Otherwise, the buyers could get the idea that at least 13% of every mortgage check — plus interest — might have been better spent…
Technorati Tags: arizona, phoenix, phoenix real estate, real estate, real estate marketing
There’s always something to howl about.
Otherwise, the buyers could get the idea that at least 13% of every mortgage check — plus interest — might have been better spent…
Technorati Tags: arizona, phoenix, phoenix real estate, real estate, real estate marketing
Doug Quance says:
That’s pretty funny, actually.
Hovnanian sticks it up there in bright lights so that the buyer will see it – demand the house – and a sizable chunk of that co-broke.
How’s it working?
January 12, 2007 — 8:08 pm
Dave Barnes says:
This only goes to “prove” that the entire system is designed to “screw the buyer”.
Hovnanian are idiots. What we they thinking? Or not thinking.
January 12, 2007 — 8:44 pm
Greg Swann says:
> Hovnanian sticks it up there in bright lights so that the buyer will see it – demand the house – and a sizable chunk of that co-broke.
That ad is from my spam. I doubt they print it. Stupid, anyway…
January 12, 2007 — 8:52 pm
Jonathan Dalton says:
But it would make for great spin for a buyer, especially if you hand them a chunk of that co-broke. You can look like a hero simply for not being a greedy jerk. For that, we can thank the idiots at Hovnanian.
January 12, 2007 — 11:08 pm
Brian Brady says:
How is this not considered mortgage fraud?
Any decent lender will take one look at the contract and realize that the home is over valued by at least 10%.
Guess who pays for that 13% premium when the buyer enters foreclosure?
January 13, 2007 — 12:56 am
Doug Quance says:
Not so fast, Brian.
Let’s say the extra 10% is Hovnanian’s profit… and he decides to dump the properties to convert back to cash. That does not necessarily indicate the market value of the property has dropped – just the value to the builder.
I wrote recently about DR Horton ditching a property across the street from one of my listings where they listed the property for $193K… but sold it for $168K. In this case, DR Horton simply decided to convert back to cash… but since they were finished building in that neighborhood – they ditched it.
It doesn’t mean the property can’t appraise for more… but as a comp, it surely hurt the neighborhood.
Hovnanian is obviously trying to NOT hurt the owners of the comparable properties in those neighborhoods, I suspect.
They should, in my opinion, stick to upgrades. 😆
January 13, 2007 — 9:11 am
Tim says:
Brian, that’s the first thing that entered my mind. Good call.
“guess who pays for that 13% premium when the buyer enters foreclosure?” Yep. And guess what happens when Wall Street Investors find out they hold a bunch of garbage?
How ’bout all those borrowers that have or will purchase with 100% financing and have jacked up the purchase price to offset borrower loan costs. And they appraise?
What at country! (insert Yakov Smirnoff accent)
January 13, 2007 — 9:16 am
Greg Swann says:
FWIW, they’re clearing inventory in built-out subdivisions. In a different year, they might have listed them with a resale broker, but they want them off their books by the end of the quarter — if not the end of the month.
Here’s another wrinkle though: Think about buying these as a licensee. With the other incentives, you’re probably at 80% LTV with nothing out of pocket. At $1,000 a month rent, a $200,000 home would lose about $1,000 a year after taxes, but at resale, after eight years of normal appreciation, it would throw off over $100,000.
Maybe that’s why they’re pushing the co-brokes so high…
January 13, 2007 — 9:37 am
jf.sellsius says:
The ad says “up to” 16%. What does the fine print say about getting to that co-broke %? Surely their going rate co-broke % is much lower. Or is it?
January 13, 2007 — 11:05 am
Invest To Freedom says:
It is always easy to look at these things at face value and simply assume certain things.
Are you educating yourself to find out why or how these companies are able to pay a certain fee?
Now I do not know or have any knowledge about the above stated builder….I am talking about builders in general here.
A developer starts off with a budget…..
There is also an underlying value that the homes are worth due to the market as a whole.
In general, no two pieces of development property are going to cost them the same. However, the construction costs of the improvements are relatively stable.
As a developer, I might not want to spend as much in advertising. I want to build not worry about advertising….I might not want a large staff of in house sales people……Maybe I want the Realtors to do all of that work for me……..
