A friend asked me to recommend a methodology to find foreclosures in Orange County California today to flip in 2013 for profit. This is my
synopsis of Orange County opportunities for residential real estate returns 2013.
This is a loosely described chain of ideas as to how one might go about finding distressed properties in Orange County
According
to Data Quick Notice of default filings
fell last quarter across all home price categories.
“Mortgage defaults remained far more
concentrated in the most affordable neighborhoods. Zip codes with third-quarter
2012 median sale prices below $200,000 collectively saw about 8 NoDs filed for
every 1,000 homes in those zip codes, while the ratio was about 5 NoDs filed
per 1,000 homes for zip codes with $200,000 to $800,000 medians. For the group
of zip codes with median sale prices above $800,000, there were just under 2
NoDs filed per 1,000 homes.” (Data Quick)
Most of the loans now going into default are from the
2005-2007 period: the median origination quarter for defaulted loans is still
third-quarter 2006. Third quarter 2006 was perhaps the high of the California
Real estate boom and by first quarter of 2007 WAMU and Countrywide started to
restrict low document loans to wage earners then my end of 2007 stopped all
together. It is those loans originated or homes purchased in 2006 with the same
owner today that are at the highest risk for default because many are seriously
upside down and death, divorce disaster, or job relocation will have them
forced to move. Some may still be in the home not making payments.
The big three "beneficiaries" in the
foreclosure process last quarter were Bank of America (8,061) mostly all are
Countrywide loans that they “got” not acquired and have no skin in the game, JP
Morgan Chase(6,713) also big number are WAMU loans they got without paying for
them and Wells Fargo (5,780) Wachovia, and others.
The trustees handling most of the defaults last quarter
were Recon Trust Co (mostly for Bank of America and Bank of New York), Quality
Loan Service Corp (Bank of America) and NDEx West (Wells Fargo). These trustees
don’t sell off bulk properties – that’s a myth in Orange County.
In Orange County there is great variety in the location.
I would suggest that your best return on investment is in the best locations. So how can you know what is the best? Best
locations being defined as the most desirable in terms of highest value in
past, those that can be financed easily ( you mentioned that you want to stay
under FHA limits), and have a view.
The Cities I suggest you target are: Laguna Beach, Laguna
Niguel, and Dana Point. Although I believe Laguna Beach will see the quickest
rebound in values (and perhaps Corona Del Mar) these communities are a bit out
of your price range.
Laguna Beach does have some properties in that price
range with NOD current as follows by street name:
Laguna Canyon Road, Alifieri, Katella, Santa Ana, Cypress,
Meadowlark, Jewel, Anns Lane
And so on but the pickle is in Laguna you have to know
the house. Laguna can have funky building construction and often illegal
additions that as a flipper you will be harnessed to City Planning office
forever trying to get some bootleg unit to conform. A buyer must also know the
difference between being in the village and south … and so on.
. Notices of Default
Numbers Declining Trustees Deeds further down)
houses and condos
Los Angeles County NOD prior
quarter 14367 last Q 10,064 down 30%
Orange County NOD prior quarter 4817 last Q 3255
down 32%
I suggest several approaches towards locating properties:
Make back up offers on certain short sales that
are past 45 days in the process as the value submitted 45 days or more ago may
be lower than the cost today. Swoop in and buy them from Bank of America, Chase, or Wells
before they last ditch foreclose.
Door to door knock on residents who purchased
in 2006 and uncover short sales or sellers in trouble to negotiate a deal
Buy properties at courthouse and communicate
with Realtor about status and structural defects of any subject
Chase down “expired” listings that are in need
of quick sales or had agent who isn’t cooperative or they have now grown tired
of having open houses and come to Jesus on price
At the Santa Ana Court House there are on average 100
viable bidders with cashier’s checks registered to purchase properties. They
work with their ipad or laptop to access property information as the list of
auctioned properties changes and fluxes daily. You know one key to investing is
to have a trusted Realtor who has already walked through the property and
accessed the flaws and rehab work necessary as well as the location and view.
In Orange County views are a large part of the actual value and very difficult
to know from a Google map or photographs the real value of a subject property’s
view. I assume you experienced this in LA County to the same extent.
You should vary the value of the single family home (door
units) you plan to buy. I suggest you find:
Homes in the $500 - $600 range in Laguna Niguel that are
on a stable hillside with lower Homeowner Association dues ( these vary from $
160- $600 making it just a little harder to qualify) perhaps most of these will
be single level which is also desirable and easier to rehab. All should have
special attention to front landscape, repaint and perhaps all the same
appliances (those are often missing or trashed) Average year built is about
1995.
Homes in Laguna Beach in the $ 800 range that may not
have a view but are in a “hotly” desirable
community.
So now you will ask me why not Placentia, Anaheim or Yorba
Linda? Yes you can find cheaper houses there but the communities are not going
to recover as quickly in my mind. Feel free to call me, I’ve bought and sold a
couple flips, even have the contractor’s license to know how to hire great people.
(949) 784-9699
Right now there are only 37 possible properties in Notice of Default, the pickings are slim. The market in Orange County is on recovery mode
