Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
One reader wants to hear what you see in the for-sale classifieds. “How about some funny/illiterate descriptions written of houses for sale?”
“I read this week that a house in my area is ‘the very personification of everything we love about the Northwest.’”
“Imagine that!”
Name:Ben Jones
Location:Northern Arizona, United States
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The ones I see over and over nowadays is the ‘priced below market.’ They just set the market!
I enjoy the ads that say “instant equity,” as if the seller is making you a gift if you buy. The old rule of thumb was that it took about 5 years to build equity, and that was in a 10% down world.
Is anybody fooled by that? “Market value” means that someone out there is willing to actually pay that price. If that were true, then why would a house be sitting unsold “below” market value?
Beware whenever you see any retailer offering a 30% or whatever discount. Does that not usually mean it was 30% overpriced to begin with?
I’ve always been partial to “seller relocating”. Sheesh, I hope so! I don’t wanna live with him!
This line made me chuckle ($675K fixer home in LA near LAX) The realtor sounds a bit peeved
*back on market* 1st time buyers don’t know what they missed.
Airport Del Rey?
fyi for non-LA people: “Playa del Rey”
Westchester
Priced to Sell.
Huh?? So how was it priced before - Priced to SIT!
LOL. I know of a listing that has been sitting a year and its been “priced to sell “the whole time at the same price . Houses have been selling just 10K lower than this listing but this guy won’t go down and the house is vacant .
Priced Below Certified Appraisal.
I see that a lot. You’d think that would set off alarm bells all over the place.
What’s the date on the appraisal :peak market 2005? Market is changing daily . Appraisals 3 months ago are already outdated .
REMARKS:
ABSOLUTELY BELOW MARKET PRICE. THREE YEAR OLD COLONIAL HOME W/ DOUBLE SIDE LOAD GARAGE . . . SOME SPECIAL ITEMS WILL BE CONVEYED. LA RELATES TO SELLERS
‘We love it, you will too.’
Why are you selling?
I know people like their ’surround sound’, but does it really require a separate ‘dinning room’ ?
relisted for 1 month only, if not sold this home we be rented
Hurry! Won’t Last!
Well thank you for the hot tip, Mr. Seller. I’ll be right over with my check book.
But why do I keep seeing your same dumb ad each week?
No, see, that means the house was built by KB or Centex, so when they say it won’t last, they mean it really _won’t last_.
Funny.
LOL
Besides all of the above, I’ve also seen “Priced AT Appraisal” !!??!
Watch out sellers, you’re heading back to the days where you can’t price 600K over appraisal and expect a quick sale.
“Won’t Last” makes my blood pressure go up every time I see it. Are all these clowns reading the same “How to be a Certified Idiot” manual?
I saw this on craigslist:
“If it doesn’t sell in two weeks, the price is going up.”
Seen those in Seattle too: “Price Reduced to 420K through June 14″, etc etc.
People are really losing it now. That kind of crap MIGHT work on a $200 record collection. It’s a little harder sell on a 400K item. Especially as more and more buyers begin to realize “Hey wait a minute that’s a LOT of money!!”
Centex’s two day sale turned into a ten day sale and then become permanent.
I see alot of “final price reduction”…or else what, I wonder?
I swear, I don’t know if some of these realtors made it through high school. Their spelling and grammer are horrible. I’ve even seen ads where they misspelled the name of the area in which they are selling. Hello??!!
yes, I know I misspelled grammar…
I’ve noticed that currently the most active buyers and agents are not originally English-speaking. We just had a group through our rental home today. I think that explains a lot of the misspellings and such. The other main set of agents are older women who have funny ideas about what words mean . . .
Yes, it’s all of the rich immigrants that are coming in to support the market.
It seems as if the trained monkeys gave up on car sales when the market was hot to become a RE agent. Here is one for you,
–”…granite countertops, new appliances, and waterless water heater”
What the hell is a ‘waterless’ water heater? Must be hard to take a warm shower. I think they ment tankless.
I believe they mean ‘tankless’ LOL
Maybe there’s a hole in it.
Here’s an interesting Craigslist ad: http://washingtondc.craigslist.org/rfs/167810484.html
“SELLER TO PAY YOUR 1ST TRUST THRU 2006″ it claims loudly and in bold type.
Seems they think that a) it’s not already 2006, although I guess they mean the end of 2006, and b) they figure anyone who will pay $365,000.00 for a 2 level TH Condo with an extra zinger of a $280.00 condo fee per month will need a second trust. So they’ll pay the first, but not the second. Also, they’re still offering 100% financing: “100% financing is available w/this program. This special program is available exclusively through 1st Savings Mortgage. Call for full details.”
