Not quite sure how to take this?????

17 years ago

Background: My wife and I toured these homes during an open house last April and and fell in love with them. We finally got up the courage to contact the builder a few weeks ago as we saw the realtor signs came down and they still hadn't sold. We figured he'd give us a better deal without having to pay commissions, so we'd give it a try.

The meeting went very well, he told us to throw him an offer and he'd see what he could do. We went home and slept on it, but never made an offer. So last week we saw he had new flyers out that said the price was reduced and he must sell now. So we emailed him. (I've copied and pasted the email exchanges below after changing names, etc.)

I'm not sure how to take his last email....What's everyone else's take on this? Do you think he's stringing me along?

***********************************************************

----- Original Message -----

>>> From: "Rob"

>>> To: "The Builder"

>>> Sent: Sunday, January 28, 2007 9:36 AM

>>> Subject: houses in Willowbrooke

>>>

>>> > Dear ******,

>>> >

>>> > A few weeks ago you showed the houses in Willowbrooke to my wife and I. We

>>> > saw the message about pre-foreclosure prices, and was wondering what

>>> > the prices currently are on each of them.

>>> >

>>> > Also, I've done this in the past with another builder but wasn't sure

>>> > if you ever do this or not... but was wondering if you would

>>> > potentially consider a builder trade if we were to buy one of your

>>> > houses in Willowbrooke. We currently live in Grand Meadows, which of course

>>> > is in "our town". Our house was appraised at a little over 250 over a

>>> > year ago and our mortgage on the house is about 246. So, as you can

>>> > see our hold-up without something like a builder trade would be

>>> > selling, which is why I am inquiring about it.

>>> >

>>> > Thanks,

>>> >

>>> > Rob

>>> > H: 555-555-5555

***********************************************************

On 1/28/07,"The Builder" wrote:

>>> Quite frankly, at this point we are willing to literally consider ANY

>>> offers. If I can pay off the bank note, it will be sold. So I'm

>>> suggesting

>>> to everyone contacting me that they throw out a number and I'll run it up

>>> against my debt owed and any additional costs associated with making the

>>> sale. For example, I still have to purchase the condensing unit, so that

>>> cost will have to be figured in and if the buyer wants any additions

>>> (such

>>> as a central vac or switching out countertops, etc.) I will have to

>>> figure

>>> that into my costs.

>>>

>>> However, it should be noted that I have exhausted my resources and will

>>> not

>>> be able to take money with me to closing, and likewise any trades I take

>>> will have to be valued within current market conditions.

>>>

>>> I hope that helps.

>>>

>>> The Builder

**********************************************************

----- Original Message -----

> From: "Rob"

> To: "The Builder"

> Sent: Sunday, January 28, 2007 4:20 PM

> Subject: Re: houses in Willowbrooke>

>

>> So you would consider a trade if an appraisal was done and our house

>> was worth what we owe on it?

>>

>> Unfortunately, that would be about the only way we could get out of

>> our house right now, as we definitely wouldn't be able to have a

>> Realtor assist us in selling with our current value and what we owe

>> being so close.

>>

>> We are really interested in making an offer on one of them if we could

>> work something out with a trade.

>>

>> Thanks,

>>

>> Rob

**********************************************************

----- Original Message -----

From: "The Builder"

To: "Rob"

Sent: Monday, January 29, 2007 9:39 PM

Subject: Re: houses in willowbrooke

> Rob,

>

> I'm going to be totally honest with you, because I think it's important for

> people to understand what's going on in the market and so many people only

> look at the positive side of it being a "buyers market". However, every

> time a buyer ends up getting a "steal" on a home, whether it be a new home

> or an existing home, they are really hurting the value of thier own property

> in the process. This is because the sales value of a home will drop as the

> comps in their area drop. So even though they purchased a home for 30K or

> 50K less than asking price, the homes worth has been determined by the sale

> to have actually been 30K or 50K less than the asking price. Unfortunately,

> this trend indicates that even recent appraisals are no longer an accurate

> indicator of a property's real value.

