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bigq
12-14-2006, 11:28 AM
What was he thinking when he signed up for a loan that doubles the payment.:hammerhea
GARDEN GROVE – David Dunn felt as if Christmas were stolen from him when prices for neighboring homes in his new subdivision fell by about $140,000.
Now, he says, his home is worth less than he owes, making it next to impossible to refinance before his $3,000-a-month payment doubles. Eleven neighbors who bought before the price cuts are in the same boat.
"They put us in a bad financial situation by lowering the price," said Dunn, 33. "Some of (the buyers) did 100 percent financing, so they're completely over their head right now."
Brandywine Homes, developer of the 42-home Heritage subdivision in Garden Grove, is one of many homebuilders that's had to cut prices lately.
Dave Barisic, Brandywine's vice president of sales and marketing, said in an e-mail that his firm recently held what he thought was a successful meeting with homeowners.
"As such, I don't think you'll be contacted again and there probably isn't much of a story there," he wrote.
But homeowners say the matter remains unresolved, and an attorney says he's still waiting for a response to a letter he sent the developer on behalf of buyers who hired him.
Meanwhile, ads offering big discounts and concessions on new homes have been rolling off the press for weeks as builders race to clear inventory before the end of the year:
•"It's a homebuyer's market, and now is the time to take advantage of it," said a Richmond American Homes ad several weeks ago that offered buyers free stainless-steel appliances, free washers and dryers, plus 3 percent toward paying closing costs.
•"Ask about our Serious Incentives for Serious Buyers," Taylor Woodrow Homes said in another ad.
•The only thing that's not negotiable, added a Standard Pacific Homes ad, is the quality of the houses – implying that the price is negotiable. Year-end incentives include below-market loan rates, no-loan payments for six months and free upgrades.
At Tustin's Columbus Grove, sales reps for William Lyon Homes, Lennar and KB Home touted plans that included help paying off closing costs and loans, flooring upgrades worth up to $20,000 or – in the case of one KB Home development – up to $70,000 off the purchase price.
Wally Welter, an Irvine home shopper, said salesmen for several builders at Ladera Ranch offered concessions worth $100,000 or more.
"I've had salespeople say, 'Make an offer,' which you never hear the builder say," said Welter, 60. "Now, they're willing to listen."
The reason builders now are listening is a housing slump that's caused new home orders to tumble and homebuilder profits to fall.
Standard Pacific Corp., for example, reported that its net income fell by $66 million in the third quarter, a 68 percent drop; Toll Brothers reported a 44 percent decline in quarterly profits; William Lyon Homes reported that its net income fell 72 percent from the third quarter of 2005.
Most homebuilders are reporting that 40 percent or more of their buyers are canceling this year. Often, cancellations result in the builder getting stuck with an empty home that's already under construction.
The closer the home gets to being finished, said KB Home's Irvine-based regional manager, Jay Moss, "the more anxious the homebuilder gets to make the deal."
Concessions, said housing consultant John Burns, are "the talk of the industry."
"On a completed home, it can be substantial."
But residents of Garden Grove's Heritage subdivision maintain that there's more to their story than mere concessions. They maintain that their builder, Brandywine Homes of Irvine, has cut prices well below market values, regardless of how that affects the earlier buyers.
At the very least, their story shows that the pain caused by falling prices isn't borne by the developers alone.
The homeowners said that the price cuts began in November, just months after the first dozen buyers closed escrow, paying from $770,000 to $888,500 for their homes. The average price was $825,000, property records show.
After the builder dropped prices by more than $100,000, all but five of the homes sold in a matter of weeks.
"Usually builders keep their prices up. They try to keep their buyers happy," said Christie Vu, 27, who paid almost $870,000 for the home she and her husband, Philip Luu, share with their two young sons. "In this case, it's just the opposite."
The builder's representatives said during a recent meeting that they are being forced to price the homes to sell and maintain they are getting "zero profit" from the project, homeowners said.
Keyvan Samini, an attorney for some of the buyers, said the purchasers relied on the lender and its appraiser to confirm the homes' $800,000-plus price tags.
But appraisers ended up using homes about three miles away as a guide for the first appraisal, and subsequent loan appraisals were based on the first one, Samini said.
The appraisals "were way too high," Samini said. "I believe that the builder knew they were too high, or should have known. And it's not the fault of the buyers. They rely on the expertise of those appraisers."
Barisic, Brandywine's sales VP, said he doesn't know anything about the comparable homes used in the appraisals.
"The appraisers are not hired by Brandywine Homes," Barisic said. "They're hired by the lenders, which the homebuyers chose themselves."
One of Samini's clients said he's facing the possibility of foreclosure because of the price cuts.
Dunn said he's in a financial bind because he's using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options.
Eventually, he'll be responsible for making full payments of $6,000 a month, he said, adding, "I don't know how we'll be able to pay that."
"It's not just the financial aspect. It's the emotional," Dunn said. "We can't eat, can't sleep. I can't concentrate on work. This is all I think about."

