January 12, 2006

Wow. Centex "$60,000 Off 12-Hour Sale" this Saturday in Atlanta




Wouldn't you be PISSED if you bought a home from Centex last week, or heck even today, and then found out that for 12 hours on Saturday they're giving $60,000 off (as in, you overpaid $60k, or your home's value just dropped $60k)

These builder price cuts are a slippery, slippery slope, and like Vegas saw last year, open the builders up to charges of fraud and deception.

One more thing for folks to consider who are buying next to where builders are building. They can crush you at any time. The profit margins on new houses have soared to such atmospheric heights that they can hack away at price and still make a fortune. However, if you bought one of their houses for say $500k, your cost basis is $500k if not more.

Hat tip to HP reader AJ for the lead

55 comments:

Wes D said...

Certainly the first of many sales we will see.

They are sounding like GM and sales like this will turn houses into depreciating assets for the near future.

keith said...

Won't price cuts like this though show up as declines to home price numbers? Or will this be an "off balance sheet" number, where say a $500,000 house sells for a reported $500,000, even though it really sold for $440,000? And the $60,000 is reported by Centex as a promotional or marketing cost.

I think it's the latter. So anyone looking at median home price numbers will be deceived

Can anyone confirm this (or correct)

thanks

Anonymous said...

Come on, you all know how these things work. There is probably one house that has the discount and its probably been sold already.

taxplanner said...

Look what happened to Pulte, when they did price cuts last year.

(KVVU) -- The real estate boom that sent Las Vegas home prices skyrocketing may be over, but the hangover is only getting worse.

The party for many people ended on October 2, 2004 when Pulte slashed prices at its four Las Vegas Del-Webb communities by 20%.

The second-largest builder in the Las Vegas area said home prices had topped out and called it an appropriate move that will help new homeowners.

But what about the ones who bought before the price cut?

A number of small mom and pop investors bought homes in Sun City Anthem, in the builder's Solera and Pinnacle Village developments.

They claim Pulte burned them by inflating its home prices and steering them to in house lenders who were all too happy to underwrite their dreams.

Were they victims of an overzealous sales force? Or their own expectations? Or a little of both?

Dyan Harmell, a Pulte home buyer, is drowning in a sea of debt. Her living room table is covered with bills and she's not quite sure how to pay them.

"There are bills everywhere. House payments and debt," Harmell told FOX5. She's a long way from those heady days of Las Vegas' real estate boom, when she says Pulte's sales staff pushed and pushed her to buy.

"They call you and say 'you are so lucky .. this just came across.. it's going to be worth 100k before it closes,'"said Dyan Harmell. "We came with the hopes of buying two houses. We left the first day owning four. Within the next week, owning 6 -- all the way up to 19."

But Harmell's story is not unique. Walk around Pulte's Solera neighborhood and it's a ghost town. It seems as if "For Sale" signs are everywhere.

Signs that many people who thought they'd make a killing in Las Vegas' real estate market are now trying to unload homes at deep discounts.

A group of these homeowners claim Pulte Del Webb created artificial demand for it's properties by a sales staff that created a sense of urgency partly through questionable lotteries.

"We were told there were 80 people in the lottery for 15 homes. And lo and behold, every single person we knew got a home in that lottery,"said Pulte home buyer Cathy Wodka.

Some of those "lucky" enough to get a house were then directed into questionable mortgages.

Allegations that are the basis of at least one lawsuit with more expected.

Pulte declined FOX5's request for an on-camera interview, citing the possible lawsuits.

In a written statement, the builder claimed "None of our employees, agents or representatives is authorize to make any representations regarding economic benefits to be derived from ... the sale of our new homes."

The buyers point to sales literature from Pulte Del Webb's Sun City's so-called collection offerings with a prominent red sticker promising price increases.

Another brochure for three other home models lists closing prices next to it's base price. The message homeowners say they got - you'll make money before you close.

Pulte called it a way of showing the "savings a buyer can realize by buying a home that is nearing completion."