I like this topic and I like its logical converse which would be a discussion about the power of the blog in general but especially this one.
To me we can all breath an “official” sigh of relief on the one hand because the bubble has popped just as many of the intelligent posters have predicted and proven over and over and over again. Of course the scary part is what happens to the economy next.
But the power of the blog!…people like us have been trying to bring sanity back to their world because so much in the last 5 years has defied sanity. “We” were right, “THEY” were wrong all along as we gathered to find a collective voice of sanity and back up assertions that defied the “new pardigm” that supposedly existed.
How many posts had we seen that said “Thanks for this blog” or “you rock” etc.? Those posts are telling us that there’s a sign of hope out there.
I say Thank you Ben, Thank You Blog!
“You decide cash flow”
I called on a condo near me and asked what the unit was renting for, and how much the HOA was.
Renting $600
HOA $185
Taxes $200
Mortgage $400
I guess that would be a neg cash flow my friend! LOL
OOH! Here’s a good line: “INSULT US WITH ANY OFFER !”
- from Craigslist at http://washingtondc.craigslist.org/rfs/167702000.html
Wow. How long has it been since insulting offers were solicited? I think it is our civic duty to comply with such a delightful proposition.
I submitted a $115,000 cash offer even though the place isn’t worth it. Let’s see what comes back.
I just sent in an offer for 209 .. LOL
And I raise you by $20K…..oops wait. This is 2006, not 2005. On second thought YOU can have it at that price
I want to know if they respond to either of you.
Why in the world would you want to buy that? You have so much beautiful land in Vermont.
I think you’re in love with me the way you follow me around…. huh sweetie…..;)
OHHH behave you little devil!
I knew it!
Well, after all, you did spend time in Rehoboth you naughty little man.
Yes we did. Didn’t you enjoy it?
Were you the one wearing the jodpurs at the Blue Moon?
No I was standing next to you when you were hitting on the guy with the fake boobs…
Settle down, boyz, settle down….
Lingus & Peter,
Why don’t you ladies take your dispute, or infatuation, whatever it is, down to the local gay bath house, and spare the rest of us your little dick-dance.
Sammy
Now THAT is a good one “Insult us with any offer”. I LIKE that. Finally, some realism is being injected into the scene.
Heh - reminds me of the time a few days ago when I got a phone call from a ZipRealty agent. I figured my 6-year old kept clicking the “make an offer” buttons.
I got a call from a ziprealty agent referencing my recent activity of their site.
I hope he calls me again and we have a conversation. That would be fun.
Re: inviting lowball offers….Before we took our home off the market, we got a readout of what had sold since January. I was very surprised to see that most had only come down $2-3k below the list price. The people that are buying (in this town) don’t seem to understand their position although the argument that CNY did not inflate in prices so we had no bubble to burst was the mantra….I did hear of one lowball on a home that was about $100k more than the home the couple bought for. In other words, they only lowballed because the price was more than they could afford. They were under the gun, however, as they had to be out of their winter rental by May 15 which was about 6 weeks before their offer date.
That was January to May info. During the last few weeks homes that have been on the market thru winter have been reducing about $5-10k at a time (2.5-5%). Smaller 2-3BR homes still selling.
OT but: The inventory at my price point is still the same (now that we’re out there are only 2 houses on the market) but like I previously posted the only people looking are people downsizing. There was a couple selling a 6000 footer down the street who our realtor said was seriously considering our home until they heard there was no first floor master. I can’t believe someone who’s lived in a home like that would want to look at ours. (We’re under 2200) That’s a huge change. I did notice they’d save $5k a year in taxes and probably similar on heat/ac.
On that same subject, couple that bought 1800 sq foot condo next to my in laws is selling their $1.5 mil estate (5000 sq footer) in the same town. (The condo probably went for somewhere in the low to mid $200s) I guess they’re going to gut the condo to bring it up to their tastes.
Wonder if the boomer downsizing will keep prices of 1800-2500 sq foot homes higher. The squeeze may be on families that had hoped to enter there or move up.
Does this mean the squirrels will have to start fending for themselves?
I used to work in newspaper advertising and I can remember a couple of funny ones.
One was from a customer who called to complain. Her real estate ad read “dead in street” instead of “dead end street.”
