“Speculators “Grabbing At Straws”
A housing report from the Washington Post. “Lisa and Reggie Starr thought they were getting a good deal when they signed a contract to buy a new six-bedroom house in Woodbridge almost a year ago. But after they had trouble selling their own house and wanted to get out of the deal, the fine print in their contract became a very big obstacle.”
“‘There’s no contingency for the sale of your home. There’s no contingency for financing. ‘No refund will be due to you’ — it’s clearly written in the contract,’ said Lisa Starr, who admits that she did not fully understand the document when she signed it.”
“The Starrs and many other would-be new-home buyers are finding that the sales agreements they so enthusiastically signed just a year or two ago have left them little wiggle room as settlement day approaches. Indeed, some consumer advocates and real estate lawyers who have been fielding calls from remorseful buyers in recent months say few contracts are as rigid and one-sided as those for new home sales.”
“The contracts are ‘written in a way to give every possible edge to the home builder,’ said Allen J. Fishbein, at the Consumer Federation of America. Some developers have added certain provisions that further strengthen the contracts, bit by bit, over the past decade, some attorneys said.”
“As a result, contracts became more prevalent during the frenzied real estate boom that block consumers from getting any ‘remedy’ beyond reimbursement of their earnest money, or that prevent them from taking the dispute to court but instead force them into arbitration, when differences of opinion arise.”
“But some buyers are trying to get back their deposits just the same, and at times are finding that persistence can prevail. There have not yet been judgments or verdicts in these cases, but some would-be buyers are getting settlements instead. In one case settled recently in Fairfax County Circuit Court, 16 home buyers in a McLean subdivision sued to get back deposits on homes contracted for a collective $20 million.”
“Robert M. Diamond, a real estate lawyer in Falls Church, said some buyers are grabbing at straws, even protesting changes favorable to them, such as when the developer added extra parking in a condominium complex. Buyers and their attorneys have alleged that these adjustments are ‘material adverse changes,’ even though the contracts clearly permit developers to make certain changes as needed to their projects.”
“‘It didn’t matter what the change was; these are excuses,’ said Diamond, adding that many of the buyers who want out are speculators who decided their investments had turned sour or buyers worried that they had overpaid.”
“The Starrs said they are hardly trying to slither out of the deal just because they were having second thoughts. They say their backs are against the wall: They couldn’t get good enough financing terms, and the builder had lowered the price of nearby homes.”
“The Starrs finally got a contract on the home they were selling, but at a price that is $150,000 less than they expected when they bought the new house. Reggie Starr marveled at just how quickly the real estate market had turned. ‘It was not even like a slight decline,’ he said. ‘It was like a big curve.’”
“‘You need to have legal representation, and you need a real estate agent,’ Lisa Starr said.”
“No matter how reputable the builder may be, buyers should seek out a lawyer before signing the deal because new-home sales agreements can be ‘loaded with all sorts of hidden land mines,’ Fishbein said.”
“During the boom, however, many builders refused to pay sales commissions to real estate agents representing buyers because builders could sell the houses without any help. And buyers risked losing out on a coveted contract if they took it to a lawyer rather than signing right then and there.”
“Jeffrey Silverstein, a real estate lawyer based in Burke, said he recently had two buyers bring him their contracts before signing. ‘When the real estate market was hot, everybody thought they had to sign right now or they’d lose the place. And that was probably true. Lawyers just weren’t in the loop anymore,’ Silverstein said. ‘Now, it’s coming back a little. They [builders] listen now. If you have reasonable changes to make the contracts more equal-handed, they’re willing to listen.’”
The Post also has this:
‘If Realtors are indeed a priesthood, then David Howell is their oracle. After I bought my first home, a condo in Old Town Alexandria, in the spring of 2004, I began receiving a monthly newsletter from the local real estate giant McEnearney.’
‘Howell’s October/November column was more sober: ‘Most of the major statistical indicators of the health of Northern Virginia’s market are trending down, but we still believe that there is a ’soft landing’ going on, not a crash. Inventory of available homes is up; the number of contracts is down; it is taking longer for properties to sell. . . . As a consequence, the average sales price of a home in Northern Virginia has actually dropped about 6% — on average — from this same time last year. Nonetheless, we remain confident that the market is experiencing a wholly expected and normal adjustment after several years of ultimately unsustainable price appreciation.’