Matt Di Orio works for Nevada's Real Estate Division. Di Orio says Pulte home buyers have contacted his office about Pulte's sales techniques. While he won't make any judgements, he says Nevada statutes are clear about what real estate sellers can and can't say.

"In fact, there's a certain disciplinary action that could result in guaranteeing profits in the future," said Matt Di Orio. But what the sales literature didn't mention was a coming 20% price cut.

Buyers like Howard Jos-Berger were left with a home that dropped $100,000 dollars in value a few days after he bought it.

"The sales manager admitted to us that he knew the prices were going to be lowered on the 27th . . . the day we closed," said Jos-Berger.

As for Harmell, she's trying to figure out how to make December's payment of $30,000.

"For the last year I've had my whole family at risk. My mother, who's 83, my daughter. It's a lot of pressure on me. I thought I was being smart but they outsmarted me," Harmell told FOX5.

Did the company create demand and price hikes for its new homes before cutting prices on October 2nd?

That's the basis for one lawsuit and the allegations coming from a group of investors.

They claim Pulte set up a system which seemingly approved anyone and everyone for a mortgage.

Marty and Jan Moss bought two Pulte Del-Webb homes as investments and are now trying to unload one of them before it tanks the couple financially.

"I was surprised we were approved for all these homes and I bet if we were applied for two or three more, they would have approved them," said Jan Moss, a Pulte home buyer.

The Moss' and other Pulte home buyers, who are now out hundreds of thousands of dollars after Pulte slashed its prices, claim they were duped by what they say were artificially high prices.

Prices supported by some apparently questionable loans.

Dyan Harmell bought 19 homes with 4-million dollars in mortgage debt. Pulte's in-house lender continued to sell her homes even as she showed a loss on her rental income . . . her sole income.

"They had me close Monday, Wed, Friday on two houses each so it wouldn't show up on my credit report," said Harmell.

In her sales agreement, Harmell agreed to sue an in-house lender or pay $5,000 more per home - a violation of federal law.

In Pulte's written statement to FOX5, the home builder called the clause in Harmell's contract a mistake "that was corrected" and that home buyers are under no obligation to use its mortgage company.

But buyers Charlie and Cathy Wodka told FOX5 a different story.

"We were told we had to use Pulte Mortgage and Pulte farmed us out," Cathy stated.

Attorney Sean Claggett's office filed suit against Pulte and he's representing a dozen other buyers in what he expects will be legal action against the home builder, its lenders and appraisers.

"Pulte homes gave incentives to use Pulte Mortgage. Pulte Mortgage would receive a one percent fee for transferring the loan to preferred lenders, those preferred lenders would come back with an appraisal that would match the price that Pulte homes was selling," said Sean Claggett.

Scott Bice, commissioner of Nevada's Mortgage Lending Division, says home buyers share some of the blame for getting into questionable mortgages.

"It's tough for me to hear consumers say 'I've been harmed, I've been harmed.' When, in fact, they have some responsibility to say NO," said Bice.

But it appears saying no wasn't a part of the discussion between Pulte, its lenders and buyers looking to get in on a hot market.

So, what's next for the empty developments?

Ironically, some analysts say a next wave of investors may be the ones to profit if and when people like Dyan Harmell are brought to foreclosure.

Nevada's Department of Mortgage Lending Practices say while Pulte's in-house lenders have been the subject of complaints, the number is not out of line with other mortgage companies.

FOX5 asked the FBI if it's conducting any mortgage fraud investigations attached to Pulte Del-Webb financing. The FBI calls Nevada a hot spot for mortgage fraud but as a matter of policy won't comment on any specific investigations.

If you are someone in the market, there are a few things you can do to protect yourself and your future home:

First, if your real estate agent tells you this home is going to appreciate by a certain amount - don't believe it. Real estate can be a good investment but no one knows what the future market holds.

Second, get an independent appraisal from someone who will give you the cold hard facts on what a piece of property is worth.

Third, be realistic about your financial situation. Don't buy rental property unless you can handle the payments. Sometimes a home can rent out in a day . . . sometimes it can stand vacant for months.

Anonymous said...