Mandelon
12-14-2006, 11:32 AM
Yup. we have 18 of these on our job board right now....:hammerhea

YeLLowBoaT
12-14-2006, 11:34 AM
better just to walk away. that what you get when you sign on the dotted line b4 you think about whats going to happen in the future.

Parker Dreamin
12-14-2006, 11:36 AM
that is part of the game/risk..... they would not be bitching if the tables were turned. Got to pay to play... but it does suck.

CA Stu
12-14-2006, 02:51 PM
Was this same guy surprised when, after being light all day, it got dark at night, too? :hammerhea
Thanks
CA Stu

YeLLowBoaT
12-14-2006, 03:06 PM
I have a friends that work for a major morage company... they tell me there is ~ 800 loan programs for just thier company.

Cole Trickle
12-14-2006, 03:17 PM
Why would they have an attorney?
They bought the house and unfortunatley the market swang. The Home builder is doing what ever they can to break even and not loose there ass.
Also they make it sound like they just bought a couple months before the builders lowered there price.....Did they do a 1 year arm or are they just pissed because you now can get more for less? :hammerhea

Moneypitt
12-14-2006, 03:19 PM
[quote]
One of Samini's clients said he's facing the possibility of foreclosure because of the price cuts.
Dunn said he's in a financial bind because he's using an exotic mortgage called an Option ARM, an adjustable-rate loan in which the homeowner can pick his monthly payment from a variety of options.
Eventually, he'll be responsible for making full payments of $6,000 a month, he said, adding, "I don't know how we'll be able to pay that."
"It's not just the financial aspect. It's the emotional," Dunn said. "We can't eat, can't sleep. I can't concentrate on work. This is all I think about."[quote]
Now this guy knew the payment would double.....Is he one of the ass&%#* speculators that figured he would cash out with a huge profit before the payments bit him on the ass? The prices falling in the development have NOTHING to do with HIS loan, only his abilty to sell for a profit or refinance in a world in which interest rates are climbing, not falling. His only shot is to prove the appraiser and the developer "conspired" to defraud.....And I'll bet he IS surprised every day when it gets dark again...........What a tool.....MP

jbtrailerjim
12-14-2006, 03:38 PM
I don't fell sorry for any moron who went out and bought over their head with an option arm loan and 100% financing. Now they want everyone to feel sorry for them because their loan is adjusting, they can't refi because they don't have enough equity, and they can't afford the payment anymore. How stupid can some people can be? Then most of them cry and blame it on the lenders who put them in that type of loan. Idiots!:hammerhea

ratso
12-14-2006, 03:38 PM
is there anywhere to read on the different kind of loan options out there?? me and the wife want to buy our first house within the next year or two and dont want any one on ***boat reading stories like this about me
Oh we'll find out... Haven't you heard, nothing is secret around here...:D

h2oski2fast
12-14-2006, 03:44 PM
Why would they have an attorney?
They bought the house and unfortunatley the market swang. The Home builder is doing what ever they can to break even and not loose there ass.
Also they make it sound like they just bought a couple months before the builders lowered there price.....Did they do a 1 year arm or are they just pissed because you now can get more for less? :hammerhea
I don't understand it either, he took that loan as a financial risk. Well it didn't work out for him. Besides, the RAs on here are saying the market is fine.

Riverblender
12-14-2006, 03:45 PM
The Appraiser did not make him sign the loan Docs. As an Appraiser we are the first to be blamed if the loan did not go through. Value was not high enough. The Appraiser is not the one to blame here if the buyer bites off more than he could chew. Whenever I see someone doing a 100% Option ARM I cringe and have been for the past 2.5 years. There comes a time when you have to pay there is no such thing as a free lunch. On that note, What is the difference between a free lunch and a BJ?

Rexone
12-14-2006, 03:48 PM
is there anywhere to read on the different kind of loan options out there?? me and the wife want to buy our first house within the next year or two and dont want any one on ***boat reading stories like this about me
My advice would be don't buy over your head.
Keep in mind prices are declining and will likely continue to for some time.
Stay away from ARM's and Neg Am loans just to get in the door with a low payment. That's how you avoid becoming a story like the above.
Get a good 30 yr fixed that you can afford the payment on and go with it. It may not be all the house you want or envishion but it will be yours when things go the other direction again you'll be able to trade up. This is the process I had to go through about 25 years ago to get into a home. Found a nothing down deal too. Contingent sale was in distress. Deals are out there if you're patient and have a "good" RE agent.