‘Hoping to rid myself of confusion, I sought wisdom from the only source who could ease my anxieties — the oracle himself. I called Howell and asked him if, in hindsight, he had been too optimistic. ‘Maybe a little,” he responded. ‘But honest to goodness, I don’t think very much. . . . Yes, my projections were probably a little on the rosy side. But there are still folks who are talking about a bubble bursting or prices really coming unglued. . . . Are prices down now compared to where they were a year ago? Absolutely.’
honest to goodness, I don’t think very much…
Yeah, he’s a Realtor.
That article is excellent. It is great to see this pompous jack-ass Howell fellow get so heavily lampooned. The only problem with the article is that it requires a reader smart enough to understand that Howell is really being mocked, not revered. I doubt there is an abundance of that type of reader. All things being equal it was about time a reporter put one of these self-proclaimed “experts” in their place.
“No lesson seems to be so deeply inculcated by experience of life as that you should never trust experts. If you believe doctors, nothing is wholesome; if you believe theologians, there is nothing innocent; if you believe soldiers, nothing is safe.”
Lord Salisbury - as quoted in “The Last Lion” written by the late William Manchester
And if you believe real estate shills “now” is always a great time to throw money their way.
You gotta read that WP article. The subtitle is “Huckster Alert!”
Yes, I saw that. But why did they make the print so small? You don’t see it unless you know to look for it.
“I don’t think very much.”
Lazy, stupid and selling real estate is no way to go through life David Howell, please for all our sakes go back to your previous occupation.
‘No refund will be due to you’ — it’s clearly written in the contract,’ said Lisa Starr, who admits that she did not fully understand the document when she signed it.
I hope Lisa gets screwed. A contract is a contract and she should have read it.
This stood out to me, too. It’s “clearly written”, yet “she did not fully understand the document”. Those two thoughts don’t go together to make a great Reeses. I hope she gets screwed, too.
I posted a quote a couple of days ago from a local elected official who said something to the effect that… nobody has time to read all those closing documents when they buy a home.
Yea, they’re too busy watching Lost or Gray’s Anatomy. How can you allocate 3 hours of your time towards reading a contract worth $500,000 when Access Hollywood has an exlusive on Paris Hilton?
I thought that was what the Tivo was for…
You know, though, they make it very difficult. I always read contracts before signing, but particularily with real estate contracts, they’re “never ready” to read before the signing and then they give you a very hard time, when you take the time read it while they all sit around waiting for you to finish. I’m bright and experienced at this and still find it a very stressful situation. Everytime I’ve done a new real estate transaction, I’ve pushed harder to get the contracts to read before signing and am doing better now, but it isn’t easy.
lisa did not have the time to read her contract as she was too
busy counting the thousands she was going to make in appreciation on her investment
if you do not understand these documents please consult a lawyer or trusted financial advisor to explain them to you
I would not “hope” she gets screwed. I’d save my hopes and wishes for more pleasant things.
She’s pretty frank about what she did and seems to accept resposibility for her bad decision.
That’s why it seems to me like she has enough of a punishment in giving up her hefty deposit .To force performance on her is going a little to far in a project . It’s a little different when you hire a small builder to build a spec. property .
They all belive that they are financial moguls and that they know that they should be able to sell their house for xyz — oopps “Smacked by the reality TROUT” - oh I only thought we were going to make a bunch of money off our house now —well know — welll — can we have our money backe !!! BOOO F**K’N WHOOOO!
“I hope Lisa gets screwed. ” The screwer may hope for that too, if she’s good looking enough.
Consumers want their cake and eat it too. If they make a bad decision then suddenly it’s the builder trying to scam them. If their house value goes down, the builder screwed them. Please, if you want it to be fair, the builder should be allowed to buy the house back at the sale price if it gains value after you own it.
Does the builder really think the Starrs will buy the place? I find it hard to believe that they can’t come to an understanding with the builder.
I wonder how big the deposit was?