How does Mr.. Developer compete while other builders are spending a ton of money on advertising?
hmm….I could lower my price to beat the competition….but then I am hurting property value in the area and all of the backlash that goes with it…
I could just sit back and wait for them to sell at a snails pace……but I do have carrying costs to think about….Maybe I want to speed up this process and free up some cash to do another project…..and I am willing to take a small loss today for greater gain on the next project….
Lets see…I have an advertising and Realtor budget of 18% and I am only spending 6% on advertising……That leaves me with 12% in the budget…..
Instead of advertising with the costs of billboards, magazines, newspapers and T.V. commercials…..Why don’t I just offer it to the Realtors out in the field and basically outsource this process to them…..
The economics of the process are a lot more complicated than just dropping price or refunding all of this back to the Buyer, but you get the idea. (The mortgage and appraisal fraud issues are another story)
A large percentage of Realtors really get under my skin because they simply do not educate themselves on anything other than filling out forms and attending a closing…
You need to create value for your clients……bottom line….then at the end of the day you will not be in a position to defend what you are being paid because you have earned it!
***If you do your research and deem that the above builder’s homes are not a good value for you client due to your current market conditions, it is your job to give your clients your opinion on that. Just make sure that opinion has professional merit…..That is your duty as their agent. You have a fidicuary position that overides a large commission check!
If you are a consumer let me be the first to tell you that there are a lot of great Agents and Brokers out there in the field .
As a consumer you need to ask the Brokers and Agents questions and really get a feel for their expertise in the field, they will be representing you in one of the largest transactions of your life.
January 13, 2007 — 1:30 pm
Brian Brady says:
“hmm….I could lower my price to beat the competition….but then I am hurting property value in the area and all of the backlash that goes with it”
Invest for Freedom brings up good points; the builder is simply “clearing inventory” and passing some of the unused advertising budget through to the Realtor. I do get that. Isn’t the “printing” of the sales price at the higher value with huge seller concessions simply an artificial support of the market? It reminds me of a new stock issue where the underwriter supports the newly issued security at an artificial price. It really isn’t a true reprsentation of the market.
I don’t think wild price swings hurt the existing owners in the subdicision. Sometimes a “low price print on the tape” creates an even larger buyer demand.
January 13, 2007 — 2:26 pm
NVmike says:
IMO, reducing prices to accurately reflect an area’s fair market value doesn’t hurt property value in the area.
Many builders and sellers are under the mistaken impression that they’re fooling today’s buyers by artificially inflating prices. They’re not.
January 14, 2007 — 7:57 pm
Invest To Freedom says:
But dropping prices and selling BELOW fair market value to speed up the sale of a development does hurt overall property value and Realtors would be upset about that.
January 15, 2007 — 3:34 pm
Brian Brady says:
But dropping prices and selling BELOW fair market value to speed up the sale
Hold it a sec…we’re missing some basic economic principles here. Inventories affect pricing which affects FMV in any products (widgets, houses, etc).
Perhaps the best thing builders could do is to show the inventory being blown out at low prices. That reduction in inventory (regardless of price) coulod create a boom that could surpass the peviously set high.
In this case, artificially “setting” FMV could be hurting the homeowners. Any manipulation of free markets reduces overall value (sorry to sound like Milton Friedman here).
January 15, 2007 — 4:07 pm
Invest To Freedom says:
If you are a large builder with a good overall reputation ….Are you going to GAMBLE on the above scenario? Builders depend on Realtors…they are going to error on the side of caution…
While the above scenario would be great for all parties….if it did not work…every Realtor in the area would be complain to the local press how this company hurt their market and their business…..
Successful developers are smarter than that….
January 16, 2007 — 6:43 pm
Mauricio Flores says:
There are many great “bargain” prices offered by home builders that a real estate agent should learn about.
I believe that agents should keep informed on any promotion that is being offered by a new home builder.
A couple that I helped get a new house in Roseville, Ca.(Sacramento suburb) actually purchased a new house from a D. R. Horton Development at below market value and I was able to earn a commission of 3%, but my client was able to own a home with nothing down. There were other homes in the area that were smaller, of lower quality, and listed at higher prices.
There is power in having knowledge about all the builder discounts and each agent should study the new home prices to help their home buyer clients get the best value in the market.
I look forward to getting refferals from this client, and their friends, because of how happy they were to get such a great price on a new home.
February 25, 2007 — 9:22 am