Friday, June 22, 2007
Cash-Back-At-Close Scheme (Y2/M2/D22)
Price Reduced: 07/06/07 -- $825k to $775k
Price Reduced: 08/14/07 -- $775k to $759k
Price Reduced: 09/04/07 -- $759k to $749k (down 9.21%)
UPDATE THE SECOND: The MLS description was changed 7/13/07 to read: "motivated sellers! New commission 2.75% yes 2.75% "
Well, it looks like the tides might be starting to turn on the housing front. Today I got a call from a real estate agent following up on her open house that I attended. I am actually kind of flooded with these calls now but this one was different. Here's a rough transcript:
Agent: Hi Kate! This is Agent. Remember the house you saw in Sherman Oaks on Sunday?
Me: I saw lots of houses Sunday....
Agent: Oh, of course! Well this one was priced at $825k and we had a long talk about how you thought it was worth closer to $725k?
Me: Oh yes, the one that needed a new kitchen? In Sherman Oaks?
Agent: Yes! Well, would you consider maybe $760k?
Me: Honestly I've been down this road before and I prefer that there be a price reduction before a I write my offer.
Agent: Well, they already have one offer but I happen to know that the prospective buyer has made an offer on another bank-owned foreclosure property.
Me: . . .
Agent: So would you be willing to write an offer at $760k?
Me: But I already told you I don't think the property is worth that so...
Agent: Well, I could get the house appraised at $800k and you could get cash back you know for your closing costs or whatever and ....
Me: Let me make sure I understand you.
Me: You want me to write an offer for $800k on your listing?
Agent: Yes. But you will get cash back so it will only be $760k and ...
Me: Let me finish.
Me: You want me to write an offer for $800k, and take back about $40k, so I am giving the seller only $760k.
Agent: Yes! Yes!
Me: But I pay 5% commission on that higher sales price?
Agent: Well... yes but you are getting cash back for your closing costs and improvements...
Me: Again, I am paying 5% commission on $800k instead of $760k, and my property tax basis will be $800k instead of $760k?
Agent: Well, the property tax is only 1.25%
Me: Every year.
Me: Okay, so I am paying higher commissions on the sale and higher taxes every single year, for the privilege of getting a $40k loan?
Me: Why would I do that? I have good credit and I do not need a loan. Also, I think it's a fraud on the market.
Agent: It's not fraud. Let me tell you how it works!
Me: Trust me, I know how it works:
You get a bigger commission and you get to delay the inevitable price crash in your little pocket neighborhood. The sales data for the area will reflect artificially high prices so honest people with decent incomes and good credit scores who used to be able to afford the area no longer can. And what do I get? A $40k loan that I don't want or need. As a bonus, I will not only pay interest on this wholly unnecessary $40k loan but I will pay an additional $2,000 sales commission to you and my agent up front because that $40k is being treated like purchase money. But that's not all! No! I will also have to pay an additional $500 in property taxes every year I own the house because the records will reflect an artifically high purchase price.
Me: Call me if the seller lowers the price.
Agent: Okay, when do you want to see the house again? Friday? Does that work for you?
Me: Are they lowering the price on Friday?
Me: I'm sorry. I'm really busy. I have to go.