>

> For example, the home at xxxxxxxxx had an appraised value of 403K.

> Knowing the market was slow, I priced it to sell quickly at 398K. Eighteen

> months later, the only offer I've had was for 360K (which didn't even pay

> off my loan amount) and they wanted 45K in upgrades thrown in for free.

>

> Likewise the home at xxxxxxxxxxx appraised at 455K. I priced it at 449K. Two

> years later, my only offer was for 400K and they wanted another 30K in free

> upgrades.

>

> So it's become quite clear that the appraised value on these homes is not in

> line with what the current market will bear. Ergo, when they are sold for a

> lesser amount, it will reduce the comp values overall and the appraisals on

> the properties will drop accordingly. Even though my costs to reproduce

> these homes would be 10-15% higher in 2007; if I were to build them again, I

> would not be able to command the full price of the product based on my 2005

> costs.

>

> Sellers that are desperate to move their homes are being forced to reduce

> their prices by tens of thousands of dollars. When this happens, appraisal

> comps of similar homes in your area fall, and suddenly your home doesn't

> have the same marketable value that it did just a few short months ago.

> Just like me, other builders (including xxxxxxxxxxxxx) are being forced into

> dumping their new homes at cost or below. Therefore, I know I will have

> difficulty selling an existing home in in a neighborhood where new homes are

> being offered at cost, so this will have to play into my decision. I have

> to consider how long I will have to carry the expense of your home, how much

> it will cost me in utilities, insurance, etc. during the time it will be

> listed, and I must consider how much it may cost me in realtor fees to sell

> the home.

>

> When I look at all the factors in this scenario, this is what I end up with:

>

> #1. I will lose all my profit on my product, which of course is my only

> source of income.

>

> #2. I will lose all my overhead expenses to date. (ie, costs of staging,

> printing flyers, postage on bulk mailings, utilities/upkeep, insurance

> premiums, etc.)

>

> #3. I will have lost all the interest paid on the construction loans.

>

> #4. I will lose the principal buydown required by the banks when the homes

> failed to sell (in other words, I'm giving away my equity in them).

>

> #5. I'm giving you full value on sale of your home, with the probability

> that I will not receive the full appraisal price for it when it sells.

>

> #6. I should be prepared to absorb any overhead expenses and/or realtor fees

> incurred on the eventual sale of your home.

>

> Quite honestly, this doesn't sound like a solution to my dilema. Now if you

> owned a 120K fixer upper that I could rent out or flip without

> the risk of losing more money, I might be able to look at things a bit

> differently. However, given all these factors, I simply can't take a hit on

> my home and then take another hit on your home.

>

> I wish I had better news for you, as I'd really like to get you into one of

> these homes, but I simply can't offer you full price on your home when I'm

> losing so much on the sale of mine.

>

> The Builder

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Comments (38)

celticmoon
17 years ago
last modified: 9 years ago
Sounds like he is being frank in a tanking market, and is not in a position to assume the market risk for both houses.

Could you work on selling yours separately and reapproach him with a contingency offer?
dannysue40
17 years ago
last modified: 9 years ago
He's not going to accept an even trade. You'll have to come to the table with alot of $$$$$$ and your house.

Doesn't sound like he's in deep desperation mode...yet.

He's being honest and not yanking you around.
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nyarmush
17 years ago
last modified: 9 years ago
If your house is appraised at $250K and you owe $246K, you cannot afford to move. I agree with the builder 100%--appraised values and true market values are two different things. I really doubt you'd be able to quickly sell your house for $250K. I do think the seller is in desperation mode, but trading and ending up with your potentially over priced home doesn't help him at all. I'm sorry if this sounds harsh--I don't mean it that way. But I think you need to temper your love of this new house with some realism.
akkw
17 years ago
last modified: 9 years ago
I heartily agree with nyarmush. In the current market it's very possible you owe more than the true resale value of your current home. How can you possibly afford to move?

