Virginia Foreclosures! The new FEVER!

The FEVER was lost for two years, but it’s BACK!

My Virginia Real Estate blog showcases the trends before you ever knew they existed. This is a new trend, and it is on fuego. Problem is, is it real?

The message is slightly different, but the bottom line is still there: Buy Foreclosures, Flip (more…)

  • 11
  • November
  • 2007
Posted in New construction tricks, Virginia Foreclosures | 13 Comments »

Beware of Inflated Appraisals: 1st Major Lawsuit

When two of my blog readers send me WSJ articles on the same day, you know something big is up.

Appraisals 101: An appraisal is a report that is supposed to be a 3rd party impartial review of a property (usually under contract) to make sure the price is in line with recent closed sales (not counting houses still “for sale”). This protects the bank from (more…)

  • 5
  • November
  • 2007
Posted in Buying Risks., New construction tricks | 21 Comments »

New Construction Bargains: Risks or Rewards?

Many Virginia condo builders have bailed before completion of their projects, voiding thousands of contracts (see: Arlington Condos Trend: Back to Apts). Meanwhile, other builders, including single family home (SFH) builders, decided to plow through the rough market.

Earlier in the year, builders (condos and SFH) were finding buyers were backing out of new construction contracts. Some left 2-7% deposits on the table, some fought for their deposit (ask for specifics). Can you blame them? If a property has dropped $70,000 and you put a deposit for $20,000… um, I know that stinks but why not just leave your deposit on Monday, and go in on Tuesday and buy another one for less?

So now the builder has inventory that they need to move and fast! The liquidation sales are here! And “These prices won’t last!” But are they a good deal? I’ve said before that (No Such Thing As a “Good Deal”) but now I want to specifically look at new construction homes.

The decision is VERY (more…)

  • 28
  • September
  • 2007
Posted in Buying Risks., New construction tricks | 9 Comments »

Builder Tricks Part 3! Independent Appraisals & Fiduciary Duty

Frankly, builders are in a heap of trouble with excess inventory! (Just take a glance at Brian Brady’s mortgage blog for more details.)

So with this trouble comes questionable practices in order to unload properties. Get a Realtor (the price is built into the condo, you won’t get a better deal without one) to represent YOUR best interest.

 

I already called out one Arlington Condo builder (more…)

  • 22
  • August
  • 2007
Posted in Buying Risks., data manipulation, New construction tricks | 15 Comments »

Builder: Guaranteed Lowest Price* WITHOUT THE ASTERISK

The first builder I noticed offering “Pricing Guarantees” was The Park At Courthouse. I thought the idea was brilliant. A promotional plan that would give buyer’s some security in their preconstruction purchase, in case prices dropped.

So in theory, if you bought a place for $400,000 and a few months later, that exact or similar unit dropped to $390,000, you would get (more…)

  • 17
  • June
  • 2007
Posted in Buying Risks., New construction tricks | 17 Comments »

Beware: New Constructions Illegally Not Disclosing Seller Subsidies

(Thank you to MRIS for warning agents about illegal MLS fudging, perhaps due to BusinessWeek’s story that referred to my blog. More at the end)*

Now I have reported to MRIS another violation.
Lets see what they do about it.

New Construction Fudging the Reporting of Seller Subsidy… how conveeee….enient.

Before I get started on tricks that the builders are using to unload inventory, did you know that it doesn’t cost you anything to have a Realtor represent you? The cost is the same to the buyer, oftentimes the on-site sales agent gets the double commission. Sometimes a “free” buyer agent can save you even more, even if you think you already squeezed $100k out of them, who cares, if your buyer agent knows they recently dropped a place $200k around the corner. Price drops are relative, and a good Realtor can help protect you. See I Need A Buyer’s Agent! But For My Car.

So back to builder fudging. On the MLS, when a listing closes a Realtor must enter in the closed price. This can easily be verified by the tax records once it comes out. A Realtor is also required to post the seller subsidy amount. The “seller subsidy” is the “cash back to buyer” or “cash toward closing costs” and it is a marketing scheme to make a listing look more favorable, even though I tell my buyers to ignore them and just to net everything out. A $515k place with $15k back should be viewed as a $500k. Don’t let that marketing confuse you.

  • Damn side note: I once had a listing for $325,000 and an agent said “but the developer is offering an amazing $15,000 in incentives, will you match that?” The builder’s price was $350,000. I said “Sure. I’ll double it! I’ll give you $30,000 back with a price of $355,000, Deal?” So make sure you NET everything out!

Anyhow, the builders are in a bad situation right now. Especially Arlington County condos in Virignia. They have already sold a ton of units at a great price, but they need to sell the rest of their inventory without pissing off the current owners and people under contract.

So how do they do this?
Well one way is through fudging the “seller subsidy”. If a place is $600,000 and they want to drop the price to $580,000, they will instead give $20,000 worth of “seller subsidies” or “cash back.” Effectively the sale is $580,000, but it gets recorded in the tax records as $600,000 (which is fine). The part that is not fine is they are leaving off the subsidy information on the MLS. Insert Dr. Evil’s voice: How convenient!

How do I know they are fudging the MLS?
  • The graph to the left shows one builder’s last 40 sales. Not one included a seller subsidy. Meanwhile I have been in their sales office. As with EVERY builder, they give huge seller subsidies. Yet not one is posted here, as required by the MLS.
  • The box on the right side of the graph are 50 Arlington Condos sold in 2006. About 40% have seller subsidies.

Why does seller subsidy disclosure matter?
If you are considering buying a $500k condo in Arlington, you will look at the past sales as one of a dozen metrics to value a home (I wish I could show all my tricks on pricing and offering on homes, but the competition might be reading this, email me if you want a sample). If the builder just sold a nearly exact unit for $500,000 and recorded no subsidy, you might actually consider buying the unit near $500k. However, if you knew that there was $20,000 cash back, and the net price was actually $480,000, that is basically a Honda Civic value of information ($20k).

So in conclusion, make sure your buyer agent knows the market well and knows about tricks like those and other listing agent tricks that could cost you $20,000.

For all those super smart people that think like my Mom (read Mom Blog on not trusting Realtors) did “I don’t need no stinking buyer agent,” this stuff happens all the time. (shameless plug here: sign up to get emails of new blogs, the sign up box is at the bottom)

And you all think all we do is push paper and get you to buy quickly?

- Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
703-827-4OO6 Please report all typos, I don’t like looking stupid. If you like this post, sign up for new blogs daily, use the form on the right of the page.

Videos at YouTube.FranklyRealty.com

*Thank you to MRIS continued: I would like to thank MRIS for warning agents about MLS fudging.(the local MLS system) for posting a bulletin board on Matrix (the back end Realtor system) warning listing agents that Data MLS fudging is illegal and will not be tolerated. I believe my MLS Data fudging Blog (Part 1 and Part 2) and the resulting Business Week article probably lit a fire under them. While I wanted to copy and paste that notice, it wa
s gone after 24 hours. Oh well. Update: I found the link to the notice.


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Keywords: Housing bubble? Arlington, Alexandria, mls, homes, Real estate, Virginia, Alexandria, 22201, 22314, Fairfax Va, DC Realty, Realtor

  • 3
  • February
  • 2007
Posted in Buying Risks., New construction tricks, Shady Agent Tricks | 7 Comments »