It is tricky these days buying a new construction condos (read post on the risk of new construction). Why? You don't know the freaking real price. Some builders are actually INCREASING prices. I think they are doing that because they feel pressure to give a large % off list so the buyer gets a "deal."
Meanwhile other builders are using this as an opportunity to aggressively drop their prices to look like a steal... but then they won't budge. Not even $5,000.
Also I have been hearing from these builders about several buyers coming into their offices after reading my blog. They come in without a Realtor (including me). So I blame myself for obviously not fully explaining our value vs being a paper pusher. Builders love unrepresented buyers... since they have a big "sucker" pasted on their forehead. Why have an agent that knows which buildings drop by how much?
And if you only know the BS that I have heard come out of these builder's sales teams mouths.
It doesn't cost you anything (and some of you now are thinking, but I can get a better deal if I can cut out the buyer agent, and that is also just wrong)
Don't like me? Ok, I probably wouldn't like you. So go buy with Jay, Rick or Brian, (all 3 different firms) I don't care, just don't walk in solo.
Sign up for the main blog over at blog.FranklyRealty.com and I'll try and do a better job outlining a good agent's added value.
Written by Broker FranklyRealty.com
Tuesday, May 6, 2008
Builder Pricing... Mark It Up & Go "On Sale"I
Posted by FRANK LL0SA Va Broker- BLOG.FranklyRealty.com at 4:24 PM
Labels: new construction
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You still haven't explained what information you provide that I cannot find on my own: whether through a search of tax records, recent sales on the Washington Post, or a search of the MLS listings.
Building A has a unit for $400k, Building B has a unit for $400k
One will only sell for $400k, the other will take $250k
How does your tax records search and Wash Post Search tell you which buildings are marking their prices up and which are taking huge price reductions?
Say it. "I think Realtors are worthless."
Oh, all information being equal, I know realtors are worthless.
Comparing published lists of prices or advertisements (both publicly available) to recent sales (available in tax records and in the post), which both you and I can handily do, tells one which buildings are taking price reductions.
For those that lack the time or the patience to gather this information, then realtors provide a service. For those that do, realtors are indeed worthless.
Also, I never heard such self-justifying marketing ploys from realtors when the market was hot. You have buyers' best interests in mind? Please. You have your best interests in mind, which means closing a sale at the highest possible price.
Can you at least use a fake name. How about Eric?
Are you the type that has an open mind and will admit when they are wrong or admit when they see value, or are you one of those that can never be wrong and will debate to the dying end. The type that always feels scammed?
So when you so cleverly look at that $700k place that closed in the tax records, and the list price is $800k, you will think that the price drop was $100k right?
INSERT SUCKER ON FOREHEAD
Tax records don't show seller subsidies. And the builders know that. They can hide as much as $50,000 that way.
I guess $50,000 is no big deal right?
Also the builders put up only 2 or 3 properties on the MLS. They don't try and sell THOSE properties. Instead they sell all the other units in the building, so that there is no way to compare the MLS list price to the Tax record closing price.
As for when the market was HOT, I was giving my clients tshirts that said "I just bought during the 05 housing bubble," so don't accuse me of scamming people in the the hot and cold market.
Yes I have to put food on the table, but I make MUCH more by fighting for that extra $10,000 lower price (which makes me $300 less, big whoop) and that client sees the effort and gets me 3 more clients.
I can testify that Frank does not go for the highest closing price. We went in low on one house, they countered, and I wanted to counter again, but Frank advised me to walk and look at other houses. He could have easily closed the sale by letting me keep offering until the seller was satisfied. Rather, we went out and looked at other houses and found one that we liked even better. Our closing price on that house was less than what I would have countered on the first house. How's that for looking out for the buyer's interests?
So if the first example doesn't succeed, try another ridiculously absurd example?
Let us for a moment grant your (albeit absurd) assumption that a buyer in this market is moronic enough to both a) not know of any incentives and b) not ask for any.
And let us also grant your (another absurd) proposition that a buyer is looking at a place that for $700,000 with a maximum of $50,000 in potential incentives.
But say I do have some wits about me, and I demand a cut of 2.5% off the list price for not using one. Sellers' in a buyers' market routinely ask "Are you working with a realtor?" If no, the price is obviously lower. So that's an instant savings of between $17,500, and the seller saves .5% for not having to pay a realtor.
Now, if there are in fact seller subsidies or incentives on top of that which total $50,000, I may in effect pay an additional $32,500 price for being a COMPLETE AND TOTAL MORON and simply not demanding closing costs, loan points, or any other incentives in such a buyers' market.
But if I a) am in fact informed (having even a cursory understanding) of the incentives being offered in this market and/or at a property in particular, and b) also ask for them (which I suppose also presumes my ability to speak conversational English at a 7th grade level), I still stand to save much, much more without using a realtor, even if I capture only a portion of the $50,000 worth of incentives in your fictitious and absurd example.
We are talking builder units here.
All you do when you "negotiate" the 2.5% "discount" is give the builder's listing agent a 2.5% "bonus." Sure they might give you "2.5% off" but that doesn't come from the listing agent since you are not a party to their contract.
Also if builders did give discounts to people that walked in without an agent, the agents would boycott them so quickly that they would be bankrupt by the end of the week. It is actually illegal for them to do such (or at least against MRIS rules).
As for the $50,000 rebate. It has nothing to do with the unrepresented buyer being Moronic. I'm not talking about published $50,000 incentives. I'm talking about UNpublished incentives that SOME builders will give, and some will not. (Again, some WILL give $50k, some will give $0) And you can't know which is which unless you have closed other customers in that building.
Let me repeat slowly in another way. You asking them "do you give incentives" is that same SUCKER sticker on your head.
