Lake View, this four-bedroom house was foreclosed in May 2010 and then got a thorough cleanup, including a new kitchen…">

Sale of Fixed-Up Lake View Foreclosure Is a Win-Win

List Price: $1.175 million
Sale Price: $1 million
The Property: Situated on a great block in Lake View, this four-bedroom house was foreclosed in May 2010 and then got a thorough cleanup, including a new kitchen…


A foreclosed four-bedroom home in Lake View


List Price:
$1.175 million
Sale Price: $1 million
The Property: Situated on a great block in Lake View, this four-bedroom house was foreclosed in May 2010 and then got a thorough cleanup, including a new kitchen. As a result, the house sold swiftly— and at a price that was both more than the bank could have gotten if the house had been left in its foreclosed condition and less than its appraised market value. In other words, there was a payoff for both buyer and seller.

The 11-year-old house was uninhabitable when Wells Fargo got the property back in May, says Mike Olszewski, the Area Wide Realty agent who represented the bank in selling it. “Fixtures were missing, pipes were busted, the hardwood and the carpeting were all ruined,” he says. “It was in horrendous condition.” But rather than sell it as-is, where it would most likely have gone to an investor who would fix it up and reap the financial advantage when reselling it, Olszewski urged the bank to fund the fix-up. “The [number] of owner-occupants who are willing to do all that work in that neighborhood and price is limited,” he says.

The 3,500-square-foot brick and limestone house has three-plus bathrooms, four decks, and an attached alley garage. In all, Olszewski says, the bank spent more than $100,000 and less than $150,000 on the improvements before putting the house on the market in early November. Five weeks later, the house was under contract, and the sale closed December 23rd.

The buyers, who are not yet identified in public records, “had been looking for a year,” says their agent, Emily Santos of @Properties. “Their budget was $1 million, no more.” Of the home’s new kitchen, she says, “It’s not that great of a kitchen for a million-dollar home, but it’s livable.”

Price Points: Olszewski, a foreclosure sales specialist, believes that the home would have sold in the $700,000s prior to the fix-up. “My client would have been leaving too much money on the table,” he says. But after spending approximately $100,000, Wells Fargo was able to sell for $1 million, collecting about $200,000 more on the sale. (The $1 million sale price was 64 percent of the $1.55 million that the foreclosed owners had paid for the house in 2005, and 95 percent of the home’s prior purchase price, in 2001, when it was new.) Santos notes that her clients made out well, too: After repairs, the property was appraised at $1.75 million, she says. On top of that, Olszewski suggests that the neighborhood benefits as well. “There’s a sale in that marketplace at $1 million instead of, say, $700,000,” he says. “That’s good for everybody’s property values in the neighborhood.”

Listing Agent: Mike Olszewski of Area Wide Realty; 708-656-3333.

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1 year ago
Posted by Art the Physicist

What I don't understand about this is the impact of the various contributions to the bottom line to the real owner. Wells Fargo only holds the home in trust as a means of collecting a debt for what can be almost no time or no time if sold directly, and it's my understanding that if sold directly, the real owner can bid, but if not sold then is not allowed to say pay $100,000 more then anyone else in this example before additional funds they are responsible for at best/worst get put out. It's important to note that every dollar they pay, all, not just the $100,000 extra, reduces there debt to the bank dollar for dollar. This happens all the time and is going to the U.S.S.C. I've read as normally stopping this from occuring is illegal, as normally it's the bank that has the debt they are trying to lose as little as possible on not the owner. In the exception driving the conflict however it's an owner that's wanting to pay what can be obtained from sale to anyone without allowing the bank to bid.

Many will fail to see this comparison but that's ok it's subtle or I'm far from clear.

What matters to me is that in your example the new actual owner has equity that might of been preserved for the original owner but for the perceived moral hazard. The owner(s) of the debt, the creditor, does not have to foreclose and I do not understand/lack info on the conflict about those who exercise there right to not take back the home. One reason finding out who they are matters is because this discretion if no entity exercises it is always not exercised. At this point I realize that among the waste illustrated above, beyond the still large amount of money left unpaid to the real owner who you don't disclose whether they had equity or not, but one assumes the bank would not of bothered to cut a bigger check to them by selling it for more instead of the rule still respected here, less, given a chance, beyond that, is the commissions you have earned on the higher price and the fees charged from contracting this work.

More importantly I can not rely upon my assumption that you keep records in case 'too much' is offered so you can make sure you pay the original owners whatever pittance of there loss you've recovered. Sometimes owners pay there mortgage to pay down there debt and to keep the house forever- both. In the caselaw and oral argument recently reviewed however an opportunity to require a refund given the latter not being honored was missed by an appellate panel.The home had similar value as here, about a million bucks first at 1% then when depreciation prevented the expected new rate, months of half a dozen grand payments each got lost, got pocketed, with a thank you very much but "out you still go."

