From the Palm Beach Post:
Home flippers’ investments flop
“Joe Passarelli wakes up anxious and sweaty some nights, wondering how much longer it will take to sell his never-lived-in townhouse south of Stuart.”
“Despite slashing his asking price by $55,000 to $285,000 and keeping vigil at sparsely attended open houses for six months, he still has no takers.”
“”They come, they look, they give a low-ball offer and they leave,” said Passarelli, 50, a New York native. ”
“If he doesn’t sell the four-bedroom home, he’ll have to walk away from contracts on two other investment homes — one in the new Port St. Lucie community where he lives and another in West Palm Beach. If he pulls out of those deals, he’s down $80,000.”
“”I was never much of an investor before this wild craze began, and somehow I backed into it,” Passarelli said.”
“Passarelli made out well last year, grossing about $100,000 on a home he flipped in St. Lucie West and an additional $50,000 from his mortgage and real estate business. But this year is emerging quite differently.”
“”The end result is it may have to all be given back,” he said.”
“One in Martin’s Crossing, a former commodities trader who lives in Palm Beach Gardens, offered to give away a flat-screen TV. The investor, who asked not to be identified, also intercepted buyers approaching the community’s welcome center, then redirected them to his home.”
“After carrying a mortgage for about six months, he finally sold one of his single-family homes in April for $350,000 — less than the $353,000 he paid. He earned enough off a second investment home in the community to recoup his losses, but some of his friends weren’t so lucky. One walked away from a $40,000 deposit.”
“As with the Internet boom of the late 1990s, those who stand to lose most in this shifting market are novice investors and those who bought too much too late.”
From the News Press:
Buyers control home market
Today’s tough housing market is pitting neighbor against neighbor in the selling wars.
“We’re not grumpy with them,” said Ken Koch, whose Cape Coral home is for sale and sandwiched between two neighbors homes for sale.
“Although I don’t know if they’re grumpy with us.”
Ken and Wilaiwan Koch have had their home on the market for five weeks and already lowered the price $10,000. Their neighbors to the right, Rachel and Brett Bonham, have dropped their price from $345,000 to $269,900 since November. Their neighbor to their left, Peter Hadden, reduced his home from $344,500 to $309,900.
“It’s frustrating,” Ken Koch said. “People have money, but they are waiting for the prices to go down. It’s frustrating for all of us.”
But getting angry at a neighbor for lowering their price isn’t fair, said John McWilliams, Realtor for Coldwell Banker.
“It’s not personal,” McWilliams said. “You have to give them the benefit of the doubt. Not everyone has the same tolerance level for losing money. Some people can hang in there and some can’t.”
This is in stark contrast to a year and a half ago when they sold their condo after two days and got “multiple offers at full price.”
The market is making them “a little nervous” and they’ve chosen a Realtor to help them sell it.
“We hope to break even at this point,” Tara Williams said.
What a wonderful article Grim. I like the references made to “stinking buyers” and just the general sense of entitlement that the sellers seem to display just below their emotional surface.
I have been in the market for about a year after I sold my home in West Milford at the peak. I now rent and am I glad I waited- and will continue to wait.
That’s the thing with most of the flippers – even if they did make money early on, most of them just used the profits to continue to “invest” on a larger scale in an effort to double or triple their money.
Joe Passarelli wakes up anxious and sweaty some nights, wondering how much longer it will take to sell his never-lived-in townhouse south of Stuart.”
I have a friend who did not realize any gains but has an investment he has been unable to sell, he was not a savvy investor he was conned by a supposed friend that has made a lot of money doing this flipping, but he also makes money by bringing buyers , so he’s not losing any sleep over his “friends” troubles. He is currently under contract, but it has fallen thru 3 times already, I worry seriously for his health. There are a lot of people on this board that may say he should have known what he was getting into and I agree, but he was conned, by an aggressive con man, who sold this unit 3 times prior to them buying it. They are the defintion of bag holder, but as I said they had not realized any gains prior to this except for there own home’s increase in equity which they also tapped to buy this. They also went stated because they would have never been approved for this high of a mortgage with out lying. They were told do this do that it will be fine, you’ll have this sold in no time – you’ll never have to make one mortgage payment, well june will be payment # 7. These payments do not include taxes because they have not been assed yet and they are over 3,000 per month. If they don’t sell soon they will have a giant tax bill on their hands also, they probaly will be hit with a prorated tax at closing also.
