Real Estate

[fatlazyless]

"There are three kinds of lies; lies, damned lies, and statistics." unknown author, circa 1850


"The famous statement refers to the persuasive power of numbers, the use of statistics to bolster weak arguments, and the tendency of people to disparage statistics that do not support their position." Wikipedia

.....

You all have to agree that a 27-percent, one year drop in the waterfront average selling price based on 55 different sales between January 1 and September 30, 2009 is certainly a statistic to contemplate. Like, why-O-why did this happen?

Let me pitch out a grease ball of a reason here.......well,,,,shazam - a - ramarama ! .....you know that January 1, 2009 was the first day of the Winnipesaukee 45-25 speed limits....therefore....it is absolutely-positively-absolutely an undisputed fact this 27-percent price decrease is all about the nice folks with the big, expensive go-fast boats wanting to unload their waterfront homes and move away, somewhere to a new Lake Go-Fast. ....case closed!

[JupiterMackem]

If I'm not mistaken the 'three types of lies' quote comes from the British Prime Minister Benjamin Disraeli. It's a particular favorite of mine.

[VtSteve]

One of the reasons the Case-Shiller real estate index was so valuable during this tremendous real-estate bubble was that it sought to compare sales of the same property. It has proved far more reliable that the stats compiled based on median price, average selling price, etc..

Averaging a small sample of just over 50 sales is meaningless without the underlying data, and probably meaningless even then. If you had two properties that sold for $1.3 million in 2005 or 2006, and were sold for less than $1 million this year, that's pretty conclusive. Having properties that go from $200,000 to over a million means nothing, especially if a third or more of the properties are towards the high end.

I'll just guess that if anyone investigated some of the properties sold, which you can do if you have the address, you could find out what the previous buyer paid. Some realtors around here were trying to paint the impression that the real estate market was stable, and hadn't declined much. A simple search turned up a property bought in 2005 for $469,000, that is now listed at $379,000.

[ITD]

Originally Posted by fatlazyless

....

Let me pitch out a grease ball of a reason here.......well,,,,shazam - a - ramarama ! .....you know that January 1, 2009 was the first day of the Winnipesaukee 45-25 speed limits....therefore....it is absolutely-positively-absolutely an undisputed fact this 27-percent price decrease is all about the nice folks with the big, expensive go-fast boats wanting to unload their waterfront homes and move away, somewhere to a new Lake Go-Fast. ....case closed!

I declare the science is settled, anyone who thinks not is a denier, good job Less.

[laketrout]

You would think the auction company would tell people right off the bat that there is a minimum reserve price so not to waste peoples time. Most likely the bank will put that condo at auction back into the MLS listings at a given price and typically in the notes you will see "subject to 3rd party approval". Which to me is a green light to low ball the asking price which might be up in the 80-100k range as you noted of the previous properties went for and or are listing for. Local or regional banks that are smaller tend to hold onto properties; hoping to recoup lost monies, larger national/federal banks tend to dump when they have so many properties to contend with.

[fatlazyless]

...the bank was the Scituate S & L...., and the auctioneer just breezed right through the auction procedure quickly.....reading from a written text and recording the entire verbal proceding as he and the qualified bidders went through the transaction...

The auctioneer speaks for about five minutes or less, introducing the auction and with regard that the sale is in "as is condition....and to be aware of any outstanding, unknown liens which are your responsibilty." Auctioneer makes a point of informing the room that collusion between bidders is illegal, and that any collusion will be prosecuted by the auction house to the full extent of the law.

Proceeding ahead, the auctioneer starts off by asking anyone want to bid 100k......80k.......60k....40k....20k....bidders looking around at one another.....and he got a starter bid at 20k.....in one minute or less....it goes up to 45k....and no one counters...so 45k is the high bid....and as I already mentioned...he then announces that the bank has a reserve minimum bid in at $87,500.

Could be the real estate broker, she was there to try to buy it low, or else get it as a listing, herself.