The lawyer did argue perhaps untimely that they did not have the chance to even pay a lot more then the home was worth at that point- again understanding that every dollar paid, not just in excess of what the security is supposed to be even absent 'cram down', was justifiable to reduce there debt despite it still being considered a foreclosure. Losing the home to yourself, cramming down in that fashion, is not what disallowing cramdowns has mind. THe lender can bid up to what is owed, but NO MORE REGARDLESS OF THE PROFITABILITY AND EASE OF RAISING THE FUNDS AS LIKEWISE THEY ARE OWED AND GET TO OFFSET ALMOST AS MUCH.


So my question is almost fully asked. Besides making sure you would of paid any equity left over I wonder why you think the owner should have to pay 100% plus lots of fee's of what you spent in it going into there accounts payable report? I don't know what the interest post judicial action is where such actions occur, but assuming it's as much at ten percent did you make sure this wasn't a bargain for them? Did the original real owners give you permission to spend and bill in essence them just so you could collect the debt faster, charge MUCH MUCHMUCH morethen ten percent annually in essence? Or did you excuse them formally as many states do from owing anything which only leaves the last aspect you discuss.

'Raising the tax burden for those owning in the area by increasing there assessed values.' Again not just landlord renting from underwater positions fail to appreciate that favor- so do those who might have inherited the property and are muslim or otherwise put there equity to work outside the home to afford owning it. I don't get that either. Maybe someone cold walk me through it- because ultimately such flipping comes at a high price for the planet and the local community. If lenders are allowed to mitigate there losses THAT's the moral hazard. Draconian relief should not be an even easier street for anyone. On a final related note short selling to cash buyers should not be allowed at all. Not at all! Cash buyers need to all bid at the same time in public. Short selling is only more functional then not if the lender gets the diligence of appraisals and sufficient marketing to reach buyers and more then just them as lenders.

IF fargo is willing to pay for the work then they should do that by loaning the money to whoever wants to buy it. What they require to loan being spent is fine- but what will allow them to loan the most is not. If I was the owner I would agree to this if for every dollar collected now I was given a percentage, either in cash, like a quarter, or if offset on my residual if now unsecured debt then two full dollars.

1 year ago
Posted by Art the Physicist

Put another way, why do the old owners have to possibly have there wages garnished to pay for the new owners new kitchen? That is when the bank spends this money to collect this debt do they get to tack it onto the amount still owed less the short term 'profit.' That money left on the table? It's to be collected, dollar for dollar only, not half a dollar reduced only for every dollar made now. Is that clear? It's not the banks! It's money the prior owners in the worst case chose to deny the bank, or in the best case are completely innocent of, much more innocent then the bank. Even this calculation is possibly based upon a auction price of what two million dollars? It's not like you had to right down the highest amount offered or even offers being made below that. ON the 'wars' show now in phx this year such a 'offering' was made at the very last minute, reduced by like half, so nobody showed up believing they would seek nearly as much as had been loaned- so one buyer got it for asking, and pocketed too much- in essence what your hypothetical does- saying $700,000 because buyers won't wait months to move in lol despite the buyers having waited a year for you to put it on the market and not liking the decisions you made! Buyers who would of borrowed far more for the kitchen then you did and ultimately will put yours in the landfill or have the labor be wasted that went to put it in- it's not like those man hours could not of been spent furthering or creating something of real value even lasting forever not just much more important.

So again there are lots of facts ignored- the law does not require the lender not ask for too much more then it's worth prior to taking it to the steps. The law does not require the consent of the homeowners you essentially smurck about. However, the law does say you can't rent it, and I believe that means you can't do this either. Historically you would just sit on the asset punitively. Perhaps that's why late fees don't have to be paid by investors when too little was loaned originally and it's selling for above what you can require be bid, denying the lender the flipping profits which are not profits of course, any real profits do have to go to the original homeowner about this I'm not joking. I've met suchpeople before- who wander homeless for a decade or more while there loot is used to pay for there treasures to be stored in such extravagance that when finally reached they barely have enough coming to them to buy another house, and you guessed it, or thereon the steps now, bidding, so cliched, is that cycle of abuse.

1 year ago
Posted by Art the Physicist

Although I thought I was merely assuming as much, you did confirm what I accuse the bank of, as banks are not just able but have duty to cancel escrow if an appraisal reveals what I think you note to be the case parenthetically? (see paste at the bottom of this pile on) (all REO's are premissed in there obnoxious and even more so brazenly ignored addenda that that discloses in essence that if it's learned it's not contracted for near market value they can market it further, they can extend multiple acceptances and open multiple escrows up to the point of them overlapping- when the renovations increased the value perhaps beyond what was owed, not just what was spent, the bank gifted the prior borrowers equity to the new one and could of possibly done a refinancing so as to start earning interest income on that new equity as well- funds taken out of the local community!)
"(The $1 million sale price was 64 percent of the $1.55 million that the foreclosed owners had paid for the house in 2005, and 95 percent of the home’s prior purchase price, in 2001, when it was new.) "

The repairs did precede the closing or even marketing in this case. If the appraisal cost is lost to the low ballers who finally found a mark after a year of doing that so be it- it's not much compared to the half million they looted for risking it!

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