April 7, 2008
From Foreshadowing To Foreclosure For A Marquee Loft Off Van Ness
Four months ago we called out a Craigslist ad which read:
I have a modern kitchen by Pedini for sale. With the appliance I paid apx $55,000 for it….Its current installed in my condo. It was never used….You have to take out and install it your self. Includes all the appliances….Im located in off Vanness. Send me your offers. Please no under bidders I need it. sold asap.
Last week we called out a Marquee building condo that's missing a kitchen, is touting a “motivated” seller (Merrill Lynch Mortgage Lending), and is listed for $620,000 ($245,000 less than its last open market sale eighteen months ago).
∙ Change Of Heart, Cash Crunch, Or A Condo Sitter Gone Crazy? [SocketSite]
∙ Another Non-Comp Comp Along The Booming Van Ness Corridor [SocketSite]
First Published: April 7, 2008 7:45 AM
Comments from "Plugged In" Readers
wow. I think that's really cruddy when people do that. place looks horrible. I'm starting to get really kinda ticked at all these people who bought these houses with mortgages they couldn't afford then loot the places. So all the taxpayers now are supposed to bail these losers out for driving up prices then walking away? no thanks.
Posted by: cooper at April 7, 2008 8:23 AM
I must say I get a bit of a laugh at the bank getting a poke in the eye like this for making such a stupid loan. That said, this guy needs to be criminally prosecuted as well.
And, of course, the "comps" in the neighborhood take quite a beating from this 30% price reduction.
Posted by: Trip at April 7, 2008 8:38 AM
Bad lenders will be punished by the markets for making bad loans, and this is what that looks like. Hitting an inherently Capitalist correction process with the Socialist label "bail out" because you are paranoid and out of capital letters is not reasonable. Please explain how the Bear Stears flame out or the bill in congress that isn't passing any time soon result in your paying for this mess.
Posted by: Mole Man at April 7, 2008 8:43 AM
The beauty of it is that the bank will hold out to some stupid price, assuming that it's giving any buyer a great deal because it's priced so much less than fictitious comps (that presumably actually have a kitchen).
I've seen plenty of REO's. Just saw one this weekend in the East Bay actually that sold in '04 for $405K, and then in '06 for $530K and was back on the market for $400K. Thanks to the miracle of Google, I found pictures of it when it sold for $405K. Looked fine, livable even. The house I saw for sale by the bank this weekend was not livable. So why should I pay 99% of what it sold for in '04?
Banks are stupid. They have no clue and that's another reason why this bust will last for years.
Posted by: David at April 7, 2008 9:23 AM
^^ Come on, really Mole?
The connection is very easy, and can be made in three sentences: Fed Gov guarantees $29B of Bear Stearns with questionable collateral. If it goes down, it costs the Fed Gov money. Fed Gov is financed by taxes and thus taxpayers, so tax payers (us) are on the hook for losses.
Bad lenders should be punished by losing money, bad borrowers should be punished legally if they break the law or lie on their apps. Calling someone a "socialist" (which, like capitalist, does not require capitalization) for expressing their opinion is silly. Are we back in the cold war, and what's next, calling him a dirty red commie?
Posted by: Yes at April 7, 2008 9:33 AM
Wow, I guess this is what happens when actual deadbeats are given loans that they could never afford in the first place. But I guess I would be a little angry about being foreclosed and having a property taken when I'm also being forced to finance the bailout of the banking system. I don't think I'd take an entire kitchen apart, though.
Posted by: foreclosurefish at April 7, 2008 9:39 AM
I disagree with cooper -- since I'm bitter and cynical, I think this is a pretty wise business decision to cut your losses, salvage what you can from the carcass of your failed venture (RE speculation) and then move on to your next victim (er, "opportunity").
Posted by: Jimmy (Bitter Renter) at April 7, 2008 9:54 AM
As long as you are a taxpayer, and assuming that taxpayers will ultimatly foot the bill if and when these lending institutions fail, you could ultimately end up paying for this person's 'salvage' operation.