So great, walk in there and in your 7th grade English, ask them "do you give rebates" and just trust what they say. The amount of BS that I have heard from builder's sales office is amazing. My favorite one is "These are our last 3." What they left off is "Last 3 until we release another 10" or "Until we go to auction with the last 30."
And you are buying loan points? Ha, that is a totally different and funny blog post.
Good luck with that.
Nice straw man there. I am not advocating trusting what builders say anymore than I would advocate trusting what realtors say.
I will say it again. Realtors have THEIR best interests at stake, not buyers'. Realtors have THEIR best interests at stake. And never has this been more clear in this environment.
And I'm sure these builders feed realtors the same crock of BS they feed buyers. And realtors back to them. It's one big cycle of useless BS!
If a realtor has never closed in a particular building before, how does he or she discover those incentives? Does this mean your first client buying in a particular building always gets screwed?
No, you do the same thing a buyer would do: gain information, market data, recent sales information, other knowledge from a variety of sources, and then make demands.
Bottom line: if you are a buyer that has the ability to cut through bullshit--fed both from realtors and from builders--and has the ability to become well informed and gain knowledge of incentives out there (and solely not from the builders' lying mouths themselves), and demand them of your seller, and have a tiny bit of patience, your better off on your own.
One more thing. Your statement that realtors would boycott buildings that would give buyers discounts without using representation only cements my (repetitive, I know) central point of who's best interests are at stake for you people.
I would agree with you regarding 70-90% of Realtors.
But there are actually a few that look out for your best interest and will LOSE a deal to make sure you get a lower price.
I encourage you to head over to my main blog and post all of your rants over there when you find it suitable. They will make for good debate.
Heck, for all anybody else knows, I might be "anonymous" and writing all that stuff since buyers trust a blog MORE if it has unkind words about the blogger.
Alas, you are not "anonymous," but I wouldn't be surprised if you were "John."
The only way I can prove that I am not John is the timestamp. As a night owl, there is no way that I would be up at 7:38 AM just to reply to your post.
Also I like how you disregard the $50,000 hidden incentives. You refuse to believe that, geez, you MIGHT not have fully thought about that. Of course AFTER I mention it, you can say that you would start looking for it, but that is the entire point, you wouldn't have thought of it, and you would have been tricked by the builder.
It was you who brought up the "50k in hidden incentives" when I proved your Building A vs. Building B example to be totally absurd.
Then I proceeded in the next post to address the "50k in hidden incentives" absurdity, proving that I would be able to recoup nearly half of that JUST SHAVING OFF THE COST OF USING A REALTOR.
Now buyers who are either a) morons or b) unaware that this is an unabashed buyers' market (i.e., from Mars) might not think of the whole slew of incentives one can get from sellers these days. It pains me to do this again, but here goes.
Even if a buyer asked for and got around half of the "50k in hidden incentives" (of which you have not provided concrete examples of how incentives halfway near this amount exist, besides of course, the obvious of NOT using a realtor) a buyer could be just as well off. And that all presumes a buyer who is pretty ill-informed.
Wake up, realtors; this is one of the most educated parts of the entire country! Now that the market has tilted in the buyers' direction, they are failing to engage useless middlemen to purchase overvalued real estate, let alone buy into the nonsensical self-justifications of the realty profession.
Here is a quick example of a closing that had substantial seller subsidy that was not reported in the tax records:
For that matter the builder wasn't recording the seller subsidy on the MLS until I reported them (see blog post on builder tricks), thus saving many other people from getting scammed (of course you will maintain that no value was added and I still suck).
I am glad that you are so smart that you would have thought about that already. Yeah 8% seller subsidies are so common. Hats off to you.
Your logic makes no sense. You still assume that you can walk into the builder and get the additional 3% (or you said 2.5%) off, which is just wrong. Go ahead, walk into a builder and record your meeting with them. Be your own 20/20 and record them saying that they will pass on the 3% to you. I'd love to see it.
Also, Please email me once you have bought a place. I'd love to look at it.
Ok this is getting tiresome. I would even it here, but I'm sure you will want the last word, as most irrational people tend to demand. But I won't be replying anymore.
At least we agree on one thing; this is indeed getting tiresome. The bottom line is that you claim to have some sort of extraordinary powers and an access to secrets that are in actuality not much more than an access to relatively open information and an ability to negotiate. And Frank, those skills are not confined to realtors.
Buyers with time, energy, a shred of intelligence and patience can indeed save quite a bit of money in this market by not using a realtor. And that reality is pretty self-obvious, which is why buyers are using less of realtors; incidentally, it also provides an explanation as to why you must resort to constant self-indulgent scare tactics in justifying your value.
Entertaining exchange. I am a Realtor, and I fight like hell to get my clients the best price, because losing $300 worth of commission by getting a $10,000 price reduction is well worth it because I will be getting referrals from a satisfied client. That is a total no brainer. Plus, I get the satisfaction of doing my job right.
"Eric", you might want to tune into Mike Aubrey's HGTV show, Real Estate Intervention Thursday at 10:30pm. A guy who bought a tiny fixer upper in Arlington in 2002 for $250k thought it was worth $750k last year. Oddly enough, he didn't get it, and he blamed his Realtors. If he wanted to see what the problem was he could have looked in a mirror. What the show doesn't tell you is that although he got a contract at 98.5% of Mike's recommended list price, the contract fell apart on the home inspection. The contract fell out and that savvy seller, who thought he knew better than the Realtor, is paying two mortgages.
Realtors are like most people, some are good, some are bad and most fall inbetween. I have worked with a Realtor that is on Frank's team, and he was a pleasure to work with, a tough negotiator for his client but professional. I imagine Frank is as good or better.
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