“The Starrs finally got a contract on the home they were selling, but at a price that is $150,000 less than they expected when they bought the new house.”
It looks like they sold their current home so they need to buy something. However, buy taking an “expectation” hit of $150,000, they may be in even a deeper hole now.
This story likely has at least a few more chapters to go.
I talked to a Colorado couple who recently bought a new home from a developer and they served alcoholic drinks to them during the closing. You know that you are getting really screwed when the free drinks come out. There are some legal arguments one could make as to contractual capacity.
We always wondered if the housing mania would push into the court system and it looks like those who said it would were right. This is in two areas on the same day! (see Florida post)
The second gate of this will be the ones who are already in these places and sue to be let out under shoddy construction theories.
heck no, that slight slant in the kitchen floor is a purposeful feature the builder put in at no charge. See how much easier mopping is now?
Tx, this is good. It’s my bread and butter right now. I have to turn down work inspecting for construction defects due to not having enough hours or daylight in a day. I’m seriously thinking of giving up my regular day job. I’ll make more working a half day today than I’ll make all day tomorrow.
I’ve already been asked to assist someone who wants to bail on his contract based on misrepresentations by the Seller regarding a
pre-construction unit. It’s not my field & I had to decline, but it certainly raised some interesting questions I’d research if I had time. (Is square footage measured from the outside skin of a wall or the inside? How long does a delay have to be before a judge will decline to enforce a “we’ll take as long as we want to finish” provision?) If prices fall enough, litigation to get out of (buyer) or enforce (seller) purchase contracts on pre-construction homes especially will become profitable (and therefore multiply rapidly).
Jim, I’m not a lawyer but I work with and for some that specialize in construction claims. Generally, floor area is defined as the area enclosed within the exterior walls of the building, but it depends on what the specific contract or agreement says. Many contracts also refer to “gross” and “net” square footage. Some count roofed areas used as living area on the outside. It depends on the specific instance. Enforcing a “finish” clause is hard if it’s not specified in the contract. In most of the cases I’ve worked the “standard of the industry” is usually taken into consideration. In other words, if similar homes are being built in four months, your home should be built in four months. Can you believe anyone would sign a contract without a completion date? Happens all the time. Even with a specified date there’s a million loopholes for weather delays, delays waiting for the buyer to pick paint colors, delays due to a full moon (just kidding). In the past years building or buying a home was a no-brainer. Between the time you signed a contract and took possession you could count on it gaining a lot of value. It wasn’t unusual to make $20k on on average house. Now the tide has turned.
Free booze at closing?…..what’s next, break out the bong and Pink Floyd’s Dark Side of the Moon playing in the background?
On second thought, this might be appropriate:
Brain Damage
The lunatic is on the grass.
The lunatic is on the grass.
Remembering games and daisy chains and laughs.
Got to keep the loonies on the path.
The lunatic is in the hall.
The lunatics are in my hall.
The paper holds their folded faces to the floor
And every day the paper boy brings more.
And if the dam breaks open many years too soon
And if there is no room upon the hill
And if your head explodes with dark forebodings too
I’ll see you on the dark side of the moon.
The lunatic is in my head.
The lunatic is in my head
You raise the blade, you make the change
You re-arrange me ’til I’m sane.
You lock the door
And throw away the key
There’s someone in my head but it’s not me.
And if the cloud bursts, thunder in your ear
You shout and no one seems to hear.
And if the band you’re in starts playing different tunes
I’ll see you on the dark side of the moon.
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free booze = “comfortably numb”.
A little SFV News:
Median proce for Valley home drops
Gregory J. Wilcox, Staff writer
Article Last Updated:12/10/2006 12:13:10 AM PST
It had to happen sometime.
The median price of a San Fernando Valley house had to fall. Last month it finally did, by just less than 1 percent.
And, just maybe, November brought us a glimpse of what the residential real estate landscape is going to look like for months to come.
But you probably shouldn’t get too giddy thinking prices are going to collapse.
Those inside and outside the industry agree that prices are leveling out, which means the Valley will remain a very expensive market.
“Those inside and outside the industry agree that prices are leveling out, which means the Valley will remain a very expensive market.”