Another was a price mixup. Headline on ad read “WHAT A SURPRISE!” The rest of the ad described an older mobile home. At the end, there was the price: $300,000. (This was in the good old days and I think it was supposed to be $3,000.)
how about this listed as an amenity:
“parking space wait-list available”
To cover the car with it?
congratulations looking4mee…..your offer has been accepted with no changes at $209K….escrow will be opened tomorrow.
saw this the other day “oozes charm and priced right”….wtf!
I would have a heart attack! Hell no.
Any house that oozes ANYTHING should be reduced in price and sold as-is. Oozing is pretty scary.
I saw that in a movie once called the “Amityville Horror” stuff oozing through the walls…not pretty!
RE: “oozes charm”
Heh - that belongs up there with “reeks of class.” When money-grubbers start reaching for metaphors, put on your HazMat suit.
Seller will entertain offers between $600,000-$629,876 on this pristine, upgraded and remodeled charmer in quaint College area neighborhood,
I hate these ones!
the words “pristine” “charming” and “quaint” (among others) should be banned from RealtWHORES’ vocabularies.
Why? You shouldn’t take your anger out on realtors by censoring.
Realtor translator:
“cute” = small
“lots of potential” = overpriced by at least $50K
“seller motivated” = seller’s ARM resets later this summer
“million dollar views” = what is the point when the home itself is over 1M?
and of course…
“new granite countertops” = seller is a flipper.
The Greater Depression - an Update
By Doug Casey
The International Speculator
Jun 5, 2006
I recently shared some updated thoughts on the prospects for a Greater Depression with readers of our International Speculator newsletter. Given the increasing levels of volatility sweeping global markets, I decided to give those thoughts a broader airing, below, if for no other reason than to help those of you in a position to rig for stormy weather get a sense of the gathering storm.
Hopefully, I’ll be wrong about what’s coming. But the way I see it, being aware and prepared follows the same basic logic as personal gun ownership: better to have one and not need it, than to need one and not have it. You get the idea.
Doug
It’s been said that if you spend 15 minutes a year thinking about the economy, you’re wasting 13 minutes. That’s generally true. But as an amateur historian, I can’t help myself. And I’m forced to believe that this is a time when the subject is worth some real thought.
My view is that the longest, and certainly most important, trend in history is the ascent of man. I have little doubt that it will not only continue but accelerate. But that doesn’t mean there won’t be nasty setbacks along the way. As I have said before, possibly the best definition of a depression is a period when most people’s standard of living drops significantly. You can also define it as a period when distortions in the economy and misallocations of capital are liquidated. The distortions are almost always the result of government intervention in the economy, through things like taxes, regulation and currency inflation. Those are the factors that caused the unpleasantness that began in 1929. Since the government is exponentially more powerful and invasive today than it was in either the 1920s or the 1970s, I expect the consequences will be much worse this time around. Things could have come unglued, and almost did, back in the 1970s. I don’t see how we’ll dodge the bullet this time. Although that’s not really a good analogy, in that, for reasons we don’t have time to explore in depth, a depression is probably inevitable this time.
The only serious question in my mind is whether it will be essentially deflationary in nature, as it was the case in the U.S. in the 1930s, or inflationary like in Germany in the 1920s. My guess is the latter because the government is so much more powerful today. Or it could actually be both at once, in different sectors of the economy.
How?
Inflation could drive interest rates to 20%. This would collapse the bond and real estate markets, wiping out trillions of dollars of purchasing power - which is deflationary. Meanwhile, that same inflation doubles the cost of food and fuel. In other words, the opposite of what we’ve mostly had for the last generation, when we had “good” inflation in stocks, bonds and property, but stable or dropping prices in “cost of living” items. This time the pattern could reverse, which would be a nightmare for most people.
And as people become more focused on speculation in a generally futile attempt to stay ahead of financial chaos, they inevitably divert effort from economic production. Which will decrease the general standard of living even more.
The situation isn’t made easier by the possibility that we’re facing Peak Oil - the start of a secular decline in world oil production. Or the fact that Americans, both individually and collectively, are deeply in debt and living on the kindness of strangers. The problem with debt is that it artificially increases our standard of living. But when we pay it off, especially with interest, it reduces our standard of living in a very real way.
Wrap this economic environment around the so-called War on Terror, which is rapidly morphing into the War on Islam, which could easily turn into World War III, and you’re looking at the perfect storm. The odds of a major conflagration are very high, and it’s not being adequately discounted. If Bush starts a war against Iran, or if another incident like that of 9/11 occurs, or even if the trend of the last five years accelerates, the U.S. is going to be locked down like one of its numerous new federal penitentiaries. And that will be accompanied, and compounded, by mass hysteria among Boobus americanus.
