Only took the little guys a year or more... maybe someone at the AP reads HP? It's flattering they called me an "Economist". But hey, they call the corrupt David Lereah an economist too.
This report today on rampant incentives and an unregulated system spinning out of control. Yes, this will end badly. A crash of a lifetime. Horrific, ugly, epic, historic - just pick your adjective.
Deals distort home sale prices - Proliferation of buyer incentives such as cash back suggests market downturn is worse than reported.
Vinnee Tong / Associated Press
NEW YORK -- Buyers latched onto mortgages with all kinds of exotic teaser rates to be able to afford the soaring home prices that sellers were demanding during the boom years.
Now that the situation is reversed, buyers are demanding cash payments and other incentives that may be artificially propping up sales prices -- suggesting the market downturn could be even more pronounced than has been reported.
Gonzalo Sotelo, a licensed real estate agent in Salinas, Calif., said that three times in the last few months, buyers' agents approached him about securing cash back at closing without informing the lender. In the most expensive proposition, an agent from the nearby San Francisco Bay Area proposed having a home with a $539,000 asking price reappraised and sold at $600,000, with Sotelo's client paying back $60,000 in cash to the buyer. Sotelo, of Prudential California Realty, said he turned down the deal and hasn't heard from the agent since.
The type of offer Sotelo received prompted his boss, Jose Palma, to devote a recent staff meeting to a discussion of how to avoid potentially fraudulent deals, since giving cash back without telling the lender creates legal liabilities for the broker and seller.
"I think people are trying to be a little bit more creative," Palma said. "We tell our agents: 'There's a black area and a gray area.' I tell them to stay away from the gray area."
Offers abound from sellers willing to pay closing costs, several months of mortgage payments and, in some cases, cash. Giving cash back allows a seller to sweeten the offer without having to lower the stated value.
Buyers are taking the incentives, and economists say the practice could be inflating reported prices and distorting our view of a market already suffering from higher mortgage rates and a sense that the market is enduring a significant correction.
October 18, 2006
Pigs are flying alert: MSM reports that use of incentives is distorting official home sale price numbers
Posted by blogger at 10/18/2006