Time will tell, time will tell. Are most of the homes in “like, The Valley” purchased by rich people with 20% or more down, or by people like you and me stretching their housing budget with risky loans and little or no money down? The risk is there.
A few weeks ago a snotty realtor insisted to me that prices were not falling but had reached’a permanently high plateau’ as in ‘housing souffle’. It makes me happy that she can eat her d@mn words.The fall just hadn’t been reported yet. I hope the downward trend continues as the SFV doesn’t have the income to support these insane prices. $750K for a starter home…sheesh!
Stagnation slowly squeezes away all of the excessive gains from the bubble. With inflation going up this sounds more and more like a “pressed duck” prepared in the traditional style where you have to wait until you are nearly starving before your meal is ready and afterwards the bill kills any desire to ever eat again.
why do people not read contracts when signing the dotted line, especially on something that costs so much? what kind of friendly contract is the builder supposed to write? i could only imagine the contracts start to specify much worse stuff in them like the buyer losing more than just their deposit. i rarely feel sorry for any of the buyers’ stories i keep reading about.
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because “When the real estate market was hot, everybody thought they had to sign right now or they’d lose the place.”
“why do people not read contracts when signing the dotted line”
I hate to say this but blame our Educational system, i remember in High school many years ago we had Home Economics, which changed into a Life skills classes ( made it more gender neutral) were required to graduate.
They made us balance checkbooks by hand, read contratcs Especially Apartment Leases and Car sales, Employment. Fill out job applaications, how toorganize you personal papers, yes the teachers taught us not to cary our SS car birth certificate on you….or how to apply for credit how to figure APR…
Yet if you go to Craigslist and read all the posts on the Legal Board, you quickly realize just how stupid we have become as Americans, lots of problems stem from not being taught this stuff in HS and be force to make it a required subject to graduate.
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nah - it has nothing to do with education. Lots of educated (but dumb) people didn’t “see” the fine print either - doctors, lawyers, CPAs, PhDs, etc. Why? because in their frenzy of blind greed and “keeping up with Joneses”, THEY SAW ONLY WHAT THEY WANTED TO when contract was in hand. There are a lot of educated idiots in this world.
Upton Sinclair: “It is difficult to get a man to understand something when his salary depends upon his not understanding it.”
Actually I would blame our legal system and all of the bottom feeders for making the contracts indecipherable. Every clause in the contract is the result of a lawsuit. If you make the document big enough and use obtuse terms that have non-standard meanings, unless you are a lawyer you will not be able to understand it. I doubt the education system has the wherewithal to get everyone a law degree by the time they exit high school. For example read the following paragraph
I witnessed something most extraordinary in the traditional behavior of the canine species and believe it has pertinent relevance regarding the relative roles of their species in both the symbiotic and parasitic or saprophillic relationship with our own. Upon approaching the habitat enclosure of our particular domestic birds, it became apparent by the noise that it had been, once again, invaded by the vixen predator that had been so troubling as of late. Our own domestic hound, supposedly our guardian and sentry, had interposed himself during the predatory raid squarely in the atrium of our aviary abode. The auburn vixen, quickly exiting by the portal upon my approach, vaulted with celerity over our indolent interposition with him scarcely noting nor caring about the invasion of the ingenious interloper, displaying little more locomotion than a perfidious yawn.
What does this mean? - The quick brown fox jumped over the lazy dog.
Anything can be made more complex and lawyers are the kings of taking the simple and making it complex.
The legal system in this country is a JOKE, but the real scary part is it is better than the rest of the worlds - that doesn’t leave a lot of hope…
Good point. The contracts are made so that it might take more than a day to completely read in its entirety. I have owned several homes in the past and have not read every word of the contracts when I signed. I did,however,double check each area that had been negotiated…but the WHOLE contract? Sorry, not possible? Skim…yes. Read? no.
That paragraph reminded me of some of the crap I had to read in my high school british lit class. When someone writes like that, they get a Pulitzer prize, but when they speak that way, we call them schizophrenic.
test
I would like to buy a ski condo when prices have really dropped. The question I’ll throw out is how does one have a pretty good idea that price declines have arrested? By the way, I just want it for our enjoyment. It doesn’t have to be the world’s best investment - just one where the value might increase very modestly over say 15 years.