I agree that there has been predatory lending and there are some unscupulous lenders that have made lots of money off borrowers that perhaps should have known better, but may not have. I'm all for prosecuting people of this nature. However, at the opposite end of the spectrum are these vultures, who figure the bank can only attach 'their' real property, so they savagely gut it as far as possible before being evicted. They deserve the same disdain as dishonest lenders - both should be prosecuted as both do a dis-service to society as a whole.
Posted by: Recent ORH buyer at April 7, 2008 10:20 AM
I'm pretty bitter about people potentially getting bailed out of bad mortgages, however.....
Dude, until he gets foreclosed upon, it's his kitchen. He can do whatever he wants with it. The bank has collateral on the piece of real-estate. That doesn't necessarily come along with a top end kitchen, or appliances at all.
Now, I do hope the bank reports the "gain" (the difference between the loan and the settled value of the property) to the IRS. Make the person pay his taxes on this stuff.
I sold a house this past year, and put in nice new appliances to make the house more sell-able. If the home didn't sell, I paid for the appliances - and I would have taken them back - not give them to the bank.
Posted by: Treeman at April 7, 2008 10:21 AM
"Dude, until he gets foreclosed upon, it's his kitchen. He can do whatever he wants with it."
he didn't just take the appliances, he took the cabinets and the counters and everything.
someone somewhere told me once (so I have no idea if it's true) that the homeowner does have the right to take certain things, like appliances and maybe lights, etc.
but the general rule was something like "If you need tools to take it down, then it's a fixture and not something you can take".
So if this guy just took the appliances I'd be unphased...
but he took the cabinets and the countertop too, didn't he?
where should one stop? what about the electrical wiring and the copper pipes? the drywall?
Posted by: ex SF-er at April 7, 2008 10:29 AM
The funny thing is that it would be normal to take a Pedini kitchen with you when you left in Italy.
Posted by: redseca2 at April 7, 2008 10:43 AM
Can someone explain what's predatory lending ? Are there people out there who were forced to borrow huge sums of money to buy houses they couldn't afford ?
How could you not read the huge pile of documents they give you when you sign up for your loans ? It's the biggest financial decision of your life and you'll just trust a stranger to make all of your decisions for you and then be surprised when they didn't tell you all the dirty details ?
Posted by: Snafu at April 7, 2008 11:17 AM
"How could you not read the huge pile of documents they give you when you sign up for your loans"
I don't know about you but at every COE event that I've been involved in, that huge stack of documents always included quite a bit of dense pages that I had never seen before. Those pages were not in the advance review packet. It is pretty annoying to have to speed read and attempt to understand that jargony stuff with the title agent breathing down your back.
Still I agree that there's no excuse for not realizing how much continuous cash flow is required to service a $1M loan.
I wonder how many people did look at the cash flow requirements and saw that it was unsustainable. But then they signed the loan anyways because a friend/co-worker with a similar financial situation also bought a similar home. "If they can do it, I can too !".
Sometimes people will grasp at anything, no matter how unbelievable, to justify an unreasonable action.
Posted by: The Milkshake of Despair at April 7, 2008 11:55 AM
Fair enough - appliances, I've seen houses for sale without them. So I don't have a problem with someone selling them.
Countertops/cabinets, etc. Well, that's part of the property. So taking those is stealing.
Fixtures - I think those are part of the property as well, but I'd say it would be fair to strip all of them and then replace them with cheapo ones. But they need to be there.
Posted by: Treeman at April 7, 2008 12:08 PM
It's the biggest financial decision of your life and you'll just trust a stranger to make all of your decisions for you and then be surprised when they didn't tell you all the dirty details?
Before the recent shenanigans, a bank would not loan you money that it knew you could not pay back. Therefore, I can understand why someone would believe that if a bank is willing to lend them the money, they must be able to afford the payments. Banks were loaning money to people that they knew could not pay them back unless appreciation continued at it's unprecedented rate. I think you could call that predatory lending. They were preying on people's belief that a bank would act in it's own best interest.
That said, I agree that anyone who signed for a loan is responsible for their own actions.
Posted by: location at April 7, 2008 12:08 PM
Hilarious. I was the one who submitted the tip for the kitchen for sale, and I didn't put them together.