[Rag Top Daze]

Originally Posted by fatlazyless

...the bank was the Scituate S & L...., and the auctioneer just breezed right through the auction procedure quickly.....reading from a written text and recording the entire verbal proceding as he and the qualified bidders went through the transaction...

The auctioneer speaks for about five minutes or less, introducing the auction and with regard that the sale is in "as is condition....and to be aware of any outstanding, unknown liens which are your responsibilty." Auctioneer makes a point of informing the room that collusion between bidders is illegal, and that any collusion will be prosecuted by the auction house to the full extent of the law.

Proceeding ahead, the auctioneer starts off by asking anyone want to bid 100k......80k.......60k....40k....20k....bidders looking around at one another.....and he got a starter bid at 20k.....in one minute or less....it goes up to 45k....and no one counters...so 45k is the high bid....and as I already mentioned...he then announces that the bank has a reserve minimum bid in at $87,500.

Could be the real estate broker, she was there to try to buy it low, or else get it as a listing, herself.

Earlier this year we went to several auctions. We stopped going tho when we found out this was the way they all were going. It's a waste of time.

We have also found out that when you see a bank owned property listed at a reasonable price for today's market, it's just another game they are playing. When you go to look at it, you find out they are accepting multiple bids. A silent auction sort of plan. We refuse to play that game too.

I can't imagine why the banks are interested in holding onto these properties.

[jmen24]

Originally Posted by Rag Top Daze

Earlier this year we went to several auctions. We stopped going tho when we found out this was the way they all were going. It's a waste of time.

We have also found out that when you see a bank owned property listed at a reasonable price for today's market, it's just another game they are playing. When you go to look at it, you find out they are accepting multiple bids. A silent auction sort of plan. We refuse to play that game too.

I can't imagine why the banks are interested in holding onto these properties.

The reason they hold on to the properties is because it shows a Capital Loss on the books. A Capital Loss can be applied directly to the tax portion of a Capital Gain. It all has to do with liabilities. If they sell the house, great. If they do not sell the house, great. They make out in both situations, because they are holding or selling a house well below the money invested, its a loss either way and can be used to offset the Capital Gains Tax either way. That is how you can still show a profit even though you are holding a huge loss, not only are you lowering your tax burden, but that money then becomes profit along side the Capital Gain for the year or quarter.

SEE MY POST BELOW THIS INFORMATION IS ONLY PARTIALLY CORRECT

[neckdweller]

Originally Posted by jmen24

The reason they hold on to the properties is because it shows a Capital Loss on the books. A Capital Loss can be applied directly to the tax portion of a Capital Gain. It all has to do with liabilities. If they sell the house, great. If they do not sell the house, great. They make out in both situations, because they are holding or selling a house well below the money invested, its a loss either way and can be used to offset the Capital Gains Tax either way. That is how you can still show a profit even though you are holding a huge loss, not only are you lowering your tax burden, but that money then becomes profit along side the Capital Gain for the year or quarter.

How can the bank lock in a capital loss if they haven't sold yet? Isn't it similar to an individual - I have to sell a stock below what I paid to offset any capital gains. They may be able to book a reserve for bad debt expense equal to the difference between the mortgage note and the current market value of the property, but I don't see how they can record a capital loss.

I really don't know much about how the books work for banks so if you can further explain that would be great.

[jmen24]

You are correct, I did a quick check as you made me think, the sale has to be made in order to show the loss. The reason for holding a default mortgage is that they can stem the time to apply that loss on the books. That is the reason for not being in a big rush to off load these homes.

I guess I should elaborate a little bit. I made a quick call to a friend in the know to clear this up and that is where the response above came from (I am learning more everyday!).
The difference is really in how the bank is held, a large publicly held bank is not interested in taking a quick loss on an asset as it lowers their overall value in the market and you would not want to invest in a company that is taking a big loss, quarter after quarter.
A smaller privately held bank is more interested in reducing exposure to stay in business, and the loss helps them reduce the tax burden.