I understand how much you want the new house, but I am not sure how you could think it would benefit the builder to take on your house as a trade, at appraised value. The builder sounds like a very forthcoming and honest person and he's taken the time to explain his position very clearly -- a very refreshing concept, since he could have just blown you off and left you wondering. I would also recommend that you try to sever the emotional ties you have with this house... sorry!
susanjn
17 years ago
last modified: 9 years ago
"I'm not sure how to take his last email....What's everyone else's take on this? Do you think he's stringing me along?"

I don't see any ambiguity. He said, "No, thank you." And he explained why.
cpowers21
17 years ago
last modified: 9 years ago
I agree with all the others. It sounds like he is in a very bad situation. Your offer, though it sounds good to you, could put him in a worse position than he's in now. He might only lose 10k on his home, but 50k on yours.
swimmer22
17 years ago
last modified: 9 years ago
With your current loan to value ratio the last thing you should be considering is buying a home with a higher price tag than your current one... Save some money and pay down your current mortgage as you are presently upside down in value on your home when factoring in closing costs alone.
laura1202
17 years ago
last modified: 9 years ago
I don't understand why you are confused about the builder's email. He explained his position very well, there's no "stringing along" going on.

If you really lovelovelove the new house, ask a Realtor to run the (SOLD) comps for your current home and see what a realistic selling price would be. Forget a year old appraisal, it's probably no longer accurate. What is the average DOM in your area? You might be able to go back to the builder with a contingent contract IF you get your home in top shape and price it to sell quickly. Traffic has picked up in a lot of areas but there is also a lot of leftover inventory because 2006 was such a sucky selling year in many locations.

The builder sounds like someone who would be willing to work with you, but you have to give him something to work with!

GOOD LUCK!!!
chiefneil
17 years ago
last modified: 9 years ago
Is the builder's house cheaper than your current house? Otherwise I'd be wondering why someone with 2% equity in their current house would be wanting to purchase an even more expensive house?

I agree with the others that the builder was very clear. I don't see how you could think he was stringing you along. You offered him a bad deal and he declined with a very informed and eloquent explanation. Actually he sounds like a good person to do business with.
berniek
17 years ago
last modified: 9 years ago
"I'm not sure how to take his last email....What's everyone else's take on this? Do you think he's stringing me along? "
Yes he needs to sell and as quickly as possible. However, he is not willing to give the homes away, although it looks like he wont make any money on them.
You really have nothing to bring to the table to change his mind, it looks like no equity in your current home, and thinking of trading a new house for an old one is not like trading in your old car.
I think he's had an up front explanation of his situation and you have to come to the realization of not being in a position to buy. As was suggested above, stay where you are and gain some equity.
laura1202
17 years ago
last modified: 9 years ago
OK, what am I missing here? Why can't the OP sell his current home and pay off that mortgage and buy a new home with little or nothing down? I have no idea if he would want to do this, but if he can afford the new payments, what difference does it make?

Not everyone sees their home as a "nest egg" or savings account...
chiefneil
17 years ago
last modified: 9 years ago
"Why can't the OP sell his current home and pay off that mortgage and buy a new home with little or nothing down?"

He could, if he could afford it. I think in his email exchange with the builder though, he said he couldn't afford the realtor's fees on the transaction and still have enough to buy the new house. To do it the traditional way, he'd be looking at 6% + closing costs on his current house, plus closing costs on the new house, maybe a total of 10% for the roundtrip.
terezosa / terriks
17 years ago
last modified: 9 years ago
OK, what am I missing here? Why can't the OP sell his current home and pay off that mortgage and buy a new home with little or nothing down?

It doesn't seem likely that the OP would be able to pay off his existing mortgage if he sold now, as he owes $4000 less than last year's appraised value, and he is in a declining market. If the OP has other assets he may be able to use those to purchase a new home.
laura1202
17 years ago
last modified: 9 years ago
chiefneil wrote: I think in his email exchange with the builder though, he said he couldn't afford the realtor's fees on the transaction and still have enough to buy the new house.