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IMO, 1997 prices + 3.5% annual inflation should be your offers. when they accept, you’ll know you’re in a fairly priced market. you can make those offers today if you want and keep making them until you hit. Eventually you will.
Good luck!
Gekko,
3.5% annual rise may be true nationally, but in areas like the DC Metro area, it is like 6–7%. I would be comfortable with that rate, or even 8% for a ‘good’ location. But prices have gone up at an average 12–15% in the area in the last decade; most of that rise came in 2004/2005 in the form of 30–40% rise. In my conversations with sellers as well as realtors, they are of course saying I am crazy to expect that prices again. The issue is that realistically there are family pressures and we may be able to wait only until next summer; but for prices may get back to their normal level only in 2009 or later and most people can’t wait that long.
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offer 3.5% and let them counter at X%, then make your call. at least you know what you’re “paying” in terms of inflation rate.
Finding the bottom is a combination of art and dumb luck. You only “know” when the bottom is in because prices have started to rise and you’ve missed it. I would pull the trigger when prices represent value to me based upon my intended use and ability to pay.
FWIW, vacation properties tend to get hit hardest in a downturn. Obviously, when times are tough, the least important asset is thrown overboard to lighten the ship.
“I would pull the trigger when prices represent value to me based upon my intended use and ability to pay.”
Exactly.
>prices represent value to me based upon my intended use
the value defintion is too murky and ambiguous to get your hands around. your perceived “value” may differ from others - on th eupside or the downside.
IMO, you have to quantify it and throw math at it to solve the riddle - ie reversion to the mean or median vs. income or price vs. replacement cost etc.
http://www.files.bz/files/11251/RealEstateValuationMethods.xls
“your perceived “value” may differ from others”
No big deal to me…after all, it will be my (and the bank’s) money I will be spending.
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it will be a big deal to you if you ever have to sell it!
Let’s get this “when property has bottomed” argument settled. It’s very simple.
When prices DO bottom, they will stay there for a long, long, long, time. There will be no need for eager buyers to rush in because, just like every other boom in any previous market, people will be so gun-shy of being the first in, so weary of the rip-off and scam artists and carpet baggers, there will very little movement for YEARS. A few percentage points at most. Also, the next boom, be in concrete, prime hogs or condoms, will be in the gestation period.
These boom and bust scenarios never change. EVER. As Robert Schiller states, booms and busts are determined by mass psychology. Booms, be they stock market, property, tulips, Florida swamp land or chocolate bar booms are momentum driven with buyers greedily piling in to grab as much as they can. This, in turn, feeds the boom. As we have seen in the last few years.
Then, as we are now seeing, like a deer caught in headlights, the psychology of the buyer(s) senses there is something wrong and they stop listening to the hype merchants like realtors. At this point, the boom “hovers” at a tipping point with buyers each looking at each other and sellers each looking at each other for some sign of direction. Of course, the hype merchant realtors continue their boring mantra of, “Now’s the time to buy!” Then comes the tipping point and the downward slope starts which we are seeing now. It then becomes a time factor scenario determined by the commodity.
With stocks and tulips a seller can dump them overnight. Not so with property. Sellers, who just a few years ago, figured the house they bought for $200,000 which grew in value to $600,000 and was their passport to a comfortable retirement, is STILL worth $600,000. However, it isn’t. On the other hand, the buyer, now sensing he can call the tune just by waiting, isn’t rushing in. He sees the foreclousure rate rising and hears about the horror stories of fb’s who took out exotic loans. He hears murmers of a possible recession. So……..there’s no urgency from the buyers side but there IS urgency on the sellers side and on the hype merchant realtors who’s income is taking a big hit. In many cases, to the point where it isn’t worth being a realtor anymore and they get out, turn in their leased Mercedes and go back to working at WalMart.
