Real Estate 48 hour sales

[monee]

I noticed many of the large home builders offering huge discounts for purchases on a certain weekend.

With people buying homes with this huge discount isn't it going to affect the comps?

Someone looking to put down 10% could find out his home is appraised 10-15% less than he is paying and the bank will only lend on 90% of the appraised value ..not the sale price.

 

[danoXP]

Quote from monee:

I noticed many of the large home builders offering huge discounts for purchases on a certain weekend.

With people buying homes with this huge discount isn't it going to affect the comps?

Someone looking to put down 10% could find out his home is appraised 10-15% less than he is paying and the bank will only lend on 90% of the appraised value ..not the sale price.

What seems like such innocent question ... hits to the heart of the of pending home price decline.

In a declining market, lending requirements (ex. 20% down, 35% of income, etc...) will reduce the afford ability and the pool of buyers, to drive prices down to historically affordable levels.

 

[drsteph]

I think the more important issue is that the HB's are willing to let these properties go either at a miniscule profit, flat, or perhaps even a small loss to soak up available liquidity in buyers.

While these buyers may be thinking either "I've just gotten the best deal in the world", or "I have no choice but to do this", the reality is that they are buying into a very precarious situation.

When these buyers evaporate, and there's really nobody else left to buy, now there's an infinite supply with no bid in sight. And then the fun will start. Once all is said and done, what do you want - a normal, mature home which is livable in a neighborhood without a HOA and covenants that are difficult to meet? Or a house in a neighborhood full of REO foreclosures that you have to spend $500 a month in for fees and a similar amount for maintenence just so you don't get fined. (and I doubt the REO properties will be treated the same way)

Give it until the spring. That's when this last wave of liquidity ends. My bet, anyway....

 

[vacation]

Quote from monee:

I noticed many of the large home builders offering huge discounts for purchases on a certain weekend.

With people buying homes with this huge discount isn't it going to affect the comps?

Someone looking to put down 10% could find out his home is appraised 10-15% less than he is paying and the bank will only lend on 90% of the appraised value ..not the sale price.

No, because the homebuilders do not have to disclose so-called "incentives" which are really just price cuts.

Sales in a nearby new development are being recorded at $750k, when the buyers are actually only paying around $500k. The appraisals come in at the phony numbers, not the real numbers.

There's a whole double book system going on at the homebuilders now. The buyers sign a piece of paper saying they bought at $750k, and then sign an "addendum" that states the real price. The "addendum" never sees the light of day outside the company walls.

When you see those numbers being reported about new homebuilders in the news outlets, they are the phony numbers, not the real numbers. Which is why these piddling 2-4% declines they are talking about are not real. The real declines are much, much higher than that.

 

[vacation]

When these buyers evaporate, and there's really nobody else left to buy, now there's an infinite supply with no bid in sight.

That's quite an assumption. Except in certain bizarre markets like possibly LV, a more reasonable assumption is that there is a growing pool of buyers on the sidelines waiting out the downturn.

 

[danoXP]

Quote from vacation:

No, because the homebuilders do not have to disclose so-called "incentives" which are really just price cuts.

Sales in a nearby new development are being recorded at $750k, when the buyers are actually only paying around $500k. The appraisals come in at the phony numbers, not the real numbers.

There's a whole double book system going on at the homebuilders now. The buyers sign a piece of paper saying they bought at $750k, and then sign an "addendum" that states the real price. The "addendum" never sees the light of day outside the company walls.

When you see those numbers being reported about new homebuilders in the news outlets, they are the phony numbers, not the real numbers. Which is why these piddling 2-4% declines they are talking about are not real. The real declines are much, much higher than that.

I understood that a bank appraiser had to use comparables that are recorded with the County Clerk (S1RA). These are the legal price of the transaction, the amount on which a "transfer tax" is calculated. For which the buying and selling attorneys must certify as a legitimate transaction price.

Any "side letters", or "kick backs", that would misrepresent the "full consideration" of the transaction to the government would constitute Fraud.

The builders can report what ever they want, the county clerks office should show the "total consideration". If not, people will be going to jail.

 

[vacation]

Quote from danoXP:

I understood that a bank appraiser had to use comparables that are recorded with the County Clerk (S1RA). These are the legal price of the transaction, the amount on which a "transfer tax" is calculated. For which the buying and selling attorneys must certify as a legitimate transaction price.

Any "side letters", or "kick backs", that would misrepresent the "full consideration" of the transaction to the government would constitute Fraud.

The builders can report what ever they want, the county clerks office should show the "total consideration". If not, people will be going to jail.

I don't know that that isn't true of "bank appraisers". But I know appraisers who say they don't know the price of incentives, and don't consider them in their comps.

I will ask about that. I think it is a willful ignorance.

Our county clerk's records show a lot of things about recorded sales, but price of the transaction is not one of them, at least not online.

 

[vacation]

Quote from danoXP:

I understood that a bank appraiser had to use comparables that are recorded with the County Clerk (S1RA). These are the legal price of the transaction, the amount on which a "transfer tax" is calculated. For which the buying and selling attorneys must certify as a legitimate transaction price.

Any "side letters", or "kick backs", that would misrepresent the "full consideration" of the transaction to the government would constitute Fraud.

The builders can report what ever they want, the county clerks office should show the "total consideration". If not, people will be going to jail.

This is getting interesting. I just checked the County Clerk records against sales prices I know for a fact, and they do not match.

I wonder if any investigative reporters would be interested in this, if what you are saying is correct.

 

[OldTrader]

Quote from vacation:

No, because the homebuilders do not have to disclose so-called "incentives" which are really just price cuts.

Sales in a nearby new development are being recorded at $750k, when the buyers are actually only paying around $500k. The appraisals come in at the phony numbers, not the real numbers.

There's a whole double book system going on at the homebuilders now. The buyers sign a piece of paper saying they bought at $750k, and then sign an "addendum" that states the real price. The "addendum" never sees the light of day outside the company walls.

When you see those numbers being reported about new homebuilders in the news outlets, they are the phony numbers, not the real numbers. Which is why these piddling 2-4% declines they are talking about are not real. The real declines are much, much higher than that.

This method of a "double book system", two contracts, an agreement that "never sees the light of day" is called loan fraud, defrauding of a lender. The FBI has made many arrests, and obtained many convictions all over the country on just these types of arrangements. I rather doubt that you're correct, but if you are, it is a federal crime.

OldTrader

 

[vacation]

Quote from OldTrader:

This method of a "double book system", two contracts, an agreement that "never sees the light of day" is called loan fraud, defrauding of a lender. The FBI has made many arrests, and obtained many convictions all over the country on just these types of arrangements. I rather doubt that you're correct, but if you are, it is a federal crime.

OldTrader

I've seen the contracts with my own two eyes. But I'm not sure why it defrauds the lender. The loan is made for the real price minus downpayment.