Hmmmm.....OK, maybe a FSBO then?

Also, aren't some mortgages now including the closing costs in the total mortgage amount so that you don't have any upfront costs?

(We have never done this and I'm not really suggesting it, just looking at every possibility for the OP to be able to get that new house!)
laura1202
17 years ago
last modified: 9 years ago
Terriks wrote: It doesn't seem likely that the OP would be able to pay off his existing mortgage if he sold now, as he owes $4000 less than last year's appraised value, and he is in a declining market. If the OP has other assets he may be able to use those to purchase a new home.

You're right, terriks. I missed that.
bethesdamadman
17 years ago
last modified: 9 years ago
"OK, what am I missing here? Why can't the OP sell his current home and pay off that mortgage and buy a new home with little or nothing down? I have no idea if he would want to do this, but if he can afford the new payments, what difference does it make?"

I think you're missing several things, Laura.

1. You're assuming that the $250k appraisal from April 2006 is still valid.

2. You're assuming that the OP can sell his house FSBO for that amount.

3. You're assuming that the OP won't have to pay any closing costs on the sale of his house (or at least less than $4k so he won't have to bring money to the table).

4. If 1,2 & 3 all happen, you're assuming that the builder can wait 30-60 days for the OP's house to close so that the OP will be able to come to the table unencumbered.

5. If 1 through 4 all happen, you're assuming that the builder will pay all closing costs and that the OP can get the builder's house with absolutely no out-of-pocket expenses, including pre-paid items.

6. If 1 through 5 happen, you're assuming that the builder's house will appraise at whatever price he and the OP agree to.

7. If 1 through 6 happen, you're assuming that the OP can qualify for a 100% loan.

If all that happens, then yes, the OP can buy the builder's house.
laura1202
17 years ago
last modified: 9 years ago
bethesdamadman wrote: If all that happens, then yes, the OP can buy the builder's house

WOW it's a wonder that anyone ever buys a house isn't it?? @@
robnmo
Original Author
17 years ago
last modified: 9 years ago
UPDATE!!!

Although I felt kind of insulted at the builder's insinuation that my home probably wasn't worth as much as it appraised for when refinancing in 2005, I took the time to absorb his message and finally got it. So I emailed him again. (see below)

----- Original Message -----
From: "Rob"
To: "The Builder"
Sent: Tuesday, January 30, 2007 9:33 AM
Subject: Re: houses willowbrooke

> Sorry, to keep bugging you like this (but my wife really likes the
> idea of living out there), but I had one other question based on your
> last email. If we compared apples to apples where we were potentially
> willing to give your original asking price with a trade on ours at
> it's appraised value, would that be an option or would that still not
> work for you? Just shoot me a quick email and let me know either
> way... Otherwise maybe we'll talk to you down the road when the market
> picks up and we could sell it outright.
> > Thanks for all the information though!
> > -Rob

**********************************************************

----- Original Message -----
From: "The Builder"
To: "Rob"
Sent: Tuesday, January 30, 2007 11:16 AM
Subject: Re: houses willowbrooke

Rob,

If I was able to offset any losses on the sale of your home, it would
definitely make it easier for me work something out. I should be available
this evening after 5pm, why don't you call me then and we can discuss our
options. My home office number is 555-5555.

"Builder"

**********************************************************

So I'm thinking... if he's prepared to lose money anyway, he can lose money on my home just as easy as he can lose money on his home and I will get the payoff I need to make the move. I guess now we just have to concern ourselves with appraisals coming in high enough for me to qualify for the mortgage amount at the full price offer.

Am I dreaming or is this possible?
qdognj
17 years ago
last modified: 9 years ago
just playing devils advocate, but why would he be inclined to take the loss on your home,instead of the loss on his? The only possible winner here would be you...In essence, whats in it for him?
robnmo
Original Author
17 years ago
last modified: 9 years ago
but why would he be inclined to take the loss on your home,instead of the loss on his?

The way he explained things to me when we met with him a few weeks ago is.....