At that point, your investment portfolio will be among your lesser concerns. People forget that, in every country and time, there’s a standard distribution of sociopaths and misdirected losers. In normal times, they seem like normal people. But when the time is right, they show their colors, and they love to get jobs with the government, where they can lord it over their betters.
Is the Greater Depression really inevitable? How bad will it be? Is there another side to the argument? Can it be avoided?
I suppose it’s not absolutely inevitable. Perhaps friendly aliens will land on the roof of the White House and present the government with a magic technology that can undo all the damage it’s done. But we live in a world of cause and effect where actions have consequences. That being the case, I expect truly serious financial and economic trouble. And the government will make it vastly worse by trying to “do something” instead of recognizing itself as the cause and backing off. I don’t see any way out.
How bad will it be? In historical terms, the last depression was relatively short and mild. The longest depression on record was the Dark Ages. Residents of the old USSR and Mao’s China suffered through a depression that lasted decades. I’m not predicting it will be that bad, if only because the U.S. has basically much sounder traditions and institutions and vastly more accumulated capital. But it’s hard to overestimate how serious this could be. I sometimes joke that it will likely be worse than even I think it will be.
Getting back to whether it’s truly inevitable, it’s a question of degree. The recession of the late 1970s and early 1980s involved a terrible stock market, 15% inflation with interest rates to match, 10% unemployment and a near war with the USSR. But the country not only hung together, it went on to a tremendous rebound. My guess is, however, that the last 20 years of good times will later be viewed as an economic Indian Summer before a harsh winter.
The good news, of course, is that no matter what the economic conditions, technology - which is the mainspring of human progress - will keep advancing. And many individuals will continue innovating, saving and improving conditions for themselves and their associates. Also, it’s entirely possible to go through even the worst of times and not get hurt. Indeed to profit from them. If the price of a house you want now but can’t afford falls 75% (as outrageous as that may sound at the moment) while your own investments in the high-quality gold stocks we follow in our International Speculator quadruple, you’re much better off. That house now really only costs you one-sixteenth of what it did before. Of course it’s a problem for the guy who has to sell his house but I always prefer to look at the bright side of the equation. There’s time now to structure your affairs so that you’re on the right side of the trade.
What indicators should we watch for that might tell us it’s about to get ugly?
Well, one obvious indicator is how the price of gold is running. Gold is the only financial asset left in the world that’s either safe or cheap. It’s also under owned and largely unrecognized, which is why the smart money has been moving into it.
Then there’s the CPI itself - although I don’t think it’s very accurate, in that all the adjustments, exclusions, weightings and what-nots the government has insinuated into it over the years makes the CPI as much of a floating abstraction as the dollar itself. It’s funny how the government plays with figures for fear of hurting confidence. They believe the economy rests mainly on confidence, which, ironically, in today’s world, is true. Unfortunately, confidence can blow away like a pile of feathers in a windstorm - and we have a class-5 hurricane coming. If the economy were sound and people for some reason lost confidence, the currency and the banks would be unhurt, and the next day things would go back to normal. But that’s not the world we live in. So, higher CPI numbers are another thing that could destroy confidence and supercharge the gold price. They’re coming.
Higher interest rates, which we’re already seeing, will inevitably burst the real estate bubble, which is floating on a sea of mostly adjustable-rate debt, a lot of it interest-only or even with negative amortization. Higher rates will also crush bonds and probably stocks. And they’ll devastate the economy since everybody is deeply in debt. However, I feel the Fed will keep short-term rates - which are really the only ones they control - as low as possible for as long as possible. For one thing, they don’t want a recession, which this time could snowball into the Greater Depression. For another, my guess is that they want to gradually depreciate the dollar against other currencies, in part to decrease the chronic, massive trade deficit. And because increasing the number of dollars makes people think they’re richer than they really are, it can stimulate some additional spending but these days that spending is mostly done on credit, so it is only illusionary.
The biggest single problem, however, is that there are trillions of U.S. dollars outside of the U.S. Unlike Americans, foreigners have no reason to hold them. And at some point very soon, perhaps when the Fed finally hits the wall on its ability to raise rates, these overseas dollars are going to start flooding back home, while the products and titles to real wealth flow out of America.
