RE and the Sheeple

[don]

thread proposal - we here on the 'tulip share sheeple 'insights' into RE, in effect the "other side of the hill" from the 'tulip's actual real world insights. For both our amusement and not inconsiderable insight . . .

Here's one:

Across the street from my development a new project is underway. There's been a number of starts and stops, with at least one developer bailing out. Supposedly 300 units are projected - so far the faux impressive entrance is up and a couple of models.

A neighbor of mine - recently retired IBM engineer - approached me with a business deal. We buy and flip one of these units. Apparently his RE expertise is based, of course, on nonstop msm propaganda, mixed in with his own home ownership experience. He's lived in several mortgaged properties that over time appreciated (standard inflation), one by the Mother Of All Bubbles (MOAB). That's it.

We would be competing with the developer.
Where to start . . .

PS: the original large ad sign reads, starting at $299,000 . . . The latest sign, joining the first one, reads, starting at $269,000 . . . Sheeple explanation? There must be two builders . . . .

[don]

Re: RE and the Sheeple

Here's another:

A condo is going into foreclosure in my development. The occupants have lived there for 9 years, buying near the top of the MOAB at $300k. They are $17,000 in HOA dues arrears (about 3 years worth). Another local was interested in buying the place. The current market value is half the mortgage, $150,000. Somehow he blended all that together, coming out with "how could they have spent $150,000 in 9 years?" What? What really nixed the deal for him was the $17,000 HOA tax the new buyer would assume. At least he's out, and on to the next "good deal."

A couple of points:

A valid assumption is the mortgage payments have also been skipped for some time. The bank has now decided it's time to take the property and let the "custodians" go.

Note how the buyer gets the HOA debt, not the lender. It's good to be king.

I wonder if the disclosure laws, notoriously weak here, would provide info on that little RE bomb.

And wouldn't that be a fundamental portion of a purchasing negotiation, the $17,000?

[Forrest]

Re: RE and the Sheeple

Just show how well those that started the MOAB are doing out of it...I'm not positive they planned the MOAB, just that they used it well.

As for that development...is there any need for extra housing in that price range? Who would you sell it to? When a builder starts a project, the financing is based on the sales price, net after costs, after taxes. Dropping the price might indicate the Bank is finishing the project, and at a price above cost, but not leaving all that much for a profit, which would not make flipping it advisable.

Sounds dicey.

[don]

Re: RE and the Sheeple

the financing is based on the sales price, net after costs, after taxes. Dropping the price might indicate the Bank is finishing the project

Agreed but note this project is just starting. The developer holds all the real cost cards and can cut his gain to a minimum if need be. Competing with the developer in a just-starting project, in an environment where new home sales are puny, and apparently ignoring the overhead of financing, finishing costs, HOA dues, possible assessments, property taxes, realtor selling fees and capital gain, is a no-win investment. It would take a repeat of the MOAB, with buyers lining up before dawn, to have a prayer in seeing a return.

That's what makes these stories important. Seeing the easy fodder that FIRE depends on is instructional. It's tough enough when you know a little . . . .

[Forrest]

Re: RE and the Sheeple

Agreed but note this project is just starting. The developer holds all the real cost cards and can cut his gain to a minimum if need be. Competing with the developer in a just-starting project, in an environment where new home sales are puny, and apparently ignoring the overhead of financing, finishing costs, HOA dues, possible assessments, property taxes, realtor selling fees and capital gain, is a no-win investment. It would take a repeat of the MOAB, will buyers lining up before dawn, to have a prayer in seeing a return.

That's what makes these story important. Seeing the easy fodder that FIRE depends on is instructional. It's tough enough when you know a little . . . .

If I were to speak biblically, I'd call these a snare by the devil for the unwary...but then, I'd never say such a thing.