Please no boooyas over this one.
KL
Hat tip to the Shore Bubble Blog for this piece..
From the APP:
Buy now, pay later
“You could find that you are ill-prepared to manage (the risks) in the case of many of these products,” said Keith T. Gumbinger, vice president of HSH Associates in Pompton Plains, a financial publisher that specializes in mortgages. “The prospect of higher — perhaps significantly higher — monthly payments just down the road is very real.”
But there is no denying that these so-called exotic mortgages have helped sustain growing home prices and fueled a booming marketplace.
“It enables people with a given income to buy a bigger house and to reach and stretch in the housing market,” said Joseph J. Seneca, an economist and professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers University.
In Monmouth and Ocean counties, 27.9 percent of the mortgages used to purchase homes in 2005 were interest only, up from 18.5 percent in 2004, according to LoanPerformance, a subsidiary of First American Real Estate Solutions. Interest-only deals represented 17.1 percent of the mortgage refinancings last year as well, up from 10 percent in 2004.
rymingrealtor
You did not mention where your friend had this investment unit : Florida or NY/NNJ ?
CNS
You did not mention where your friend had this investment unit : Florida or NY/NNJ ?
CNS
Jersey Shore
Here are some pathetic real estate “investors”:
MLS 2271722
$925,000
http://www.realtor.com/Prop/1059079226
Lists the property as a “tear down” and states no one can go in the house, the “value is in the land.” Problem is, the house is on a very busy street, on the wrong side of South Orange Ave.
Another problem for this “investor” is that there are other houses on the market on quiet streets, with bigger lots, include a nice house to live in, and are priced lower.
This house would have sold for $650K at the close of the bubble market last summer. Now? Good luck.
MLS 2261641
$840,000, now $799,000
http://www.realtor.com/Prop/1057139135
Owner bought for $745K last summer, had plans to tear it down and build a large colonial. No improvements made. Canceled the tear down plan, and put it on the market for $840,000 in March, and for that extra $95,000, he’d throw in the new plans. Dropped it to $799K a few weeks ago. House remains vacant, “investor” has so far burned over $40,000 in carrying costs.
MLS 2237332
$759,000, then $698,999, then $698,998 (dropped $1)
http://www.realtor.com/Prop/10550264443
Bought in Sept 2005 for $525K. Added some granite counters, and re-listed in Jan 2006 @ $759,000. Been sitting since, no Greater Fools signing up.
unrealtor, love the stories. keep em comin!
i was in scotch plains today. i’ve never and i mean never seen so many open house signs in all my days. there were pretty much 1 on every corner, sometimes 2! the middle class towns like this one is where the bubble will burst quickest around here IMO.
Rymingrealtor –
Perhaps your friends story should be in the press as a cautionary tale. There are a lot of people out there who need to be warned of the risks they could be getting into, the word has still not really reached the street that the bubble has burst.
Have you tried to get your friend to cut his losses and drop his price?
Rymingrealtor –
I think it’s an hysterical slip for you to have accidentally mistyped “assessed” in your post above. Your word is much more appropriate!!!
OT
My wife and her parents visited some open houses in Fair Lawn today (Sorry Bob). He father can’t understand why we are thinking of leaving the area and why we don’t just buy something now. My wife decided to take him around just to show him how ridiculous prices really are.
They visited one house listed at $499,000. Of course, they were the only ones in sight at all of the open houses they visited. The realtor said the homeowners bought another house in Wayne and were convinced this house would sell quickly. Well, 90 days later and no takers. The realtor practically begged them to make an offer. She said they were desperate and would definitely take $400,000, and might even be willing to go lower. They can’t afford 2 mortgages and 2 sets of property taxes.
Things are definitely getting interesting.
Sure thing Richard.
I’m also noticing a bunch of houses that were bought 1-2 years ago, that are now on the market for $150K more.
These must be people with Broken ARMs, hoping to cash out and move on before their rates adjust.
Should be interesting to watch.
We attended ZERO open houses today!
We’re out until 2007, at least.
“The realtor practically begged them to make an offer. She said they were desperate and would definitely take $400,000, and might even be willing to go lower. They can’t afford 2 mortgages and 2 sets of property taxes.”
Take note, most realtors will sell out their clients like this in a second. This seller trusted the realtor with confidential information, and the realtor disclosed that info to total strangers.
I’ve seen this many times, and a buyer can exploit such greed to get a good deal.