Therefore, when the trade deficit starts turning around - which most people will think is a good thing - that will be the real tip-off the game is over. Trillions coming back to the U.S. will skyrocket long-term interest rates and inflation. The dollar will go into freefall.
But although I think these are the things to watch, to my way of thinking it makes no sense to wait until the stampede starts to try to get out the door. If you haven’t done so already, take advantage of the current correction in gold to begin repositioning your portfolio for what’s next.
For information on the International Speculator, click here.
DOUG CASEY is the author of Crisis Investing which was #1 on the New York Times Best-Seller list for 26 weeks. He is also editor and publisher of the International Speculator, one of the nation’s most established and highly respected publications on gold, silver and other natural resource investments.
-Doug Casey
The International Speculator
Or: You can listen to “gold bugs” like the above, buy a bunch o’ gold and watch it go down the tubes, as the dollar rebounds.
It’s like listening to the “end of the world” people: If it’d been true, the world would’ve ended thousands of times already!
As the dollar rebounds… based on what?
Based on the fact that there is far more debt outstanding than dollars to come back. There are a couple trillion dollars floating around outside the US and there is TWELVE trillion dollars in debt here. All the dollars could come rushing home, long rates skyrocket (no one buys our debt), and suddenly everyone is trying to pay off loans that they can no longer afford. Classic deflationary spiral in which dollar rebounds. Perhaps to then be destroyed by Helicopter Ben, but still the deflation hits first.
The article said itself it wasn’t sure about inflation or deflation, but suspected inflation. I can’t know for sure. Hence, I own some gold, understand the argument for it doing well, but also understand the opposite argument and hold cash as well.
I understand all of the other repercussions, but if I have a fixed mortgage and a large amount of money, won’t super-high interest rates help me pay my house off sooner?
After all, when I took out the mortgage, it was denominated in $USD, not yen, EUROs, or rupees.
The value of your house will most likely go down. In addition, if rates go to the moon, there’s no incentive for you to ever pay off your house. If you expect hyperinflation, getting the biggest house you can with a 50 year fixed would be the optimal thing to do.
First,
Very interesting.
But what is missing from your analysis is the huge cash positions of US companies. In no time in history have they sat on that much wealth.
Oh, I expect a recession. To quote another: Gloom? Yes. Doom? No. Prices will drop and fast.
But the neat thing about fiat currency is the flexibility with handling a downturn.
I’m not saying it will be pretty. But we won’t have a depression. Bad recession? Yes.
Either way, the fun starts this fall.
Neil
I found this from Casey’s article especially insightful:
People forget that, in every country and time, there’s a standard distribution of sociopaths and misdirected losers. In normal times, they seem like normal people. But when the time is right, they show their colors, and they love to get jobs with the government, where they can lord it over their betters.
As things worsen economically and culturally, watch Homeland Security morph into our version of the East German Stasi. Already a huge jobs program for the right wing, it’s certain to be rife with lots of creepy junior J. Edgar Hoovers.
Oh this is easy. From real estate section todays of Tampa Tribune:
“WE INVITE YOU TO ACT YOUR AGE.
Go ahead and get your pant legs wet….You’re close enough to the water to make it a regular occurence. And way past caring what anyone else might think when you do….
ACTIVE ADULT LIVING BY CENTREX HOMES.”
I think I am too old to get my pant legs wet with joy.
Or not old enough…..
Think Depends
I guess it all depends on what you’re wearing.
Just remember, God bless you to make it. Every day is a gift!
Sorry I was laughing. Correction: from the real estate section of today’s Tampa Tribune.
This isn’t funny, this is sad.
This is a “story” in the major local newspaper that hits a large metro area in Southeastern Virginia. With “stories” that are more like advertisements, it’s no wonder the paper won’t report the truth about the market:
http://home.hamptonroads.com/stories/story.cfm?story=105406&ran=62395
OUCH, you should have put a warning on that link, just looking at that garbage hurt my eyes. Hopefully we will never have need of an objective press.
“The dogs basically stay To read downstairs about other and the cats neighborhoods are upstairs,” in Hampton Craig Reed Roads, go to said. “They are getting along a lot better now that they have more space.”
and Story run edit before they read do?
Edited this story, Yoda did.
Newspaper infomercial with no disclaimer…Chuck Norris should be featured somewhere.
http://norfolk.craigslist.org/rfs/167847357.html
“Lowballers and scavengers need not respond.”
That house wouldn’t have gotten $130k 3 years ago.
No, he only wants greater fools.
