Sunday, June 6, 2010

Pictures and Real Estate Reporting

We have rolling thunderstorms going through right now. Hopefully it will end soon so I can go out and cook. I may have to add a dinner picture should I be able to get out there.

Just a few pictures, a guest post, and some thoughts on deck.

Guest Post: Reader Gawains
On Friday I offered up the blog to anyone that would like to put together a guest post to be featured here. We shall see how many are interested. It is my belief that I have the best audience out there.

Reader Gawains offers plenty of great inside information about real estate in the comments section. A real "on the ground" type of reporting that you will not get most places. I think Gawains will submit a few posts and I will be glad to publish them. I did get an email from Gawains showing me how bad many homes are after foreclosure. Here is Gawains:
There is a reason why most realtors (80%) don't work with repossessed homes. Because they don't have the money or don't want to do the work. It was 100 degrees outside today as I wandered around this house taking pictures, and I haven't even attached half of them. Broken door frames, missing sockets, trash everywhere, sheetrock damage, missing water heater, broken circuit board, missing a/c, missing cabinets, missing kitchen sink, missing commode, it's a disaster zone. I figure it's going to cost at least $20,000 to fully repair this house. And that doesn't include lawn maintenance, utilities, marketing and advertising, or selling commission. See what I'm talking about?

I was provided with a set of pictures that were just unreal. I had no idea grass can grow to be about 6 feet tall! Also, and you have to take my word for it, the interior of the house in question was ransacked and damaged. Due to confidentiality concerns I cannot publish the photos, but it was an eye opener.

More from email exchange by Gawains:
A couple of years ago, we would have had to hire contractors to clean this mess up. The entire lawn not only has to be mowed, but the cut grass and plants bagged and hauled off. Then there's all the trash, which as you can see is a lot. That has to be hauled to the dump. Then the house has to be cleaned.

These days the mortgage company uses a field asset management company to handle all that. Which is good, as it saves us the billing expenses. Still, cleaning up this house is going to cost several thousand dollars.

And then there's the repairs. Are you kidding me? The circuit breaker destroyed, water heater and a/c stolen, electrical outlets and sockets ripped out, kitchen cabinets and appliances taken, commode stolen, door frames broken, sheetrock damaged, we're talking about tens of thousands of dollars here.

If this property were to be sold as is, only a cash investor could buy it.

So you see the severity of the problem and the depth of the crisis. There is no way a profit can be generated by the resale this house. Think of the costs involved (the delinquent taxes must be paid by the seller at closing, for example). It must have been abandoned at least two years ago--how long does it take grass to grow six feet tall?--and was only recently repossessed. This is part of the shadow inventory. Only God knows how many properties like this--and I've seen worse--are on the banks' balance sheets.

While I have often tried to illuminate just how bad things are in the mortgage area, this insider look should really be more helpful. Thanks Gawains!

Monster Fish
On Saturday I was able to get out on the water in the kayak between rain storms. I had a small spinnerbait on one fishing rod and as I was tying a lure on another rod, this massive bass grabbed the spinnerbait as it dangling over the side of the boat! I was almost pulled into the water by the force of such a lunker fish:

Big fish, HA!

Things You Can do if You Are Nervous
On Friday I noted that I am now officially nervous and the reasons why. I am prone to being down on things economic (really?) but Friday was really ugly. I think that if this week does not go well in the markets a rout could ensue as there is nothing underneath stocks. But it could all be fine as well! Now I want to be very clear here; I do not think the world is going to end and we all will be living in caves. What I think is about a 1 in 10 chance right now is a situation where people start to panic and we get all the dumb behavior that would come with that.

Things like bank restrictions on withdrawals could happen. How do you think the average person would react to that? If you consider just that item it leads to other issues like grocery store mad dashes, gas runs, and related things. I think it would be short lived, but not fun at all.

So what can you do for peace of mind? Everyone is different but few things to consider having on hand are:
-Cash. Maybe $1000-$2000 in cash, preferably in smaller bills ($20 and smaller). If we get bank withdrawal restrictions you do not want to be in a spot where you cannot pay for things.
-Food. Canned goods in a pantry so that you could avoid having to contend with a store run when everyone is going nuts for a few days. Better to stay at home. Water you should always have quite a bit stored no matter what, water mains break all the time.
-Fuel. Well unless you are able to store gasoline safely this one is a tough spot. Just keep your gas tank on full for a while whenever you get the chance.
-Medical. If you or someone in your home has medication needs talk with your doctor about getting extra up front just in case a break from access would mean you would run out.

Now I am not trying to scare anyone, I just think we could have a 3 day to one week departure from the normal should things go bad in a hurry.

What about gold and silver? I did not mention them because if the 1 in 10 event happens they will not be useful to you at the time, but they should go higher in price!

Plenty of discussion about gold and silver as of late and I think it is good. All I can do is speak for me and I believe gold and silver will at some point become integrated into a new money system after the fiat paper ones all do their printathon thing. This will mean much higher prices. Both could also collapse, just like any other form of investment. Long term metals have maintained purchasing power, and I expect them to continue to do that. A good suit cost 1 ounce of gold in 1900, and today you can get a damn fine suit for an ounce of gold. How does paper money compare?