I think I am out until ’08 unless i find the perfect house for the perfect price.
>>Take note, most realtors will sell out their clients like this in a second
it’s not just the realtors. i recently cancelled a contract due to a home inspection contingency clause. the sellers attorney gave my personal phone number information to the sellers to talk with me about why i cancelled the contract cause my attorney was out and didn’t return their calls. isn’t that illegal?
i also think the other attorney gave the sellers the home inspection we had done. first off the contract clearly states the inspection results are between myself (who paid for it), my attorney and the home inspector. another illegal move.
the whole industry needs serious regulation. it’s disgusting.
“We attended ZERO open houses today!”
We’re with you – saw a ton of Open Houses along the Jersey Shore, but stopped at none.
We had a good laugh watching one realtor jumping out of his Mercedes and chasing some fly away balloons, but no one else was at that Open House either.
“We’re out until 2007, at least.”
So are we. The purpose of today’s open house visit was to demonstrate to my wife’s father just how ridiculous prices really are. It’s hard to truly comprehend it until you walk into a cracker box build in 1947 with a leaky roof and the original windows and the realtor® says “that will be half a million dollars please”.
Today he has a new understanding of what we are going through
bob,
please boooya rymingrealtor and his friend. the guy who if he had been coned only a year earlier would think he’s a brilliant real estate investor. cmon bob tell him if you play with fire your gonna get b-b-b-b-b booooyaaaaad! ha! ha! lol! ha! i hope they all suffer. they celebrated on the way up. let them have their hangover. and one more thing booya!
rymingrealtor and his friend
Since it was a mystery
I am a she not he.
KL
The prices listed on the 3% and FSBO sites are still outrageous. They are adding the ‘usual’ 15% to last year sale prices. The 6% percent at least are for most part lowering their prices but still no where close to affordability :(
Do you see the same pattern?
Since it was a mystery
I am a she not he
whatever
link
FSBO property was bought for 325K last year(about 3/01/05) … the house is on sale for 415K.
“… their prices but still no where close to affordability :(”
I see the same thing. Sellers are either ignorant or their realtors are. The housing prices are like any market, they rise and fall. They are falling, but sellers are in the denial. If they really want to sell, they’ll see they are the ones who need to compete in the new buyer’s market.
seems realtors are in denial also. instead of saying to a potential seller you want X for this? you’re ridiculous and we won’t list you if you don’t get more realistic they take the listing, put out the outrageous price and suffer their reputation along with the seller. i’d like for once to see a real estate company say we won’t list you because we don’t want to waste time on you and your ridiculous asking price.
it’s not just the realtors. i recently cancelled a contract due to a home inspection contingency clause. the sellers attorney gave my personal phone number information to the sellers to talk with me about why i cancelled the contract cause my attorney was out and didn’t return their calls. isn’t that illegal? i also think the other attorney gave the sellers the home inspection we had done. first off the contract clearly states the inspection results are between myself (who paid for it), my attorney and the home inspector. another illegal move.
In general, I think anything that goes to the other seller’s attorney is available to the seller. In fact, the seller’s attorney probably has a fiduciary responsibility to the seller to give the information to him.
As far as home inspection goes, how did the seller’s attorney get the inspection in the first place ? Did you or your attorney give it to them ? If so, its as good as giving it to the seller.
Also, the way most contracts are worded (if the sellers attorney was doing his job) is that on the conclusion of a home inspection, the buyer can ask for remediation of defects. The buyer can cancel only if the seller refuses to fix the defects or provide a credit (i.e. a price reduction). In that case, the seller most definitely should get a copy of the home inspection results so he can decide whether to fix, and what sort of credit to offer. A credit for a leaking faucet is much lower than for a roof that needs replacement, naturally.
If your contract gave you an unconditional right to cancel after the inspection, good for you, but shame on the sellers attorney for allowing that. The seller also can sue if you try and cancel and if the inspection shows no major problems — that is not normally grounds for cancelling a contract.
To add to my previous comments — in general, a buyer can (depending on contract wording) cancel if there are major problems even if the seller promises to fix them. If theres a serious foundation problem, you may not want to live in such a house even if the seller promises to fix it.
On the other hand, problems that are not so serious, but are still not minor are an excellent opportunity for the buyer to squeeze some concessions out of the seller.
” bob,
please boooya rymingrealtor and his friend.”
What is this world/blog coming to? “Boooyaaa” is becoming a verbZ????!!!!