My favorite around here in N Scottsdale is “Priced 30k below appraisal, instant equity”. Yeah, right…… apparised when, last year! The price should only go down from here.
My other favorite line is from those Real Estate channel brokers/realtors telling everyone “you deserve to own a home regardless of your credit history.” OOOOOKKKKAAAAYYYY, isn’t poor credit history one very good reason NOT to loan money for a house…… uugghhh.
When my husband and I bought back in 1998, we had to write a letter to the lender stating we understood the responsibility of purchasing the home.
Oh, yeah, and I am also getting sick of reading the words
“gorgeous remodel” and “granite countertops”
If I ever find myself owning a home with granite anything I will remove it myself. I guess the theory is that if that the granite is subject to enough pressure it will turn into a giant diamond and justify the outragous markups on these shacks.
Well, I certainly concur that endless price appreciation cannot be taken for granite.
That’s why I would advise sellers not to get greedy and to accept a reasonable offer. You can’t take for granite counter in this market.
meant to say “granite, counter offers in this market”.
Guess I botched that one.
didn’t you know? adding granite automatically increases the home’s value by 30%!
As expensive as today’s homes are, the counters should be marble with gold trim. Solid gold trim.
Granite urinals would rock!
“Gorgeous remodel” usually entails Pergo floors, too.
Here’s another one from today’s Tampa Tribune:
“Life is full of compromises. You shouldn’t have to live one.
‘If I just have the salad I can order the cheesecake.’
Trade-offs. We face them every day. Sometimes it works out for the best. Sometimes you’re left wishing you’d ordered the filet mignon. Small mistakes are easy to overcome. It’s the big ones we have to live with-or live in. Don’t compromise when it comes to your home.”
David Weekley Homes
This kind of makes me NOT want to buy. What do you guys think?
Janni, where the hell do you find these diamonds? I ROFL here, and my coworkers are a nervous. Adult living, cheesecakes? Please stop!!
One of my favorites is sign by the main road announcing:
$450k Easy terms can make you a millionaire
In multicolored florescent letters and numbers - like a used car sign.
http://www.windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=6807610
If I was a millionare, I would feel pretty uncomfortable living in Ferndale.
Wonder if that home even has an electrical socket on the outside wall.
Also went to the Horton home builder sales office and got a phamplet of info regarding their homes, yet to be built. For $250-$400k or so you can get a house where the builder labels an outside electrical socket as a feature, as well as the fact that the garage has a plug in for a future garage door opener!!!
I like the ads where the photos are really bad and blurry. Is an out of focus picture supposed to entice me to be interested in going to see the hoouse? Did the agent know how to hold a camera? You’d think someone working for a $10-20K or more commission would at least be able to get a couple of decent photos up.
Saw a grainy picture in the RE fold out on Saturday where the picture was of the park behind their house. I was like: “Where’s the house?” It wasn’t even in the picture. LOL.
MLS# I607348. Description ends with “SELLER HAS PURCHASED REPLACEMENT HOME. MAKE US AN OFFER!”. Um, OK. So I’m supposed to act now because the owner bought another place before he sold this one? Uh, no.
I only know about this listing because I rented that house for a year. My wife and I moved to Riverside county at the end of Feb 2006. The house has been on the market since March 1st with no action. The nearest comps are the two houses across the street, which sold for $620K and $580K toward the end of 2005. Those are the actual sales prices - not the “official” sales prices. Both the buyers got checks for more than $50K back from the realtors during escrow. That’s a seperate topic in itself!
Anyway, this place started at $739,900 - and now, 12 weeks later, it is down a whopping 2.7% to $719,900. Wow, what incredible value.
Looks like my old landlord will be chasing prices down for a while. He’s still got $40K to go before he his official comps from the fourth quarter of last year. Better hurry, buddy!
I
M-C White ….I’m very interested in your statement about Buyers getting 50K checks back from the real estate agents during escrow , if you care to talk about it .
Wiz - I know of three instances where this happened in my old neighboorhood, and I’ve heard several people talking about it at work as well. The buyer recieves a kick-back during escrow in the form of a decorating allowance or something else like that. The reported sales price does not include the kick back. I asked one of the involved real estate agents about the kick back, and she told me she couldn’t discuss it because “transactions which take place during escrow are confidential under California law.”
I’m no CA real estate expert, so I don’t know how close this comes to fraud. I also don’t know how this IRS would view this transaction, or if it is reported to them at the close of escrow.
Two things I know for sure about this practice: 1) It artificially buoys prices - and 2) the buyers who participate in this practice are nitwits because they end up paying property taxes on the full “purchase price”.
