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List Price Higher than the Value to Break Even....

By
Real Estate Agent with Archway Realty, LLC

  Last week I stopped in my office to pick up my mail and drop off a file...An Agent was doing his Floor Time and we started to chit chat... He handed me a tax report of a couple and asked me if I would like to List their home...I reviewed the report and asked the Agent why he didn't want it....

Whenever I stop in the office and another Agent hands me business with no strings (a referral fee) I always wonder why ????

So, getting back to Mr. Floor Time....This Agent said that he just likes to be a Buyer's Agent and he doesn't want the responsibility of Listing homes.  He said that this is a probably a divorce situation... Mr. Floor Time wanted a referral fee.  That told me that this could be a good business lead....So I agree to do it.  Mr. Floor Time said that he would go to the Listing Presentation with me so the Client would see that he was part of the transaction since they initially called him...I said that we'll just tell the Client that we are a team working together on selling their home...

I did all my homework on the Property.  Prepared all the documentation.  Mr. Floor Time and I met at the Clients subdivision and toured a few homes for sale in the neighborhood.  I noticed that a lot of home were in foreclosure in the neighborhood...  It was a new subdivision and homes were still being built.

We met with the Client at the appropriate time and sat with her at her kitchen table...In the background the spouse rushed out of the home...He didn't say anything to us...They still had their Christmas tree up and the home looked like they were both living there as man and wife...The wife informed me that she moved out and has an apartment...I informed her that if her husband is in Title then he needs to be here to sign the paperwork...

During our meeting the Client kept getting phone calls on her cell phone so I could tell she wanted to get through this as fast as possible...

I had researched a list price for their home. I knew in my mind what I would list the home for.... I asked the Client what they still owed on the property.  They owed more on the property than what I came up with for a list price and they had lived in the property for three years !!  My research showed me that they bought the home for about $30,000 less than what they owed on the property... In my mind I was freaking out !!  How could they owe so much ???  I asked the Client if she did any cashout refinances...she said no.  She told me that they had an 80/20 loan on the home and they financed all the closing costs into the loan.  This was the builder's financing program.

I had to come up with all new numbers and a plan as to how I could possibly sell this house at the price....Now I could see why so many homes were in foreclosure in that neighborhood !!

Thinking that the Clients just wanted to net that price and she was BS'ing me...I call the Title Company to confirm the liens on the property....sure enough they did owe that much !!  Since I had the Title Company research the liens I had them confirm who was all in Title on the home...I called the Clients and requested them to get a pay off letter from the lender because there could be a pre-payment penalty and I don't want any surprises at the closing....

I reworked the numbers and a strategy on selling the home... I call the Client and I inform her of the new list price based on her information and without the pay off letter from the lender...She still did not have the pay off letter...The Client asked me if she could get that for her house ???  I said that she has to get that price or she and her husband will be paying out of pocket at the closing table....I also informed her that I really need the payoff letter because it could be a higher number....

Financing the closing costs into the loan really hurt this couple.... They probably had two sets of closing costs because they had an 80/20 loan....  It's like the builder was more concerned about selling homes than what he was doing to his homebuyers....

 

Posted by

Lauren Corna

Comments (5)

Brian Brass
Brian Brass - Guaranteed Rate - Troy, MI

LAUREN -

Good topic...

As a mortgage banker I encounter this situation more and more.
Many Buyers over paid using Builder financing in the past 2-3 years.
This is particularly evident with 100% financing plus the closing costs.

Good luck with the listing...

Feb 03, 2007 07:36 AM
Lauren Corna
Archway Realty, LLC - Southlake, TX
Broker
Brian-  Thank you for your response....Some how I feel that this couple was not protected when they bought this home....They trusted the wrong people.
Feb 03, 2007 07:55 AM
Lori Pannell
Home Pro's Real Estate - Wildomar, CA
Lauren, please excuse my ignorance, but what do the closing costs consist of for new construction?
Feb 03, 2007 10:56 AM
Loreena and Michael Yeo
3:16 team REALTY ~ Locally-owned Prosper TX Real Estate Co. - Prosper, TX
Real Estate Agents
This is such an ugly situation to get into. I have come to this situation several times. In my meeting with them, I would politely tell them if I take a higher listing price just for them to break-even and new builders and other properties are still for sale gets them no where. At that point, I would get deeper into the conversation with them about their financial situation (telling them that I'm not a financial advisor).

I have talked some clients out of selling their homes (it was why I was there in the first place), and cleared out some other mess (which their house problem was not one of them).... This is just a separate example - not quite similar to yours.
Feb 06, 2007 01:40 AM
Lauren Corna
Archway Realty, LLC - Southlake, TX
Broker
Loreena-  Thank you for the great advice !!  You are so right...My fear is that I would take the listing and pay out of pocket for marketing and never sell the home...
Feb 06, 2007 01:57 AM