He's already lost so much money making interest payments to the bank that he has to stop the homes from bleeding him dry. He said if he tried to make a profit now, he'd have to raise his asking price by close to 80K and he knows they won't sell then. So he wants out from under the short term high interest loans.

I figure if he buys my home at 246K (my payoff) then he can knock 30K-40K off it and sell it fairly quickly because nice homes in the low 200s are much harder to find in the burbs, especially when most of the sellers want to make enough to pay off existing loans. (I figure I can't be the only one upside down in my home.) Besides, newer homes in the 400K and up range are a much harder sell since so many can't afford them.

At least that is the argument I'm willing to make tonight.
qdognj
17 years ago
last modified: 9 years ago
so let me understand this...by purchasing your home and selling you his, he will(if all goes according to your plan)lose less $$$? I can't believe for 1 minute that he would do this, and honestly, i can't believe you do also..Whats to say your home doesn't sell as planned? This is a pipe dream if there ever was one, but i wish you all the luck...
sweet_tea
17 years ago
last modified: 9 years ago
To to OP - what is the value of your home TODAY?

Get some realtors out there to do a CMA for you, if needed. How can you talk trade based on a year old appraisal or a bank note. You need to know the market value today. What is your guess?
bethesdamadman
17 years ago
last modified: 9 years ago
bethesdamadman wrote: If all that happens, then yes, the OP can buy the builder's house

Laura: WOW it's a wonder that anyone ever buys a house isn't it?? @@

I'm sorry, Laura, I didn't mean to come off as a wiseass in my reply to you. I was just trying to point out all of the things that had to go right for this particular OP to buy that particular house.
talley_sue_nyc
17 years ago
last modified: 9 years ago
He said to you: "If I can pay off the bank note, it will be sold.

but how is taking your house in trade, going to help him pay off his LOANS?

His banks aren't going to accept your house.

He'd have to believe that he could SELL your used house house faster than he could sell his OWN NEW house. And, faster than YOU can sell your house, or perhaps for more money.

I think he doesn't want to shut down any avenues, so perhaps yes he is stringing you along.

But I still don't see why he would want to trade houses.

Or even, why YOU would want to trade houses.

Because how would YOU pay off your loan? You couldn't--because he isn't giving you CASH. Your current mortgage holder isn't going to take "equity in our new more expensive home" as payment for your mortgage note!

And I don't see why you would want to. Even if a buyer walked in the door with a banker's check, you'd essentially get out from under your current house, with NO equity. (with a house trade, you'd have even LESS, not even the imaginary $4k.) So you'd have to get your downpayment from elsewhere, and it doesn't seem as though you've got an "elsewhere."

and you'd have to take a completely new mortgage for MORE money.
laura1202
17 years ago
last modified: 9 years ago
bethesdamadman wrote: I'm sorry, Laura, I didn't mean to come off as a wiseass in my reply to you. I was just trying to point out all of the things that had to go right for this particular OP to buy that particular house.

No, you weren't being a wiseass and you're exactly right. I am snappy today because we're waiting to hear back from some buyers that we've been negotiating with for a week. We gave our "best and final" price last night (they don't know that) so I REALLY hope they accepted!!