MADNESS! GRRRRRRRR.
If the kickback of 50K isn”t in the escrow instructions , and the appraiser is not aware of the kickback ,(which is in effect a 50k reduction in price ),than it’s fraud .
Also , the underwriter/lender is suppose to review the escrow instructions for any kickbacks or money given back to the buyer ,(or the seller for that matter ).Most lenders will allow some small credits like paying closing costs etc.,but a 50k kickback to buyers that’s not disclosed is outright fraud .If the money was given in cash than the buyers might not put the money into the property to improve it also. That’s why builders usually give property upgrades as incentives at first. If I have to give you 50K to buy my 100K house , that means the house is only worth 50K. So if the lender gave me a 100k loan on the house ,the lender would of given a 200% loan to value ratio .Now I don’t know of to many Lenders that want to be in that position .,(just a example)
The escrow officer cuts the checks ,so the escrow officer would of had to go along with the fraud also .
This kind of kickback practice could of raised values in the areas by this fraud .
i really smell a rat here . i just can’t imagine a Lender approving of a kickback to a buyer in cash of 50K.
This is very serious stuff and I’m concerned about how widespread this sort of practice was .
Wiz, what if the buyer brought a huge down payment to the table, or even paid cash? Would it still rise to fraud if the lender wasn’t tricked into a super-high LTV?
….and are you really surprised to find out this stuff is happening after all the appriasal fraud we’ve seen in the past couple of years? And aren’t “stated income” loans almost always fraudulent?
By the way - thanks for the detailed reply. I always learn more on this blog than I could from any real estate book.
MC_White Sorry for this delayed response .. This sort of fraud is one the Lenders greatest worries and one of the reasons why they do a appraisal to begin with .
In answer to your question about a buyer bringing in a big down payment and would it be fraud in that case ,I have this response .
This lender of course would not be exposed as much because of the big down payment by the buyer ,but still the property is in effect 50k cheaper than the “sales price” and it should be disclosed for the appraiser ,the lender ,IRS, and escrow statements.If this realtor is doing this with every listing in the neighborhood its brings the value up to a false level of 50K higher and the appraiser thinks the market has gone to the higher level because he doesn’t know about the 50K . If someone in the neighborhood decides to do a refinance that lender will look at the higher sale prices and think the market has gone up to that level and give that borrower ,who is pulling out cash, more money than the real market will bear .
This fraud all comes into play if the market turns and the lender has to sell one of these inflated priced houses in forclosure ,so the lender will lose 50K more than expected .
Usually “stated income loans” require a higher down payment by the Lender . If the property goes into forclosure any fraud on the loan application could come back to haunt the borrower.
Am I surprised by the fraud that has been going on ? Yes , and I’m puked out about it .
I knew of a case once where a developer got a bunch of phony buyers to buy out his failing tract by inflated prices and he took the money and ran . The bank lost millions and that’s why a lender should not be exposed to much in one development .
When the market takes a turn the lenders have to be on the look out even more for desperate people resorting to many forms of fraud .
If the greedy ,self-serving realtor in your example causes your grandmother to lose her retirement funds ,you would want that con artist to be put in jail .
Sorry if I ranted on and on about this subject but it’s a subject that brings out the worry in me .
BTW, one of the new neighboors clued me in on the kickbacks during when I first went over to meet him in January. He bragged that he got the place for $50K less than the sales price thanks to the ‘decorating allowance’ check he got during escrow. He also told me that the family that bought the house next to his got even more - closer $60K.
Now I’m convinced this is fraud set up by your friendly neighborhood realtor and friends in the biz.No wonder this realtor can sell homes . Buy this house for no money down and I will get you 50K cash at the close of escrow . WOW.
Housing Wizard…
You bring up a scary scenario.
No money down.
$50k “allowance check”
Let’s pretend this isn’t fraud… Stick with me… it will become fraud! A home costs what, $6k/month?!? 103% loan… pretty soon people are buying homes like mad for these $50k checks. They’ll take out 2nd, 3rd and 4th HELOCs… and then disapear.
Oh joy… I’m going to go excercise with this new wonderous knowledge that scares the crap out of me.
But it will carry the market for another few months until the mortgage brokers put a stop to it. How long for them to catch on? 60 days? 90? 180? years?
Neil
I remember in about 1999 my sibling wanted to buy an old rambler with visible light showing through holes in the basement for about 220K (VA DC suburbs). They thought about trying to get cash out of the deal to make repairs but the appraisal wouldn’t allow it. It’s obvious with 50K back there’s some funny loans going on.
