash and time has run out for miracles.
I was struck by Hank Paulson’s somber tone last week. He went from an attitude of “calm down everybody, I will salvage the investment banks” when he announced the rescue superfund (subsequently cancelled) to last week’s ” this is a disaster and I cannot wait for this administration to end so I can go back to the private sector”.
Chase just announced another $1.3 billion in bad mortgage debt write-downs (astoundingly, one of the smaller of the many write-down announcements in the financial sector). That this bank lent $825k on a small house in this sketchy neighborhood (sold for $130k in 1998) explains the meltdown. I feel bad for the buyers losing their homes, but at least the real pain is being felt by the appropriate entities. As diemos notes, the banks are finally responding by selling off these properties at fire sale prices and significantly restricting lending. The Fed can reduce interest rates to zero and it won’t have much effect on unsticking the gears.
wow, around $6k/month to live down there. you know what they say about a fool and his money…
A lot of fools are going to be outed sooner or later.. there have been many fools trying to one up each other overbidding on asking prices.
As Buffet said, ” Ignorance and leverage usually lead to interesting results”.
”(astoundingly, one of the smaller of the many write-down announcements in the financial sector)”
Trip, you and I both know there’s more coming — this is chase’s “marquis writedown” 🙂
This neighborhood is special, actually. It underwent a 600 % runup in places over the last seven or eight years. Factor that in.
Other neighborhoods in SF have done 200-300% factor those in too.
Yeah well I said 600 and you said 200 to 300?
The “winner” in East Bay Prime was a house going for $325,000. Was purchased for $680k (100% financing, of course) in 2005. Its a REO, and doesn’t affect comps, right…
Correct me if I’m wrong (I am after all just a Bitter Renter) but isn’t Bayview a rather rundown, depressing place to live? Lacking in the kinds of shops and restaurants that people making the requisite $200k/year salaries would want in their neighborhoods (assuming they could afford a $825k mortgage)?
Perhaps the price of housing will return to a value at which some residents of the neighborhood can afford to buy it. Is that such an earth-shattering idea?
That’s right, a 600% run up over the past seven to eight years is ridiculous but 300% is perfectly reasonable…
“That’s right, a 600% run up over the past seven to eight years is ridiculous but 300% is perfectly reasonable…”
That’s your opinion? Or mine? Please do tell me what my opinion is!
I wonder if the 600% increase was not because of remodeling in some of the houses.
Realtor here. Yes it sold for $825,000 in September 2006. 100% financing. Had other inflated comps at the time to support the appraisal. Buyers probably could not afford it and were put into a loan product that was too good to be true. It went into foreclosure, the lender for the 2nd lost everything, the 1st lender took back the property for the value of their original loan plus legal costs and lost interest..and property taxes that will be collected through escrow on the sale. I saw the house and actually live about 5 blocks away. It is beaten up and shows very poorly. The bank needs to dump it to get the nonperforming asset off of its books. Thus the $435K asking price. My guess is that it will sell for around $400,000. But as a long-term buy and hold, it is THE time to buy. Things will come around, part of the economic cycles. But it very well could go lower in the shorter term. Impossible to time the bottom of any market.
“Impossible to time the bottom of any market.”
I’d say it is pretty easy to time the bottom of this market: check back in in 5+ years
The bottom is probably near when Fluj starts talking negatively about SF real estate 🙂
Until then, enjoy the show.
you’ll be long gone in five years, anonpal, having disappeared without admitting error
And this is where I have to step in and give Fluj serious props because he is exactly right: you WILL be gone, and since you chose “anon” as your alias, you WON’T be answerable for your prediction regardless of whether you were right or wrong.
Whether or not you think Fluj is right, at least he picked an alias and stuck with it, which allows those of us who give a hoot to keep score on who knows their stuff and who doesn’t. People who go by anon on this site are lame.
i’ve been working down in bayview the past week and have had a chance to do a little touring while on lunch runs. despite the run -up in prices i can’t say i’ve seen any good reason for it. it is rather a case of people substituting lower prices for desirability in some misguided effort to buy in the city…IMO.
it reminds me of the marginal areas that ran up in price during the last boom and which had to wait 7-8 years to reach break even prices. while many places in town may receive a haircut in the next coupla years, this area will likely get that plus a shave and a bath!
It’s pretty surprising that with 24 comments above so far, no one has stated the obvious here. The “homeowner” here probably did just fine. In fact, my guess (just a guess) is that he did more than fine.
