Fannie Mae, Freddie Mac and FHA stop propping up the market

[NC Appraising]

Mattamy is offering up to $24,960 towards closing cost when financing with Mattamy Home funding. Closing cost credit may be used for closing costs, prepaids, escrows, interest rate buydown & 1 year of HOA dues.

Why are you allowing this?

Do not blame appraisers for this when they go into foreclosure in three years.

 

[J Grant]

Mattamy is offering up to $24,960 towards closing cost when financing with Mattamy Home funding. Closing cost credit may be used for closing costs, prepaids, escrows, interest rate buydown & 1 year of HOA dues.

Why are you allowing this?

Do not blame appraisers for this when they go into foreclosure in three years.

Good topic- suggestion - the title should be the NEW home market ( not just the market ), or stop propping up new home prices -

I have often wondered why this is allowed,, and what regulation would stop it - I have addressed this before wrt builder "preferred financing," which can be the lender who financed the project or a lender the builder owns -consider maybe a large % of homes in development is financed by it - the builder offers a borrower paid closing costs or perks such as a "free" upgrade package - and the appraisals just rubber stamp the price, especially the first original sales and each sale is then used by a valuation or appraisal as the comps

 

[Tom D]

instead of lowering their price builders realize that buyers may not have enough cash to do the deal, so give up some profit to give to buyer someway.
mortgage bankers make a lot of money on the broker end, then more on the banker end when they sell the loan. you slam the lender for making less money to make it up in more loans. gee, i wonder how many appraisers lowered their fees in this market to get more work.
eventually the price will have to drop, or at best not go any higher than the previous high sale no matter who gives who what.
this has nothing to do with foreclosures. foreclosures are caused by economic downturns, or bad no doc underwriting with a 2/3 year adjustable loan to a higher rate, as happened in 2007 crash.

 

[J Grant]

instead of lowering their price builders realize that buyers may not have enough cash to do the deal, so give up some profit to give to buyer someway.
mortgage bankers make a lot of money on the broker end, then more on the banker end when they sell the loan. you slam the lender for making less money to make it up in more loans. gee, i wonder how many appraisers lowered their fees in this market to get more work.
eventually the price will have to drop, or at best not go any higher than the previous high sale no matter who gives who what.
this has nothing to do with foreclosures. foreclosures are caused by economic downturns, or bad no doc underwriting with a 2/3 year adjustable loan to a higher rate, as happened in 2007 crash.is -

I doubt the builder is giving up profit, instead, they inflate home prices to cover the so called free paid closing costs or upgrade package if the "preferred lender" is used -

 

[ucbruin]

Way, way, way back while I was still appraising in SoCal....
Some builders gave concessions to new buyers (instead of lowering prices) because they didn't want to **** off buyers who purchased in earlier phases....

 

[Tom D]

i may not disagree with you, but if the property appraised at the sale price, with free this that, then is the home price inflated. or did the builder give away some profit to make da bigger money on the sale. remember, it cost the builder mo money each month that a property be sitting there.

 

[Mark K]

Why are you allowing this?

F/F allows it because they don't want to slow the housing market down.

The builder does it because they know that their hand-picked appraisers will ignore the concessions when this sale becomes a comp, keeping the prices artificially inflated. In some areas the market is getting worse by the month.

As executor of an estate I've accepted a FHA offer on my recently deceased Mom's house in Port Charlotte FL. The estate is paying nearly $15K in concessions on a $275K house. I've been watching the market and it is tanking in that area so I told the broker to get it done; don't want to be left standing when the music stops. Zillow shows about 40 listings in that area and about 1/2 show price reductions, unlike this time last year when there were about 5 listings that were selling in a few days for over $300K. Do I think FHA should allow 6% concessions? No. But I'm doing whatever it takes to get rid of this thing.

Builders will do whatever it takes to keep the ball rolling and F/F will gladly be their cooperative accomplice.

 

[J Grant]

i may not disagree with you, but if the property appraised at the sale price, with free this that, then is the home price inflated. or did the builder give away some profit to make da bigger money on the sale. remember, it cost the builder mo money each month that a property be sitting there.

It is the builder's business how much profit they make - our business if the prices were inflated over MV to cover concessions -

The point is from day one, using a "preferred lender" that entices a borrower to use them via builder concessions, whereas the builder does not offer those concessions with an outside lender skews a high number of sales in a community financed by XYZ preferred lender, which is not true of the open market sales ( re sales ) and the "preferred lender" will rubber stamp prices, not account for concessions if they impact price, and from day one can rubber stamp a value to form the first set of comp prices -

 

[Mike Ault]

It's the same principle as those "equity gifting" programs such as Nehemiah & Americandream where the seller of the home gifts equity towards the buyer's down payment. In reality, the sales price is raised so that the seller isn't actually gifting anything, and the scam depends upon a gullible appraiser who will rubberstamp the higher price. Transactions such as that will distort the entire market unless diligent appraisers properly identify and discounts those seller concessions when using them as comparables..

 

[J Grant]

F/F allows it because they don't want to slow the housing market down.

The builder does it because they know that their hand-picked appraisers will ignore the concessions when this sale becomes a comp, keeping the prices artificially inflated. In some areas the market is getting worse by the month.

As executor of an estate I've accepted a FHA offer on my recently deceased Mom's house in Port Charlotte FL. The estate is paying nearly $15K in concessions on a $275K house. I've been watching the market and it is tanking in that area so I told the broker to get it done; don't want to be left standing when the music stops. Zillow shows about 40 listings in that area and about 1/2 show price reductions, unlike this time last year when there were about 5 listings that were selling in a few days for over $300K. Do I think FHA should allow 6% concessions? No. But I'm doing whatever it takes to get rid of this thing.

Builders will do whatever it takes to keep the ball rolling and F/F will gladly be their cooperative accomplice.

Imo the market is not tanking, rather it is a price correction for an overheated rapid acceleration price rise we saw in the last 3 years -

Regardless of what we call it, prices are either declining or stabilizing in many areas, which is not a bad thing and part of the market cycle though nobody likes it when it is their home - I see reductions on listings to a reasonable price wears before it would be bid higher than any prior marker - lots of mediocre or worse properties over $ paid in the past couple of years -

Builder prices are invented and controlled by the builder and using a preferred lender that rubber stamps prices in a valuation and does not account for concessions helps but is not the only thing - builders invent prices on upgrade packages, lot costs, lot premiums, price increases in a phase etc -