Then comes the “unwinding of the mess” period. This only adds pressure to the downside. In the case of this boom, clearing the inventories, watching the bankruptcy of several builders drag through the courts, reading about disgruntled buyers who are taking action because of badly constructed buildings or fighting to get their deposits back, listening to the b.s coming from politicians in Washington who hold hearing after hearing as they question bankers, Fannie Mae and Freddy Mac executives, big mortgage brokers, etc, about what went on and, to acheive the politicians REAL objective which is to get a tv platform where they can show the would be voter how concerned they are about the average working American. Politicians, of course, make realtorwhores look like Little Miss Innocent Twinkle Toes.
Thus, over several years, the bust will play out like a bad melodrama BUT, one thing is 100% certain. When the bottom does arrive there is no need for ANYONE to rush in. You’ll know when the bottom is in. Take your time if you are looking to buy ’cause property prices ain’t gonna go nowhere for years.
When the inventory of foreclosures in the area have peaked and is demonstrably shrinking over 6 to 12 months. Also, when the real estate is sold at or under rental income value, e.g., 80% mortgage would result in positve cash flow. This latter may not be reached in certain high value, close in neighborhoods or for certain desirable historical property - e.g., excellent condition victorian in a great location.
Knew a guy who bought a great place on a small mountain in NH back in the hot part of the 80s….the value recovered to “par” in the recent RE boom.
You have to do a ton of homework on ski or mountain homes to protect yourself. Like years of study (IMOH).
Another thing clouding ski condos is all the quarter shares that are up for sale. I agree the toys get jettisoned first.
I’m not even going to start looking for another year. And I’ll allow myself a year or two from there to study things.
When it pencils out as a rental it may drop more but you’re probably very close to the bottom.
“The question I’ll throw out is how does one have a pretty good idea that price declines have arrested?”
The calendar will read January 1, 2013.
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Nobody knows the date.
Gekko, sometimes GetStucco is really right about you. I wasn’t making a definitive statement.
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you are far too sensitive. my statemement was simply a general one that “nobody knows the bottom in advance” and not a personal attack on you.
Gekko –
For the record, nothing I say about anything you post is intended as a personal attack, either. I am a critic of opinions I disagree with, and not those who express them.
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likewise. no hard feelings.
>“As a result, contracts became more prevalent during the frenzied real estate boom that block consumers from getting any ‘remedy’ beyond reimbursement of their earnest money,”
why should buyers get any remedy unless there was blatant misrepresentation, material changes, or fraud by the builder? If none, the buyers should lose their desposits per the contract if they back out. This is like buying a stock on margin at $50 and if it goes to $35 I want a full refund back but if it goes to $75 I’ll keep it. I don’t have much sympathy for the builders but these buyers need to take responsibility for their actions. If you want to gamble, fine, but be prepared to lose and pay the piper.
“But after they had trouble selling their own house and wanted to get out of the deal, the fine print in their contract became a very big obstacle.”
Don’t you know real esate always goes up and if it does not somebody better just fix it so it does. I am floored by the sense of entitlement people have these days. Like it is their God giving right to make money on real estate.
Oh they can just hold onto the property until Spring when the second coming of Christ comes and while he is saving all our damned souls he can fix the housing market at the same time. I think I read this somewhere in the New Testament. Yes that’s right Jesus comes grants us all spirtual purity and saves the housing market from itself.
Spring 2007 the final housing battle of our time.
‘It was not even like a slight decline,’ he said. ‘It was like a big curve.’”
____________________________
Kind of like the mess in Iraq. Maybe if you open your eyes you can see the truth! Ask the Sen from Oregon!
Sorry - too much time spent watch Sunday news shows.
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his electorate deserves him.
Scandal-hit Jefferson wins Louisiana runoff
POSTED: 2:40 a.m. EST, December 10, 2006
NEW ORLEANS, Louisiana (AP) — U.S. Rep. William Jefferson easily defeated his fellow Democratic opponent in a runoff election Saturday, despite an ongoing federal bribery investigation.
In complete but unofficial returns, Jefferson, Louisiana’s first black congressman since Reconstruction, received 57 percent of the vote over state Rep. Karen Carter, who had 43 percent.
Carter was unable to capitalize on a scandal that included allegations the FBI found $90,000 in bribe money in Jefferson’s freezer.
