Mammoth Foreclosures 3.0––Let The Games Begin.

The past few weeks have become more and more exciting in the Mammoth Foreclosure realm. From attending Trustee’s Sales (aka auctions), to “cash-for-keys” negotiations between lenders and former owners and tenants, to sometimes disgusting “trash-outs”, to seeing happy new owners settling into a once-foreclosed property, there are few dull moments. And the paperwork, endless forms, and seller confusion and delays continue. But all of this action reveals critical insight into the Mammoth real estate market conditions.

I’ve come to the conclusion (duh Paul!) that today’s foreclosures in Mammoth are far less a statement of the current local economic and real estate condition and much more the result of the give-away lending (and consequent gambling) and the market hyperbole of the 2005–06 era. And go figure that many of those being foreclosed on in Mammoth today were active (and likely newly minted) in the mortgage business in Southern California at the time they purchased––and many of the loans were acquired in other people’s names!

While the foreclosure pipeline is filling here in Mammoth and Mono County, the overall numbers still remain on the low side and with no major concentrations in any single market segment. And the overall inventory in Mammoth remains steady. (And if you follow my theory of “scrubbing” the inventory data, the inventory could actually be considered on the low side, and with plenty of mediocrity and overpricing still in the mix.)

While much of our work has been dealing with the “unfortunate” side of these foreclosures––the personal soap operas and victim theatrics (we haven’t seen a true “hardship” case so far), the myriad of property management concerns, preparing the properties for the market (all referred around here as Tasks, Tasks, Tasks), etc., our thinking is now turning towards making the buying process more explainable and understandable to the interested buyers. While the process remains similar to buying any other real estate in Mammoth, there are some real differences, and not understanding them can make-or-break a transaction.

Like I have stated in previous Foreclosure columns, the sellers of the REOs are unemotional and non-delusional. They have no clue about The Airport and new air service, Starwood Capital, the new logo or branding, or the latest important (and meaningless) press release. It’s all business, and definitely no monkey business. But they do have policies and guidelines (that vary greatly) and they, sooner or later, become motivated sellers. And what we have experienced is some frustration on the behalf of the buyers who are looking to tie these properties up. Most of these REOs/foreclosed properties are being handled by asset managers who are inundated with files and work––to the point of being overwhelmed. Almost all communication is electronic with much of it in fill-in-the-blank spreadsheet format. Not exactly like presenting an offer to Mr. Seller at the proverbial dining room table. And much of this communication is happening at odd hours because asset managers are working late or from home or maybe even from a foreign country.

And the seller’s motivation is a moving target as well. In our present national economic environment some of these sellers are seriously motivated to get cash back on their books as quickly as possible (imagine that)––so they are pricing very aggressively. (We currently have an Indy Mac REO–––and according to a memo this morning it is business as usual in their department.) And some of these lenders don’t appear to really care and are displaying patience with the market before they slash the price. Some are sitting on unrealistic and lagging appraisals. Some are trying their best to make the next loan (with incentives) for the new buyer. And again, some are just so backlogged that everything seems to be lost in cyberspace. And just when we think all is lost––voila!––it all gets resolved.

Ultimately, buyers looking to grab one of these REOs need to be counseled on the variables in the process––not necessarily minefields but the wild cards. Buyers get to complete all the normal due diligence. But when making offers they need to understand the reasons for things instead of being set up for excuses. And hopefully the reward for their patience is a very good buy and the start on years of enjoyment here in the Sierra. Enough for now, I’m heading up to the Village to check out a 2 bedroom that was foreclosed on last week.

13 thoughts on “Mammoth Foreclosures 3.0––Let The Games Begin.”

  1. “While the foreclosure pipeline is filling here in Mammoth and Mono County.”

    (Very) Salient point.

    And the reason people would buy BEFORE this pipeline bursts is….?

    thx 4 the report Paul.

  2. I think I saw Mozilo loading a plane, heading to Mammoth.
    The flights are coming. The prayers have been answered.


  3. Someone on this blog said the media is to blame for the current problems in the housing market…To that I say, you are insane, and get a real job…Do you remember all those flip this house tv shows. I bought this house for 180k, I put 23k into it, and I will put it on the market for 750k. This is just a regular house and the average salary in this area is 49k. This only happened in real estate over the last 8 years. Never before in history did it rise above inflation per year of like 3 percent. YET, what it will take to bring things into line with rents and salaries. Owners on blogs bite your head off and say that you think the sky is falling..or they mock that you think housing wont come back…well if this speculation and price increase never before happened, why would it randomly happen again, or atleast in our lifetime.