Some of my useless silver crap that will be worthless soon that I have on hand (the rest is buried in my neighbors yard, please keep it quiet!):
10 Ounce JM Bars:

1 Ounce JM Bars:

Pre-1965 US Quarters and Dimes known as "Junk Silver":

I have a soft spot for these gorgeous Phoenix Silver bars and will buy them whenever I find one, so if you have any that you want to sell....:

At least they are shiny, better than stocks any day, HA!

Have a good night.

33 comments:

getyourselfconnected said...

#29 Kevin Harvick just wrecked a guy at Pocono, its just like the old days are back!

GawainsGhost said...

That was a fair write up, GYC. I wish I could have given you permission to publish the photos, but as I explained there are legal issues involving agency that must be considered. I appreciate your confidentially.

Here's the thing with this house. There is absolutely no way the corporate owner can generate a profit on the resale. It's a loss all around. Foreclosure and attorney's fees, taxes, clean up and maintenance, realtor commission. That's just to sell it as is!

I haven't even begun to do the research on this house, have no idea how much it sold for a few years ago. Nor have I searched for comparables yet, so I have no idea what it would sell for today. But you saw the pictures. Even cleaned, how much do you think it's worth? Not much.

I'm thinking maybe $40,000 as is. That's basically land value and something for what's left of the house.

Fully repaired, maybe $80,000, given the location. So you see the bind the corporation is in. Either they spend a lot of money and take a loss to sell it as is. Or they spend a whole lot of money and take a loss to sell it repaired.

An investor with capital and a team of contractors could conceivably buy it as is, fix it up and sell it to make maybe $5000, probably less. But that would take a considerable amount of work and several months.

This is why these corporations are delaying foreclosure. There's already too much inventory on the market at this time, and given the expenses involved in foreclosure, repossession and resale, if they flooded the market it would only further depress prices and lead to more losses. So they have to dribble it out.

Problem with that is, the longer you leave a house unoccupied or unsecure, the greater the chances are you'll end up with something like this one, making it even more expensive to repair and resell, thus leading to even more losses.

Thus, it's a vicious downward cycle we find ourselves in. How we got into this situation is beyond my ability to comprehend. (Actually, I know exactly how we got into this situation, I just can't believe we allowed ourselves to.)

That said, an older, well-maintained home in a nice neighborhood with good schools remains a solid investment. Of course, those houses aren't usually forclosed on or vandalized. That's why they retain their value and are expensive. They're worth their weight in . . . gold.

getyourselfconnected said...

Gawains,
glad you liked the write up, but you did all the work! Thanks again for the great content, I really think it adds real value to the discussions here.

watchtower said...

Gawains,
I don't know how bad the humidity is in your part of Texas, but I would think that you would have some serious issues with mold in these types of houses if the windows had been kept shut for two years.

Is mold a problem down there, or are the windows usually broken out on these houses too?

As always, fascinated by your inside view of real estate.

GawainsGhost said...

Well, I wasn't so much concerned about mold as I was about the smell of a dead animal. It reeked.

But as far as mold goes, legally as an agent I cannot say it's mold. Only a certified scientist who performs a test can determine and say that it's mold. Until such time, to me it's just water damage.

But, no, I didn't see any evidence of that in this house. What I saw was trash everywhere. Three feet deep in the garage!

Ask GYC, he saw the pictures, and he'll tell you.

As far as mold goes, I really think that's been blown all out of proportion. All you need is some chlorine to get rid of it. Unless it's severely infested, in which case you would need to tear out the sheet rock and basically rebuild the interior of the house. However, that usually isn't the case.

CT-Hilltopper said...

I've seen a lot of houses popping up for sale in the "Gold Coast" lately, not in the better areas yet, but definitely along the fringes. The middle class neighborhoods and lower middle class neighborhoods.

Many of these were bought within the past few years. People aren't staying long, or just couldn't afford to stay long.

getyourselfconnected said...

"Ask GYC, he saw the pictures, and he'll tell you."
Yeah I think mold was not the biggest issue! Was that a dead opposum? LOL

C-T,
you are still up? Good to see ya!

watchtower said...

Yes I suppose dead 'possums would take precedents over mold remediation : )

I keep imagining these houses looking like one of those houses on the A&E TV show called 'The Hoarders'.

http://www.aetv.com/hoarders/index.jsp

Jeff said...

Spent the weekend with some friends and family that made their living on Wall St in the credit markets.

All of them basically said things are going to hell and a hand basket. Futes down big tonight.

sedintary state said...

GYC, how does the markup work for those silver bars. Could it be that you pay whatever the current market price is, times the size of the bar (no. of ounces). However I have a sense that there are all kinds of additional fees.

Talia said...

WRT physical occupancy of metals, where do you keep them?

I personally am afraid to take physical possession for risk they would be stolen. And I am hesitant to put anything in a safe deposit box.

Anonymous said...

Way to go! This is exactly the things I want other people to become more aware of and why there is no fix on the way. I have no reports of the beaches in FL yet...

Lt. G

PS: When in doubt stealth-geocache.

getyourselfconnected said...

Sed,
depending on the source you will usually see a nasty mark up vs spot for delivery. Buying in larger numbers can cut it down, but who has any money anymore, HA! The Phoenix bars are somewhat rare and no one has them in large numbers so I troll eBay and Craigslist for those ones.

Talia,
A metal holder does not discuss such things! I keep a few items around to look at, shiny objects are cool! The bulk is stored at a bonded and insured undisclosed local location that deals with this kind of thing. Everyone has to do whats best for them.

hey Lt G!

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