January 24, 2011
Tales From The Courthouse Steps And Contrasts Across Town
Perhaps we missed a piece of the puzzle. But if not, and we don't believe we did, these are the types of stories that are difficult to tell but important to hear.
In March 2005 the small ("but bigger than what tax records show") and rather rough looking single-family Bayview home at 1129 Ingerson Avenue was purchased for $426,000 by way of two loans totaling $426,000.
A year later the home was listed for sale at $499,000, it sold for $530,000 in July 2006. Represented by a Realtor, the buyer appears to have put $132,500 (25 percent) down. Call it an effective $86,700 more skin in the game than the buyer of the $1,249,000 Marina condo at 3208 Pierce across town.
After a four years of making payments (versus two for the property on Pierce), a notice of default was filed against 1129 Ingerson with $10,833 past due. In December a notice of trustee sale was filed. And last week the property was taken back by the bank with no bids at $147,328 on the courthouse steps.
First Published: January 24, 2011 1:30 PM
Comments from "Plugged In" Readers
I'm not in the real estate world, nor the banking world but it seems to me that banks are actively moving against lower value properties because while the losses may be more substantial for higher value properties, what they have that will continue in their favor is location. In San Francisco, given the pricing structure of one neighborhood to the next,(deserved or not), location means you can much more likely predict/anticipate the financial pedigree of your next buyer.
Even at a loss of say 300k, 400k, 500k or more the buyer of the 1M or 2M property is still in a very different financial regard than the buyer of a 200k, 300k, 400k home despite whether or not each can make their payments. As a Bayview resident myself, i am seeing a number of bank owned properties go to contractors at low prices, for quick (yet cheap) rehabs, and flipped, even if only sold in the mid 300k to 500k range. Nonetheless they are off the banks hands (seemingly) quickly.
Yes these properties are then being bought by less discerning buyers with shallower pockets as part of a population shift but it seems to me the bank is able to clear them of the books faster than the more expensive properties. While losses may be greater for more expensive properties, it seems banks still give a preference to those who at one point on paper could afford more, because in the end it just may be that those buyers are more likely to return to the market at some point than those that simply may be priced out altogether if/when there is some substantial recovery.
Big difference between the masses always reaching for the american dream and those who simply have to decide how grand a dream it will be. Again just thoughts.
Posted by: Rob at January 24, 2011 2:35 PM
Rob, I think you are pretty insightful with this. Neighbor on Palou by the way. Represent! Easier to sell more affordable houses quickly at an discounted price to investors and smart first time buyers than a close to market price condo in the 7 figure range. Financing in this market should also be quite a bit easier for a sub $417,000 SFR than a 7 figure condo.
Courthouse steps bidding is quite risky from what I understand. Don't know anything about the property unless you are lucky. Risk of unrecored liens, buying subject to other mortgage liens, tax liens, etc.
Easier to just wait for bank foreclosure to clear title and buy it from the bank as an reo down the road.
Is this the right take on courthouse bidding?
Posted by: bayviewjohn at January 24, 2011 3:06 PM
Since the banks auction the properties for all cash, I'm not sure what stake they have in the type of buyer that ends up in a house after an auction and subsequent flip to an "end-user".
Note that this property went to auction for 66% off last sale. I have no doubt that "Prime SF" properties would fly off the shelf at 66% off peak pricing. But as you mention, the losses for the bank would be large.
My take on this is that as a bank if you want to attempt to manage the losses you're going to incur on your REO portfolio you'd allocate more time and effort to the higher priced properties. Whether or not they will be successful in managing price declines in higher priced areas remains to be seen. But it seems to make sense to focus on those areas and for the lower end areas just to slash prices to get properties to move quickly.
Posted by: tc_sf at January 24, 2011 3:55 PM
It's somewhat hard to tell from property and court records, but the (former) owners of 1129 Ingerson seemed to be industrious folks -- they just picked the wrong time to build a mini real estate empire. From what I can tell, they also own:
1025 Hollister Ave: NOTS on July 14, 2010
40 Britton St: NOTS on May 14, 2009
Posted by: EBGuy at January 24, 2011 5:42 PM