  4. Speculation happened before in Real estate the late 80’s in California.
    Not sure if there have been any bubbles as nationally widespread as this last one. There are some areas that were bypassed.
    Speculation will happen again. Don’t know when or where.
    The fundamentals will always pull real estate back to the sane basic slow trending up line.
    Booms and busts will pull the prices way above and then back below the fundamental values.
    With the size of this boom and bust we may get a large overshoot below intrinsic values. Positive cash flow! The trick is knowing when you are there or if you will get there.
    Once prices fall and people are getting good cashflow in real estate and the stock market is tanking and people want somewhere else to invest the market will move. 2012 maybe?

  5. Please forgive this off topic post but I just have to extend kudos to the anonymous poster (aka the Sage from Mammoth) who on July 11th suggested WFC (Wells Fargo) as a possible stock play. All I can say is well done…now give me another one just like the last one!! 😉 Wilbur

  6. if you want to buy financials right now, yes they are cheap and they are going to go much higher over the next 5 years…so wait a minute, why are they so is why, it is simple, no one know what 30% are going to go under. So if you want to roll the dice you may make a lot of money over the next 4 years, or you will lose it all over the next 5 months…there is no free lunch. Nor riskless purchase, if there were no risk, c citigroup wouldn’t have gone from 59 to 14 in five months. As for will real estate come back. lets look at the nasdaq. in 2000 it reached 5200, where is it 8 years later? 2200, still forty cents on the dollar. it will take the nasdaq 24 years to get to 5200, and the majority of that growth will be inflation. Housing will do the same, just not rebound as quick… if you call that real estate coming back, I guess it will, but I wouldn’t say that

  7. paul. thanks again for your blog. my wife and i are coming up this weekend for some r&r. We have been watching the market, but are torn between three schools of thought. 1) buy a condo just for us to use on the 10 or so trips up during the year, 2) buy a 700 to 800k home and "share the keys" with our family and friends or 3) (my favorite) wait for some of those superspecs to come crashing down. By superspecs I mean the formerly $3M category, starwood, etc.

    How long do you think the #3 folks can hold on? should i get a condo while waiting for them to fold, or is it closer than that?

    Thanks for you opinion,

  8. Glen,

    I’m watching the single family homes in the $1M to $2.2M and maybe a little higher range. If you can buy in that range I think we are beginning to find out who the motivated sellers are. The opportunity will be to find a quality built home in a great location–one that appeals to you and your needs and tastes. Homes that have been built in the last few years are really a step up, I know because I live in one. Overall efficiency including heating and snow removal are going to become bigger issues for all property owners.

    Knowing WHERE you want to be is important–there are lots of variables. If you are making that many trips to Mammoth and are doing your homework then spend a little time checking out the neighborhoods in all seasons. For this weekend checking them out on a bike is perfect. We call it Tour de Mammoth. Also consider renting homes on in different neighborhoods to experience the locales. The interaction with the owners alone would be valuable.

    Rather than wasting your efforts on a condo now I would be putting the energy into understanding the home market and making an optimal purchase at the right time. I think the next 12-24 months will show some excellent opportunities.

  9. IM also coming up this weekend. IM also looking at homes, lets get into a bidding war…NOT. This seems to be what sellers are holding onto, past memories. Homes would go on the market and there would be multiple offers. That was years ago, its a different market today. Seems like most sellers are just fishing. Buyers are not going to bite, just not that hungry yet. There are plenty of buyers looking, homes just need to be priced accordingly.

  10. Like I have stated in previous Foreclosure columns, the sellers of the REOs are unemotional and non-delusional. They have no clue about The Airport and new air service, Starwood Capital, the new logo or branding, or the latest important (and meaningless) press release. It’s all business, and definitely no monkey business.

    So what you’re saying is that the market in Mammoth is over-hyped; a product (and now victim) of heavy speculation driven by the greed of a few individuals for short-term gain. Many, if not most, of those individuals are realtors like yourself. But in this same post you blame the buyers, the lenders, and the media. And to add insult to injury, you call the foreclosure market “exciting”. Your tone is both cold and disconnected, and your advice seems wholly motivated by you own desperate need to make that next elusive sale.

    The reality is that foreclosures in Mammoth are sign of things to come; a town in the grips a recession not like any other we’ve seen in the past. The real estate market, it’s predicted by most experts, will not see recovery five years minimum. And this depends on broad national economic recovery that now seems dubious.

  11. Sorry Tom, not cold, disconnected nor desperate. If you’ve been a long-time reader you would know that I firmly believe in the attributes of Mammoth and my investment level both personally and financially proves it. But I was critical of the good-ship-lolly-pop hyperbole that so many got sucked in to, and that so many are now paying for.

    The whole global economy is facing the recession you speak of, not just Mammoth. Watch China after the Olympics.

    The foreclosure market is exciting to me for many reasons, but especially because I thrive on change and opportunity. And this is all part of the business cycle.

    Good luck to you.


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