I boooyaaa; you boooyaaa; he/she/it boooyaaas…
:-)
Last year a house on Fairchild in prestigious Harding Township was listed as a FSBO for $1.95 mil. After sitting out there several months the people lowered it to $1.895, then $1.75 mil. still no offers. They listed it with a broker for $1.6 mil and that listing expired. They now have a new broker listing the home for $1.45. my wife and I are considering going in and offering $900K just to give them a dose of reality.
Richard you had better believe that realtors just want listings, they dont care if the price is unreasonable. These people all feel that they are entitled to big commissions, but they feel once they get the listing they can talk the seller down.
Listen up. The story below
should be a warning to all
why you don’t listen to a greedy realtor builder or mtg broker. Think for yourself and don’t be a zombie.
LOTS OF BAGHOLDERS OUT THEIR LOSING SLEEP AND WILL BE FACING FINANCIAL RUIN. DO NOT BE ONE OF THEM!!!!!!!!
“I have a friend who did not realize any gains but has an investment he has been unable to sell, he was not a savvy investor he was conned by a supposed friend that has made a lot of money doing this flipping, but he also makes money by bringing buyers , so he’s not losing any sleep over his “friends” troubles. He is currently under contract, but it has fallen thru 3 times already, I worry seriously for his health. There are a lot of people on this board that may say he should have known what he was getting into and I agree, but he was conned, by an aggressive con man, who sold this unit 3 times prior to them buying it. They are the defintion of bag holder, but as I said they had not realized any gains prior to this except for there own home’s increase in equity which they also tapped to buy this. They also went stated because they would have never been approved for this high of a mortgage with out lying. They were told do this do that it will be fine, you’ll have this sold in no time – you’ll never have to make one mortgage payment, well june will be payment # 7. These payments do not include taxes because they have not been assed yet and they are over 3,000 per month. If they don’t sell soon they will have a giant tax bill on their hands also, they probaly will be hit with a prorated tax at closing also.
Please no boooyas over this one.
KL”
This person should worry about fraud also. Stated income and cannot afford could be further problems ahead.
BOYCOTT RIPOFF Home PRices
Boooooooyaaaaaaaa
Bob
greed = bad
If uncertain do not sign or do anything until you get the answers you need to make an informed decision.
No problema. Just Walk away and say Good bye!
Next!
Babababababababa
Boooooycott Houses!
Boooooooyaaaaaaaa
Bob
Check this out…
Police on the alert for suicides in Mumbai (Bombay) India, after Bombay Stock Exchange fell by 10 percentage points.
There are people who lost millions of “borrowed money” in just 2 hours of trading. Its commit suicide or be killed by the lenders goons time in India.
http://money.cnn.com/2006/05/22/news/international/india.reut/index.htm
“These payments do not include taxes because they have not been assed yet and they are over 3,000 per month.”
if the taxes are $36,000 per year, this must be at least a $1.5 to $2 million home.
I’m sorry, but what kind of moron buys a $2 million home as an investment with a no doc scam loan?
everyone involved in this scheme from your friend to the bank and the realtor deserves to lose his shirt, and they probably deserve to be prosecuted for fraud as well.
To be an idiot.
Boycott Ripoff House prices and DO NOT even consider using a risky suicide loan ever.It’s not worth the huge risk.
BABABABABABABABABABABA
Boycott Houses
For at least 12-18 months!
Booooooyaaaaaaaaa
Bob
“These payments do not include taxes because they have not been assed yet and they are over 3,000 per month.”
if the taxes are $36,000 per year, this must be at least a $1.5 to $2 million home.
I think he meant that the payment without taxes is over 3000/month.
Take note, most realtors will sell out their clients like this in a second. This seller trusted the realtor with confidential information, and the realtor disclosed that info to total strangers.
Please note realtor may have been told by clients – if any one seems really interested just tell them the bottom line and get this sold!
And chances are that’s not even their bottome line.
KL
Richard @ 4:35
I live in Scotch Plains and can’t believe the number of houses on the market. I also still see a lot of new builds in progress, some even in the begininng phase, not sure if these 1M homes on .15 acre are going to sell any time soon.
Andrew
Gluts of inventory PILING up on the cleaance racks.
wait for the
Blowout sales.
Much more pain required for this to happen. At least 12 months – 18 months.
patience and BOYCOTT RIPOFF Houses
Boooooooooyaaaaaaaa
Bob
thanks bob
booya