I do have to admire the OP, though for going down every avenue to try to make this new home a reality....I can see how *maybe it might work...and he doesn't HAVE to have a downpayment, although most people (here on this Forum anyway) seem to, it is possible to get a mortgage for the full price of the home.
bethesdamadman
17 years ago
last modified: 9 years ago
I'm keeping my fingers crossed for you, Laura. I hope everything goes well and they accept your counter-offer. Keep us posted.
cpowers21
17 years ago
last modified: 9 years ago
I can't believe the builder is even considering this. This is not even close to helping with his situation. If things are as bad as he's saying, do you really think they will offer him a loan? Have you talked to any mortgage lenders to see if you can afford this? Just make sure you aren't jumping in with out a life raft. How long had you owned your current home? How many homes have you bought and sold?
mariend
17 years ago
last modified: 9 years ago
Sounds like a lawyer needs to be involved on both sides to protect all.
PRO
acdesignsky
17 years ago
last modified: 9 years ago
OK, I'm glad I'm not the only one confused by the whole idea of "trading houses". I guess what OP is really saying he he will sell his house to the builder for (just throwing out some numbers) $200K and then take out a mortgage for $400K to buy the builder's house. So the builder will get out of his $400K mortgage/construction loan and take on a smaller 200K loan. The builder still needs to sell that house, but his risk is only 200K rather than 400K.
SO, OP is has to pay closing costs on selling his house, will have to do 100% financing to cover the purchase price, and still come up with several thousand more for prepays and costs on buying the new house. The builder, OTOH, may have enough cash to buy OP's house outright and certainly should have funds to cover closing cost. It seems to me OP is taking a HUGE risk and the builder actually seems like a decent guy. It just seems like an incredibly bad idea, IMO.
terezosa / terriks
17 years ago
last modified: 9 years ago
I think that the OP wants the builder to buy his house for what it appraised for last year - $250k, so that he can pay off his mortgage and then get a new mortgage for the builder's house. The OP can't sell the house for $200k, because he owes $246k on it and presumably doesn't have the cash to make up the difference.
dssxxxx
17 years ago
last modified: 9 years ago
This is an unbelievable thread.

Sell your house and then approach the builder. Take in trade......is this guy sitting on a toadstool.???
talley_sue_nyc
17 years ago
last modified: 9 years ago
The builder, OTOH, may have enough cash to buy OP's house outright and certainly should have funds to cover closing cost

I still don't see this. The builder wrote:
"If I can pay off the bank note, it will be sold."
If he had cash, he'd pay off the bank note, and stop the interest running up, and then he could wait a little bit for a higher price.

How is he going to pay off the bank note with your house? he can't even do some quick work and flip it.

If you aren't willing to do this the conventional way, don't waste the builder's time.
finesse
17 years ago
last modified: 9 years ago
If the OP is stretched as far as it seems, he's going to have a tough time getting 100% financing at reasonable rates. Plus, where's all the closing cost money coming from, not to mention the other costs associated with moving into a new home.

It sounds like they're trying to make their dream a reality well before they can afford it and are trying any way they can to make it happen.
ojoy
17 years ago
last modified: 9 years ago
I agree with Tally Sue that the OP is wasting the builder's time with his odd proposition. It seems like it would be a win-lose situation, i.e. OP wins and builder loses. The builder would be an idiot to fall for it. Why should he?

There seems to a sense of entitlement nowadays, that someone else is expected to bend over backwards so that the OP can fulfil his pipe dream.
sweet_tea
17 years ago
last modified: 9 years ago
It looks like the OP wants the builder to buy the OP's home for $246k (the mortgage balance). ...then in order for the builder to sell the OP's home , builder would have to sell it for around $210k(thus losing $30k-$40k). In other words, the builder would take the loss on the OP's house, instead of the OP taking the loss on the house that is worth less than the $246k bank note.

Here is a paste in OP's word's:
"I figure if he buys my home at 246K (my payoff) then he can knock 30K-40K off it and sell it fairly quickly."
pebbles396
17 years ago
last modified: 9 years ago
Oy. This is nutso and exactly why the market is so messed up.
greenbank
17 years ago
last modified: 9 years ago
I agree the builder sounds decent, and the OP is dreaming (reminds me of some of the car deals I tried to pull when I was 20).

However, one thing struck me as really weird: The builder priced his houses a few thousand below comps and then sat on them for TWO YEARS? That seems like horrible cash management to me. The only way that makes any sense is if you think the market is only temporarily down and you'll get your price soon.

Imagining a 300K note on a 400K house, the carrying cost is $2K a month, I would think. So $48K out the window for sitting on it for two years...how does that make any sense?

Weird all the way around.
bunglogrl
17 years ago
last modified: 9 years ago
Rob,
Did you get the house? Just curious.

Not quite sure how to take this?????

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