If you subscribe to the Registry Review you get a listing every week of the current foreclosure auctions scheduled, you also get the name of the person that defaulted as well as the name of the bank that is holding the note. The auctions held by small local banks are more likely to yield a better deal than the ones held by larger banks, but this is also leading small banks down a bad road, with little they can do about it.

But one thing to remember is that you are not going to get a property in a foreclosure auction for a huge discount if the property has any kind of potential value above what is owed. Most of the deep discount properties are complete headcases. We have looked at homes for clients in the last few months that they were looking to purchase through foreclosure, one still had the old school way of insulating the floor (newspaper laid in layers under a rug) because it did not have a single source of heat, other than a centrally located fireplace in the losest level (200 yr old home) or any insulation in the walls.

[neckdweller]

OK, that makes a lot more sense. Agreed on the point of not getting a huge bargain on any foreclosure properties. Banks aren't going to let a property go for much less than either the mortgage value or the market value - either way, it won't be a major deal for a third party buyer.

[Just Sold]

Originally Posted by jmen24

If you subscribe to the Registry Review you get a listing every week of the current foreclosure auctions scheduled, you also get the name of the person that defaulted as well as the name of the bank that is holding the note. The auctions held by small local banks are more likely to yield a better deal than the ones held by larger banks, but this is also leading small banks down a bad road, with little they can do about it.

But one thing to remember is that you are not going to get a property in a foreclosure auction for a huge discount if the property has any kind of potential value above what is owed. Most of the deep discount properties are complete headcases. We have looked at homes for clients in the last few months that they were looking to purchase through foreclosure, one still had the old school way of insulating the floor (newspaper laid in layers under a rug) because it did not have a single source of heat, other than a centrally located fireplace in the losest level (200 yr old home) or any insulation in the walls.

Great explination but remember the foreclosing bank is not going to let it sell at auction for less than they are owed. I have been to quite a few house auctions and that is what always happens. Auctions are also "buyer beware" as they warrant nothing including if taxes have been paid or if the property is vacant. If still occupied it is the buyer's responsibility to get the occupants out.

I am looking to go to another auction in Jan. The ex's 3800 sq. ft 2 year old home - oh boy!

[Just Sold]

Condo with dock Foreclose - at The Weirs. The Courtyard on Paugus Bay. Looks like a nice place 11/9 at 9:00AM
http://www.jsjauctions.com/details.asp?id=5626

[birchhaven]

why are those units seasonal? I heard the water lines are not deep enough, is that true?

[TomC]

...but sometimes units are "seasonal" becasuse the city/town says so. When the developement is approved, it is with the stipulation that it is classified as seasonal so people can't live there full-time and burden the schools. It may be that the reason for the seasonal classification has nothing at all to do with the buildings or utilities.

This is quite common with converted cottage colonies, hotels, campgrounds, etc. I know this situation is the case with the Arcadia Campground in Moultonboro.

Again, I do not know if this is the case in this situation, but it might be the reason.

[SIKSUKR]

Tom is right on.I have friends on Paugus Bay that had a 10 unit rebuilt and the seasonal stipulation applied to that building for the reasons he listed.

[birchhaven]

that is too bad, I like those units. Seems kinda strange, in this case you would think the town would look at these units and figure they will have seasonal owners, just because of what they are. So they would let them be sold/approved as year round units to get the higher taxes, since chances are no one will live there year round any how.

[Pineedles]

So am I understanding this correctly that if the home is not suited for year round living, as in no centralized heat, no insulation, and no one lives there other than the "warmer months", a tax break is in order? How much percentage wise?

[birchhaven]

I kinda thought this went with out saying, if a house can only be used seasonally, it will not fetch as high a price in the open market as the same house that is year round, so the assessment will be lower= lower taxes. I am sure the house could have and would have been built for year round use if they had been approved for it. I didn't want to get into a taxes debate, I was just disappointed because I like those units and probably would have been in the market for one.

[Pineedles]

So it is a lower assessment that the home receives. That makes sense. Thanks.