Thread: Anyone here deal with foreclosures in Cali. or know about the market?

Curious if anyone here deals with foreclosures in CA or know any information about them?

I have currently been out in Virgina/Maryland working for my fathers foreclosure business out in this area to get an overall idea on how the process works and possibly branch his company back to San Diego where I actually live.

Obviously the laws and market vary from state to state, as I am familiar with the laws and market here, I want to know how CA is, so I have an idea on how it will be like when I get back around late August.

Any information would be much appreciated.

(Ex. competition? generally how long till settlement date after bought at auction? Courts involved at all? Cancellation of listing? etc....)

I work with foreclosures (REOs), short sales, trustee sales, and probate sales out here.

Basically, I flip houses. We come in all cash, rehab/rennovate, re-list and sell the property.

In terms of the foreclosure laws out here, it's really a case by case basis.

Short Sales are often the most lengthy process as both the homeowners and the banks have to approve the offer. Furthermore, banks often hire short sale negotiators who also have their say in the matter which further complicates matters. I've made offers on a short sale listed properties that I eventually forget about, only to get a response 2-3 months later from the banks.

REO's are tricky. Sometimes the bank will list it at a ridiculously high price because they feel like they have nothing to lose at this point. Other times, they'll mark it at a stupid low price so that they generate a ton of offers and will eventually get way over asking. For example, I saw a property listed in Encino CA for $296,000. I went there to check it out and within my 15 mins of being there I must have seen at least 10 other groups come through doing the same. It ended up being sold for $350,000+. Other times, it's priced fair and the banks take the first fair offer and move forward. What really complicates the investor market right now is the conventional home owners. By this I am refering to non-investors who want to occupy and live in the home full time. While investors seek a certain profit margin or rate on return, these people just want a good deal so while I am calculating purchase price + rehab + closing costs + etc versus what I can re-list it for, they are simply happy to be getting a home for $20K-$30 below actual value.

Hope this helps, I can go on for days in you need some more info.

I broker large commercial notes and buy smaller distressed single family debt. flipping REO's is arguably more competitive in California than anywhere else in the country.

Also, banks have 'shadow inventory' which means they're controlling the flow of product to the market to drive prices up. This isn't 2008 when you could buy 2 houses a day and sell them 30 days later; you're buying at much less of a discount relative to market so your margins are smaller on the flip.

Buy notes! If you don't know the note game, I strongly suggest learning it and making yourself some bank relationships to get deals done - this is nothing new and those who know distressed debt investing (secured by real estate) are killing it right now.

I'll post a thread with greater detail sometime this month.

Good luck.

Investing in notes is something that I'd love to learn more about! Is this the same/similar as tax liens?

I'd love to hear more about them from someone that's in the game themselves.

Victorville is a hot market if you wanna buy foreclosures

deuce - i'll put something together soon for everyone on L4P; stay tuned.

johnbsk32 - I see a lot of product in Victorville coming from the banks but the trouble in that area is a weak resale market given the abundance of foreclosures - using a much more extreme example, think of Detroit - yes, lots of foreclosures but there's not a big enough secondary market.

Distressed real estate investing is not simply about who can buy at the lowest price - your exit is what matters the most; how will you get a return on your investment?

to be addressed in an upcoming thread

dirago: You service your own notes or use the same company I use out of Anaheim? Seems many use them and just set up a note exchange business.

Any chance of meeting up next Monday? I have a meeting downtown from 2-4.

Originally Posted by dirago

I broker large commercial notes and buy smaller distressed single family debt. flipping REO's is arguably more competitive in California than anywhere else in the country.

Also, banks have 'shadow inventory' which means they're controlling the flow of product to the market to drive prices up. This isn't 2008 when you could buy 2 houses a day and sell them 30 days later; you're buying at much less of a discount relative to market so your margins are smaller on the flip.

Buy notes! If you don't know the note game, I strongly suggest learning it and making yourself some bank relationships to get deals done - this is nothing new and those who know distressed debt investing (secured by real estate) are killing it right now.

I'll post a thread with greater detail sometime this month.

Good luck.

Hey Dirago.. do you have access to or any contacts that can provide me with some foreclosures or short sales out in LA county? We really like to focus on the San Fernando Valley and work within a $200-$400 budget (all cash). I'm also a broker but a lot of what I've seen are either drastically over priced or have far too much competition.

Thanks.

Originally Posted by ChumpChange

dirago: You service your own notes or use the same company I use out of Anaheim? Seems many use them and just set up a note exchange business.

Any chance of meeting up next Monday? I have a meeting downtown from 2-4.

We're usually in and out of a note within 3 months so no servicing needed just an end buyer. Yes, PM me your number let's get a coffee somewhere downtown.


I'll provide a couple of exit scenarios for distressed note investing;

Wells Fargo Note - unpaid balance, $200,000
Collateral Value (asset at Fair Market Value), $150,000
I buy the note at $100,000 or 50 cents on the dollar

exit 1: foreclose and sell at fair market value, make $50,000
pro: fairly certain of the upside
con: damage to homeowner, potential BK filing

exit 2: price the opening bid to $110,000 knowing there's equity let bidders at foreclosure auction drive price up - you get cashed out for $10,000 if one person bids the minimum

exit 3: I sell to a secondary note buyer keeping enough meat on the deal for them, make a small premium ($10-$20k)
pro: I can do this in a couple of days
con: Smaller profit margin

*exit 4: Buy the note, rewrite the paper to $100,000 and give the borrower an affordable monthly rate
pro: Huge yield (see example below)
pro 2: Once the borrower establishes solid payment history at the new, affordable monthly payment, I can sell the note in the secondary market as performing or hold for long term investment
con: Money is tied up until loan is satisfied

example with the above scenario

(bought a $200,000 note for a 50% discount, rewrote it to $100,000)
Let's say the borrower can afford 6% interest only for the time being so $900/mo ($10,800 annual)

$100,000 / $10,800 = 9.26 % ROI

Day traders would have a hard time achieving 9% return in the stock market but here you can do a few of these deals each month and still hold a 1st lien position on real property.

Originally Posted by Amongst Kings

Hey Dirago.. do you have access to or any contacts that can provide me with some foreclosures or short sales out in LA county? We really like to focus on the San Fernando Valley and work within a $200-$400 budget (all cash). I'm also a broker but a lot of what I've seen are either drastically over priced or have far too much competition.

Thanks.

Yes I have a number of contacts in asset management - pm me your email so we can discuss further.