Monday, April 17, 2006

Pulling the ole Bait and Switch..

Sorry about not posting in a while but other commitments took precedent. What was once speculation just a few weeks ago about the possibility of a bubble has now developed into an (almost) undeniable acceptance that the peak in prices is behind us and that we (most likely) are in for a rough ride regarding home prices tumbling.

In their desperate attempt to keep the grand illusion perpetuated, builders are now admitting to pulling tricks that would make a used car salesman blush. As told in this story , builders are throwing everything at prospective buyers in order to move inventory and more important not drop the sales prices on their overvalued, depreciating houses.

" Jade at Tampa Palms, a condominium complex in New Tampa, has yanked a page from the first-day-of-Christmas-shopping-season playbook: If you're among the first 25 buyers, you get a free garage.
- Beach Way Condominiums in Seminole is dealing, if not wheeling. "We'll Pay Your Mortgage for a Full Year!" its ad screams across several newspaper columns.
- Heard of blue-light specials? David Weekley Homes, selling houses "from the 380s" in Pasco County's Wilderness Lake Preserve, is holding a "Red Tag Event" with "once-in-a-blue-moon" prices.
- Housing giant Lennar has been slinging flat-screen TVs and $5,000 gift certificates from Rooms to Go. Buy a house, get the goodies. This month it's hawking house discounts, up to $62,000 in subdivisions such as Concord Station on State Road 54."

And why would your trusty Real Estate agent steer you towards one of these lovely bargains? Of course because it's in your best interest, right? Read on and learn...

" Cash payouts to real estate agents account for a big chunk of recent promotions, but the average homebuyer is kept in the dark, unaware that agents can earn big money by steering them to one home builder instead of another.
Builders typically pay agents a 3 percent commission for bringing them customers. Some have upped the ante, hiking agents' commissions or dishing out bonuses. A recent example is U.S. Home offering real estate agents a $9,000 upfront bonus for each customer delivered to Lake Brandon Townhomes off Interstate 75. Home prices range from about $250,000 to $300,000."

The real reason for such giveaways lies here, " Real estate agents caution that some home price cuts and giveaways aren't what they seem. Builders are known to slash standard home upgrades to cover their lower-priced listings. Corian plastic counter tops might substitute for granite, builders grade carpet for plush pile. As one model home sales representative said: "If you get a "free' plasma TV, do you think you're not paying for it in the home price?"

Few builders want to admit they overpriced homes during last year's boom, agents and sales center staffers said. Incentives are a way to stimulate business without depressing the bottom line. You'd rather offer incentives and hold the price the same," Knetsch said, "because when the market turns around, you can pull the incentives more quickly than you can raise the price."

These builders need to keep the sales prices artificially high or they know the game is up, hence they will change the subject from buying a house that is 40% overpriced to " How about that new big screen TV you are getting for free?"

The next time an agent shows you a house that a builder is trying to unload, watch out. The only one not making money may be you.


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