This $825,000 purchase was almost certainly a cash back scam, where the “buyer” pocketed $100K or more in an under the table payment from the original owner, who also profited handsomely on his property. It takes a few months of nonpayment before a bank even institutes foreclosure proceedings, and my understanding is that it takes 6-12 months in California before the bank gets the occupant out (someone out there with real experience here help me on this – in NY State, with which I am very familiar, the timetable is more than 12 months). Then of course comes the foreclosure auction, at which the junior lien is extinguished and the property reverts back to the bank (which is overwhelmed with foreclosures these days). Then, of course, the bank has to hide the REO weenie for a little while so that it can stretch out recognition of its losses, and the decision to list at 50% of the original purchase price doesn’t look too good to the accountants, who have to bless the asset impairment on the books. Multiply this process out all over CA, and you can see all this takes time.
If you look at the tax records, you’ll see that a homeowner’s exemption was never claimed, but a rent stabilization fee was being assessed. Of course, we don’t know all the details, but it looks like this was a rental property. There are a lot of foolish people in the Bay Area, but NO ONE is foolish enough to buy an “investment” rental property for $825,000, when the rent was likely well below $2K!
Bottom line, given the short period of time since original closing to today, my best guess is that this was a “first payment” default. The “buyer” never made a single payment after receiving his cash back scam profits. Never paid a dime of property tax, according to the public records. He likely also continued to collect whatever rent he could while the foreclosure process proceeded, pocketing all that money (tax free) no doubt. All in all, probably not a bad “investment” – after all, the leverage was infinite with 100% financing. My hat is off to him – sometimes the best traders appear in the most unlikely of markets! I like to think I’d be a lot more ethical than this, but if I didn’t have a lot of investment capital, and didn’t have a credit rating that was worth protecting, who knows?
Now, as for people who put their own hard-earned cash down on properties that were valued based on this comp, well, the next few years are going to be very sad ones…
And about the comments that this will turn out to be a winning investment over the next ten years at $435K from a realtor, my response is that you go buy it then! The Bay Area has a great number of tremendously wealthy people. There is no shortage of capital. We’ll see what this property ultimately fetches, but it seems to me that people who have actually accumulated investment capital are voting with their money. At $435K IMO this would be an extraordinarily foolish investment IMO.
shame satch, shameshameshame. keep your hat on.
the best traders do not rely on scams.
we all lose a bit with this kind of fraud. and even if this guy was stealing from strong hands it still scummyscummyscummy.
ok, polyanna is done now….sorry ’bout that.
paco, my friend, we are all going to lose a LOT. I go back and forth about the ethics of it all. Part of me thinks that the only way to bring the credit artifice down is through egregious examples of just this sort of fraud. If I had my way, as far as real estate goes, I’d like to see strict requirements of 25% down – real cash, or at least cash from the “Bank of Mom & Dad” – and no loans at greater than 3 or 4 times provable income. No exceptions. But the chance of that happening is less than ZERO. The hit to phony property wealth would be too intense, and remember the banksters make their money (even in a non-fiat regime) primarily onew way: pushing debt.
If my recommendations were implemented, you’d see how quickly the Bay Area became affordable. the whole idea of real estate not being affordable to the population is sort of foolish anyway, isn’t it? I mean, BY DEFINITION, if people can’t afford to live somewhere, how do they live there, if you catch my meaning?
as usual, i agree with you satch. and i believe that after the economic destruction that is in the mail we will likely see those stricter credit standards. but i wonder if the city will become more like switzerland or london where affordability is relative; i.e. long term leases on land (99years) and long term interest only mortgages.
perhaps that adult supervision model is what the spendthrift children need. maybe after this depression america will resemble the more mature economies/societies of the old world.
Satchel, I agree with you that this whole bubble was largely created by fraud-upon-fraud at every level, and the sooner we complete the inevitable correction the better to get back to life on a platform that is not still tainted. And recognizing that this house of cards was largely driven by fraud rather than fundamentals will help get the correction on course rather than prolonging the distortions. My only beef with your post was “My hat is off to him.” If this guy engaged in anything like you surmise, he is not to be congratulated but prosecuted. If he did everything by the book to get the foolish lender to make that loan (no misstated income, no misrepresentations about “owner occupying”, no “under the table” repayment) then I have no problem with him figuring out how to profit within the rules. But that is not what you suggest was the case.
Satchel, thanks for explaining one of the ways that mortgage fraud works. I’ve heard the term numerous times but never really understood how it was done. I guess I’m obviously not smart enough to be a criminal!
1570 Underwood Avenue closed escrow on 2/22/08 with a reported contract price of $445,000 (not including the $10,000 credit towards closing costs).
Sigh.
Only 47% down from the peak. I’m still waiting for the first house to sell for 50% off-peak.