D.C.Stephenson (Grand Dragon of the Ku Klux Klan in Indiana and in 22 other northen states) is credited with the quote, “Everything is fine in politics as long as you don’t get caught in bed with a live man, or a dead woman.”
One of the reasons I didn’t buy new construction was because I knew it was a one-sided contract and I wasn’t about to sign something like that .
Even in the used real estate market the agents were telling me that I couldn’t write a offer with “subject to” conditions ,(like subject to my house closing escrow and subject to obtaining financing etc.).
When I finally did buy a used house I put all those protection clauses in the contract anyway ,(but not because the REagent would of done it ).
So in some ways I do feel for the buyers that got into these one-sided contract ,but greed can bind people . If you have to give up good business practice than something is wrong .
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Yes! of course during the frenzy, nobody was putting in contigincies in their offers because they were afraid that their offers would be beaten by those with no contigencies. with a frenzied market and everything selling quickly, liar loans, easy cheap money access, toxic loans, the barriers to entry for higher end properties were lowered so that any schmo with a heartbeat could compete for and buy the property despite the fact that they weren’t qualified. So suddenly homes were bid up by idiots playing with money they didn’t have. So I end up competiting with a bunch of idiots with zero or negative net worth and low incomes on properties they have no business buying in the first place! I remember going to some open houses and looking around and wondering, “how are these schmoes going to make a bid?” Well, sure enough, when offer time came, four idiots bid far beyond asking price while I offered -10% asking price. Could I have kept bidding? Sure - but I backed out because I knew something was wrong at that point - too many fools with too much cheap money chasing too few good deals. You don’t get rich by being stupid.
The Day of Reckoning is here.
You bring up the best point about the market in a mania . All normal practice is thrown out the window and your in competition with people who 1/2 the time don’t even have a down payment or need a sub-prime loan to get in .
There should be a new law against market value comps being set by a sub-prime lenders ,no down loan buyers or speculators ,( because lenders in the past would of made buyers like this put a hefty down payment to offset the risk. )
Do you really have a true stable marketor true market value when you have conditions like the ones that were operative during the mania ?
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yes and i remember telling my agent back during the frenzy “i won’t have any contigencies other than inspection. i’ll have no financing contigency, no sale of my home contigency, etc.” I actually thought that it actually meant something because I figured that most of the other potential “buyers” would have these barriers and would be just barely squeaking in. Well, little did i know that cheap and easy money knocked down all barriers to entry. My agent said “I haven’t included a contigency other than inspection on my offers in years.” So you know these agents all told their customers “You better not have any contigencies in your offer or you will lose the house!”
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yes i really can spell - contingency.
Right , and as far as I’m concerned 1/2 the time the contigencies were there but just not written up in the sales contract , so everyone was taking a risk .I still refused to put in a offer without those protections and the first house I made a offer on turned me down because of it . I walked .
guess I can’t spell contigency either .
This what I don’t get: why would anyone bid for the opportunity to sign a contract, the clauses of which basically say “bend over”? Only a mania can explain it, unless buyers were planning to weasel out from day one.
But I’m not entirely sympathetic to the builders. IMHO if one writes a one-sided, “I win - you lose” sort of contract, one should expect to have the contract challenged in any but the most fortunate circumstance; for example where the loser wins in spite of the contract.
One sided contracts are usually a true win only for the lawyers.
good point
None of these people would be complaining about these contracts if housing prices were still going up.
From what I hear in Richmond, VA. Its different. All of thoese people who work for Phillip Morris, when they relocated the HQ. Moved in an bid all the property up, SO I’M TOLD!
WTF!!!
sorry… blind not bind .
Sure its true that the buyers should not of signed these one-sided contracts but they figured if they didn’t sign it someone else would during the mania . The potential for profit was the main reason why people signed up . Heck , some of these people were going to double escrow their sales contract before the market turned .Should these people be let off the hook ?
Should the builders be let off the hook?
First there are few business dealings people do that are not done for their benefit. Does acting on their own self-interest invalidate their problems?
As I see it, basing a business on enforcing a contract on someone who realizes the terms are very bad for them (they assume all risk) is an open invitation to a lawsuit.