I can sort of see where the former "owner" was coming from. They probably bought the place, and then added the kitchen. They probably had a first mortgage, which was no recourse, and then a second that was used to fund the kitchen, that WAS a recourse loan that they were going to have to pay back when they walked away.
So, although I don't agree with what they did, I can see them thinking that they were on the hook to pay for the kitchen, but not the mortgage, and they probably did not have the money to pay for the HELOC they used for the kitchen. So I can see someone rationalizing the sale of the kitchen so that they could pay off the HELOC on their way out the door.
I'm guessing that lots of people who supposedly "trashed" their homes probably made this same rationalization: they were going to be on the hook for a HELOC, and so it didn't seem fair to walk away from the stuff the HELOC purchased, so they may as well take it with them.
Their credit is trashed from a foreclosure of $5 or $500K in exactly the same way. But this way, they can pay back the HELOC that won't be discharged due to the foreclosure. Maybe the owner walked from the heloc, but if they were up to their ears in credit card debt, or owe on their car or whatever, they might be needing a way to pay that off instead.
Again, I don't agree with this line of thinking, no need for people to explain why it is wrong, but for those homeowners who stayed in their homes that they never could afford until the money ran out, and then some, and who are looking at a significant debt they owe, well, I can see how someone might think to do this.
And I hate to say it, but it is actually a very logical thing for them to do. Again, I don't agree with the morality of it, but for those people wondering why people "trash" their foreclosed homes, I'm guessing we have the reason. They didn't do it maliciously: they probably felt they had no other choice.
Posted by: tipster at April 7, 2008 12:43 PM
Some can clearly argue that it is "wrong" to tear out the kitchen like that (and it is certaintly bad for comps), but is there anything this person did that is actually "illegal"? It seems like until he gave it back to the bank he was free to do as he wished. Maybe he was tearing out his $55k kitchen to upgrate to a $100k kitchen and ran out of money along the way... (or so one could argue) This should be a lesson to banks not to give money to people who have no stake in the asset, and perhaps we will return to 20% downpayment requirements.
Posted by: Outer Sunset at April 7, 2008 1:18 PM
Thank you, Snafu! There is no such thing as "predatory lending," there are just "stupid people." Led to believe that "if a bank is willing to lend them the money, they must be able to afford the payments."??? Give me a break! This isn't "if I resist buying that new dress I can make my mortgage payment," we're talking homes costing 20x the median SF income!
As for the legality of tearing out the kitchen - who knows. But, for some of you to argue that this person's kitchen (and, therefore, your OWN kitchen)is yours - I seriously doubt it. That house you (can / can not afford to) own and every Ikea chair in it is likely bought with someone else's money. As I've said countless times, real estate's "value" is (or, for brainwashed SFers - "should be") based on FUNDAMENTALS, like including a Pedini kitchen. Without those, it's nothing. It's like the junk in your garage. You have to PAY 1-800-JUNK to take it away, not the other way around. It's time we all woke up from buying the "warm-fuzzy" that owning SF real estate is suppose to bring and actually started buying the fundamentals. Unfortunately, that means paying half this price.
redseca2 - Italians aren't stupid enough to spend the money it takes to buy a Pedini kitchen. They have plenty of brands just like it at a fraction of the price. Pedini is for credit card welding, stupid Americans.
Posted by: rg at April 7, 2008 2:42 PM
It doesn't really matter if it was illegal to remove all of the fixtures (though the appliances are certainly fair game- not sure about the counter tops). The bank will never go after him for the damage he caused because it is not worth their cost. This situation is very common in foreclosures. I read recently that in Vegas banks are paying people up to several thousand dollars to leave the houses without trashing them
Posted by: anono at April 7, 2008 3:07 PM
Ah, I finally put two and two together as well. I remember the Craig's List posting that talked about the kitchen and applicances but just now realized that this would match the two together.
Unfortunately, I believe this is more common than people realize -- in other areas of the country I've seen people strip properties as they go into foreclosure. Some may do anything to grab a few bucks as they lose their home.