""They call you and say 'you are so lucky .. this just came across.. it's going to be worth 100k before it closes.."

"In her sales agreement, Harmell agreed to sue an in-house lender..."

hee hee, surprising to find two Freudian slips in the article

Anonymous said...

RE: I think it's the latter. So anyone looking at median home price numbers will be deceived

I am going to guess yes. A lot of houses, mine included, are having the listing price stay the same but closing costs and what nots being picked up by the seller.

It a nice accting way to keep the numbers high and everyone happy with their comps.

Sean

Anonymous said...

Bah... Meant to say I live in DC.

Sean

foxwoodlief said...

Well greedy Miss Las Vegas! Amazing how her perception of her greed has changed with her fortunes! Who in their right mind would buy 19 homes? Guess the same person who goes to a Vegas Casino and uses their credit card to gamble and then cries when they loose!

And as far as business is concerned what ever happend to "Buyer beware"? People can only sell at a price PEOPLE are WILLING to pay. If all those greedy investors didn't expect to make a big profit they wouldn't have paid such outrageous price mark ups to begin with. Remember, value, location, value, and don't buy what you CAN'T afford.

My friends have always bugged me on why I don't own multiple properties. I've always chosen the safe route, one at a time. I buy, I enjoy, I sell. I make a reasonable profit but I don't buy expecting to make a profit.

I have no sympathy for multiple home buyers, I do feel for those who bought a "home" to live in without expecting to "flip" it for a profit. Do you think Miss Vegas cry-baby would be crying if she flipped her 19 homes and made a million or more? Hell, if she maid $500,000? NOT. You play, you loose, you deserve what you get.

Arioch said...

If you are going to buy 19 houses (19 houses!!!) you had better be savy and financially adept.

A) you could roll the clock back 7 years and call it 19 thousand shares of "DrKoop.com stock".

B) She is speculating. Part of speculating is risk (thus the term speculate). There is no such thing as guaranteed speculating.

C) Buying 19 houses on minimal or close to nothing down is exactly the same as trading stocks on margin.

She is simply getting a margin call. She leveraged hoping the market would go up, it went down and now shes getting the margin call.

Do I feel sorry for her? Yes, she will be living in a cardboard box (may want to write Pulte on the side with a sharpie) when this is all done. Is the builder acting in a questionable manner? Yes, they are taking people for a ride. But at the end of the day, the woman is responsible for her own financial decisions. She made very bad decisions, and ultimately she is responsible.

The company should be investigated for the manner in how those loans were approved and pushed through. She should share 50% of that burden, as she is complicit in that activity as a partner in the loan process. And that is where the liability should stop.

The fact that she is holding property which is losing value is simply how the speculating game works.

Investing is a zero sum game, she simply happens to be on one side of that equation.

She should minimize the damage and liquidate everything (keep one car), and begin her BK process now before the properties lose even more value and make the hole bigger.

Wes D said...

There's a saying in Vegas and it certainly applies to her:

"There's a patsy in every game, and if you don't know who it is, it's you"

Anonymous said...

What were the prices like a week after the "sale"? Had they gone back up, or was the "sale" a lasting price reduction?

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Mills said...

As a Centex Homes employee, I would like to respond to the negativity surrounding the 12 hour sales going on across the country.

They are a ONE DAY event. We cut prices for one day in select divisions as a marketing event.

Centex Homes (in my division anyway) does NOT deep discount as a rule. Our neighborhoods appriciate and then some. We have the lowest loan default rating in our state.

So before you get all hyped up about the opportunity to gain some instant equity in a home-- check the facts.

One day, maybe 100 homes in each divison, most with closer to $25k off.

Mills said...
This comment has been removed by a blog administrator.
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Anonymous said...

Centex adds are nothing more than a well worded bate and switch tactic to draw people into thier sub divisions.

Pulte is a McHome builder. Its thier way or the highway.

Lot perimums are nothing but gouging the home buyers. When all the same home builders have homes in the same price per square foot is nothing less than colluding on all the builders parts. Especially when they all refuse to negioate price.

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