Yeah the buyers should have known but so does the builder who is relying on a lopsided contract to conduct business by avoiding risks they should be accepting as a builder.
They want to play hardball - well a lawsuit is part of playing contract-hardball. It’s a crummy way to run a business.
Keep in mind here, for the most part we’re NOT talking about people being forced to buy a house that they don’t want. I suspect that a court would be unlikely to enforce that in the face of a buyer whou couldn’t sell his old house or get financing. What we’re talking about is “Can they get their deposit back.” I would argue that in most cases, letting the builder keep the deposit is a reasonable remedy against those who would have him borrow money, buy land, build a house and then change their mind. The builder has much more skin in the game than the buyer here.
I just don’t see why the builder doesn’t try to work with these buyers . If he lowers the sales price to the current market conditions ,(if the builder can still make a profit ), at least he still might maintain a buyer in a world where qualified buyers don’t grow on trees anymore .
Sure the flippers will want to get out of the contract totally and why should they get their deposit back .
If the builder lowered the price to the current market, he could sell it to anyone - by definition. So why should he do this for the original buyer, when he could just keep the deposit and get the market price from someone else?
As another poster said, when you put up a deposit for something, you are committing yourself to partial indemnification for the other party if you back out. You can’t back out of that committment, any more than the builder can back out if the market goes up and he thinks he can sell it for more to someone else.
What business deals are “forced” ? We have the right to life, liberty and the pursuit of happiness.
She might scrutinize the contract and find the SQ footage is inaccurate or fixtures and insulation or quality of build are not as specified in the contract. If the contract is powerful enough to compel her at great expense then the builder better meet his side of the agreement.
I think there are reasonable compromises and hope they find one.
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For those on the east coast, this show is on VH1 right now. pretty crazy. No wonder so many celebrities go broke.
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Really Rich Real Estate : Los Angeles is a new VH1 reality series following the glamorous world of high-end LA real estate through the eyes of Westside Estate Agency — the most powerful and successful real estate agency in the country.
WEA works with the most powerful and influential players in Los Angeles. And with a sales average of over $3 million per home, WEA has the best record of any agency around.
Run by power brokers Stephen Shapiro and Kurt Rappaport, with over $2 billion in sales between them, WEA has come to define the word “exclusive.” The WEA philosophy is simple: sell fabulous houses to fabulous people, and do it well. Their amazing success is achieved not by filling the office with brokers, but by emptying it until only the best, sharpest, and most cunning agents are left. If you succeed as an agent, the rewards are almost endless. But if you fail, you’re gone…
http://www.vh1.com/shows/dyn/fabulous_life_presents_really_rich_real_estate/series.jhtml
Many celebrities are people who did not have two dimes to rub together before they became famous. Unfortunately, many of these people are easy marks. Easy come, easy go. LostAngeles is full of sharks who prey on celebrities, from the overpriced hookers to the “most cunning” agents of all sorts.
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the espisode i just watched had Cindy Margolis once supposedly the “most downloaded women on the internet” looking at a $15.9M+ house. i didn’t know she had that kind of net worth or income.
i always think of M.C. Hammer when I see shiiit like this.
from wiki:
“Margolis is married to restaurateur Guy Starkman.”
I don’t know much about restaurants, but I think you have to be big-time to be called a restaurateur. plus, she’s been a model forever, so she has to have some $ laying around.
“The Starrs and many other would-be new-home buyers are finding that the sales agreements they so enthusiastically signed just a year or two ago have left them little wiggle room as settlement day approaches. Indeed, some consumer advocates and real estate lawyers who have been fielding calls from remorseful buyers in recent months say few contracts are as rigid and one-sided as those for new home sales.”
I am having a hard time imagining where the new home demand is coming from these days. Who is dumb enough to sign a new home order contract and qualified to buy, yet has not already drunk the koolaid by now?
Everyday the market conditions knock out another 10k potential buyers .
Washington D.C/Northern VA November stats are out at http://www.mris.com/reports/stats/
More of the same. Fairfax County is off 4% in median price YOY.
‘If Realtors are indeed a priesthood…
…then their clients are the buggered altar boys.
lol