Posted by: Lori at April 7, 2008 5:24 PM
If this was reduced to around $500k it would actually be a pretty good buy -- a new low end kitchen and bathroom from Home Depot wouldn't cost more than $15k if you did the work yourself, so other than that awful $800/mo condo fee, you're buying a spacious 2/2 for about the cost of renting.
Posted by: Jimmy (Bitter Renter) at April 7, 2008 5:43 PM
The only flaw in your analysis is that it is a 1/1 not a 2/2, so it is almost impossible to make buying cheaper than renting with that large of HOA fee.
Posted by: Outer Sunset at April 7, 2008 9:27 PM
Actually I don't know if its even a 1/1 -- the pics on the MLS show a window wall that serves only the one main space. The platform next to the missing kitchen in the other lofts in the building house the "bedroom" a an open to below living area (3 feet below). Basically a half level mezzanine sleeping area with storage beneath the platform -- that is not a one bedroom in my book, but rather a (formerly) fancy-ass studio...
Posted by: sferanow at April 8, 2008 12:45 AM
Correct me if I'm wrong but the comment re: him having to pay taxes on the forgiven amount - I thought there was a law/bill passed recently by our friends in DC saying that this was now a tax free event, i.e. no paying taxes on the "income" from a forgiven loan.
Posted by: SunsetGuy at April 8, 2008 7:25 AM
Why don't you deport yourself to Italy if you are so much smarter than the rest of us?
[Editor's Note: Attack the argument and not the individual.]
Posted by: fred at April 8, 2008 8:45 AM
On trulia it's listed as a 2/2 -- check it out.
Posted by: Jimmy (Bitter Renter) at April 8, 2008 9:52 AM
I have to agree with rg on the point of the Pedini kitchen. Installing kitchen cabinets at such a high cost did not make sense for the location of the condo. I would expect to see super high end finishes on a property with a higher price point in a swankier neighborhood. Isn't one of the cardinal rules of real estate to not overimprove above and beyond what is surrounding your property?
Posted by: Lori at April 8, 2008 5:04 PM
Am I the only one who sees the freaking HOT TUB in the middle of the room? What kind of pimp was this dude anyway?.... freakalicious!
Posted by: Andrew at April 9, 2008 12:36 PM
Looks like the bank really wants to get rid of this thing. So sad, it was a pretty condo otherwise. If I didn't have my money tied up, I might take a crack at it (at a reasonable price of coruse).
@Andrew, yup i saw the hot tub too. The empty spot where the tub used to be is much more noticeable in the ad above. Very freakalicious.
Posted by: BBSmurf at April 10, 2008 12:04 PM
Jesus, they took the toilet too!
Posted by: Michael at April 10, 2008 12:10 PM
And I was dumb enough to just add an Ikea kitchen. Oh wait, I didn't get foreclosed on because I bought something I could afford.
Posted by: Pete at April 10, 2008 10:47 PM
Im the orginial owner on this condo. and I have to tell you guys that when i brought the condo it was NOT upgraded the way it was. I had a business partner and we were doing remodeling projects around the city. If you look at the other condos in the complex it was identicial to those condos. We spents alot of money and time to remodel this condo. The business partner ran off with everything and I was stuck. So I took out everything. Trying to make ends meet. I still have everything in my storage and I will sell it if someone buys the place. Its an easy install. I have people I have to pay also. My email is Leo94568@yahoo.com. Just a FYi The HOA is $1020 which was increased a few months after I brought the place.
Posted by: Leo at June 6, 2008 8:24 AM
Just a FYI that toilet is worth more than you think.
Posted by: Leo at June 6, 2008 8:27 AM
Thanks for the credit! I'm the plugged in reader mentioned. ;-)
Interesting to read the story (and now to learn the sale price).
Posted by: John at June 26, 2008 1:13 PM
It is not illegal or immoral to take the cabinets or appliances PRIOR to a foreclosure. You may want it to be, believe it should be, but it is not.
Posted by: Kathy at January 31, 2009 7:00 PM
It is not illegal given the legal fictions that we operate under but if they were there at the time of purchase then they form part of the collateral for the loan and it is definitely immoral to abscond with them.
Posted by: diemos at January 31, 2009 9:00 PM