My favourite ad’s are the ones on craiglist proclaiming ‘investor special’ more like ‘idiot special’
The first thing we do, let’s kill all the realtors.
Okay, maybe not…but at least really punish them by breaking the exclamation mark key on their keyboards.
AND FOR WRITING EVERYTHING IN CAPITAL LETTERS
Drop - you’ve gone too far this time. Which of the below sounds better to you if you were a buyer chomping at the bit to get in before being priced out forever?
***
HURRY!!!!!!! BUYERS DELIGHT!! THIS ONE WILL NOT LAST!!!!!!!!!!!!
or
Hurry. Buyers delight. This one will not last.
***
See?! You still want to break thier exclamation point key?
I like this one from Irvine. http://orangecounty.craigslist.org/rfs/167859947.html
“Vacated for immediate sale”.
“This amazing plan won’t last!” (which plan is that? To buy and flip without getting burned?)
“Largely sought after” Ambridge Plan 4B.
It has “generous recessed lights”.
BTW, it’s $849K for 1,843 sq ft. This part of Irvine is flipper central.
Only $460/sq ft. I can top it. MLS #S441393. $501/sq ft. In Westpark.
Move over gents.
Woodland Hills, MLS# R2035040. A whopping $559,000 for 660sf = $847/sq ft.
When realtors advertise a new ceiling fan on a listing ,I know the listing doesn’t have anything going for it .
This one just seems like a scam,
http://washingtondc.craigslist.org/rfs/167977940.html
“SHOWING Appointment ONLY, Must lease by emailing a Postal Mailing Address to triangle7enterprises@yahoo.com. to receive a free copy of the application with pictured description. $35.00 credit check fee .” Is it free or does it cost $35? No way would I give this guy my address, why is he so paranoid, and what does he mean by “must lease by” is he renting or does he not know what a lease is or is this some RE term I never heard before? And $35 just to have a showing. He also randomly uses CAPs and * and offers discount car detailing. I like this sentence “Ideal for Investor, Family or professional male/female(s).” I guess it is less than Ideal for single working class and executive individuals.
I think “Stainless steal” is a Freudian Slip!
From the classified section of the local newspaper:
WE BUY HOUSES
Any area, any condition, any price.
http://www.SellYourHomeToMe.com
Wow! That housing bubble really is going strong!
I’m sure there’s a home for sale somewhere in all these typos. From Craigslist SD today.
BEST BUY, $75K REDUCED,…HUGE 5 BEDROOMS 3 BATH 2000SF HOUSE ON 10,000 SF FLAT LOT. HOUSE CAN ALSO BE USED AS 3BED 2 BATH PLUS RENTAL QUARTER ($825/MONTH), OR MATHER AND DOUGHTER. NEW LIVING ROOM, PARKET, BRAZILIAN TILES, FRANCH DOOR, DOUBLE PAIN WINDOWS, JACUZI, ALL NEW BATHROOMS, APPLIANCESE, LONDRY ROOM. TWO PATIOS, ONE TILED AND COVERED, ROOM TO BUILD ADITIONAL GUEST HOUSE….FLEXIBLE TERMS. FSBO PLEASE
I’m thinking I may need to go check out those double pains and the franch door, but my Appliancese is rather rusty.
All I could think about with all the typos was:
What do we get for 900 thousand dollars?
Any-ting you want. Me love house long time.
Me so housey
Annnnd… here come the locusts!
http://washingtondc.craigslist.org/rfs/168067539.html
Sing along: It’s hard money time, it’s hard money time!
Ok, this is slightly off-topic - but i read in the news today that a couple died - they smothered in helium after climbing into a balloon that was advertising condos for sale in Lutz, Florida. It’s tragic, but maybe the weirdest/funniest bubble/ballon story I’ve heard yet. You could make a lot of really bad jokes about this in relation to the housing bubble.
I think that they needed to rewatch Map of the Human Heart. You’re supposed to do it ON TOP of the baloon, not IN the baloon.
Ok, this is slightly off-topic - but i read in the news today that a couple died - they smothered in helium after climbing into a balloon that was advertising condos for sale in Lutz, Florida.
It’s terrible. Their cries for help were mistaken for Mickey Mouse impersonations.
“a french chalet awaits you!” on .25 acres,for $675k…..a 3br 2 ba home in an ok neighborhood in santa rosa…”unique in many ways”