Do F150's Float?
12-14-2006, 04:20 PM
back to the noob guy here... what is ARM?? i understand 20 or 30 year fixed but how do these adjustable rate loans i always hear about work??
Booby (:D hahah..) i pm'd you...
anyways, arms are set up a few different ways. Lets use a 5 year arm for an example.
The "fixed period is for 5 years, and is at a rate of say, 6.25%. Once your 5 years are up, your rate becomes adjustable (to a point, every adjustable loan has caps on it for how high or low the rate can go) on either a 6 month or 1 year index (ex: Libor, Codi, cosi, cofi, MTA, etc). the adjustable rate is determined by the index value (lets say 4.00) plus a margin (which is fixed for the life of the loan and determined before you close - let's say 3.00) so for 5 years you pay 6.25%. Then after the 5th year, the index is at 4 and your margin is 3, so your rate is now 7.00%. 6th year rolls around, and the index goes up to 5, now your rate is 8.00% (make sense?)
There are all kinds of arms, including interest only (usually you have a fixed period of 2-7 years with an interest only period of 10 years). What happens after the Interest only period is up is that your loan amortizes of 20 years, bringing the payments way up.
Neg am loans are confusing, and will take me longer to explain. but i will, because your name is Booby :D

Rexone
12-14-2006, 04:27 PM
ARM = Adjustable Rate Mortgage
Not the right economy for them with rates very likely to rise.
NEG AM = You actually pay less than the rate interest accrues, resulting in a rising principal balance.
Both are promoted by lenders to get you in the door with a low payment. Both are bad news down the road if you can't afford to refinance out of them later due to declining home value (along with little or no equity built). They were both ok in a booming market for those who knew what they were and used them accordingly and dumped them at the correct time.

77charger
12-14-2006, 04:35 PM
Dont care for the idiots who make a combined 100k per year(Not saying 100k is low read on) and think they can afford a 800k house.It doesnt work that way.Its also real estate it can go up and down they bought at peak they could have gotten a used house for less that they can really afford but had to impress others.Besides that they have to pay property tax for what they bought not what house is currently worth.
Seems like many will do what they can to get their foot in the door and think it will get better NOT with an ARM,interest only type loan.Now they want to blame evryone else well they signed for the loan on their own choice not at gun point.When we bought our house for 190k in 2000 i think the basic rule for a 30 year fixed was loan amount for 1.5-2 times your anual income and 2 times was were we sat at.Now you can make 100k and buy an 800k house go figure!:hammerhea

Boatcop
12-14-2006, 06:44 PM
Bought in '87 for $40,000 (10%)
Refi in '00 for $70,000 (7.5%) ($100,000 apprasial-dumped the equity back in remodel/addition)
Refi in '02 for $100,000 (5.6%) ($140,000 apprasial-more improvements)
Current Apprasial - $270,000
No more refis. We're happy where we are.
Moral of the story-Stick with RE for the long run. You can't lose.

diggler
12-14-2006, 08:25 PM
I have a 30yr fixed at 5.6%
My wife and I got on it at exactly the right time. We own over 70% of our home now. (thank god)....

Old Texan
12-15-2006, 11:10 AM
Dont care for the idiots who make a combined 100k per year(Not saying 100k is low read on) and think they can afford a 800k house.It doesnt work that way.Its also real estate it can go up and down they bought at peak they could have gotten a used house for less that they can really afford but had to impress others.Besides that they have to pay property tax for what they bought not what house is currently worth.
Seems like many will do what they can to get their foot in the door and think it will get better NOT with an ARM,interest only type loan.Now they want to blame evryone else well they signed for the loan on their own choice not at gun point.When we bought our house for 190k in 2000 i think the basic rule for a 30 year fixed was loan amount for 1.5-2 times your anual income and 2 times was were we sat at.Now you can make 100k and buy an 800k house go figure!:hammerhea
These folks also have their BMW's and Hummers on a "Smart Lease" so they can afford the payments, then bitchabout the payout on the backend to get out from under their highmilage vehicles.
Since they are cash shy at month's end they have their dozen plus credit cards all maxed out due to eating out at high end restaurants and keeping the young uns' in designer clothes.
And these bankrupt creating fools always get indignant when their "House of Cards" world comes tumbling down on them.......
-Fools and their money easily part ways.

dumbandyoung
12-15-2006, 11:32 AM
Wow ..sorry to hear this. Being that development has declined over 20% in the past year it does surprise me. Im a Realtor. My team has a relationship with Bowdin development and a few other developers.. We sell are their residential and small commercial projects in our area. I've seen first hand, developers losing alot of money or not making as much as expected. I am also dealing with a number of short sales at this time. Basically no matter what the media has to say, it is a GREAT time to be a buyer right now.. for a few reasons..
1. there are so many properties to choose from.(compared to the last few years)
2. sellers are offering so many incentives to buy their home.
3. interest rates are still so awesome.. anyone remember those 18-19% rates in the 1980s??..haha i think its cheap money right now, haha
4. you can buy a home with almost no money out of pocket..because 100% financing is the most common loan right now and sellers are willing to pay closing cost.. some are even going as far to pay for the buyers inspection.
im a very optimistic about the market we are in right now and see it as a great opportunity for buyers and sellers..
pm if you have any real questions about the downward market. id be more than happy to help.

dumbandyoung
12-15-2006, 11:33 AM
I have a 30yr fixed at 5.6%
My wife and I got on it at exactly the right time. We own over 70% of our home now. (thank god)....
thats a good loan.. congrats!

SHOTKALLIN
12-15-2006, 11:46 AM
This is actually payback for all the fake ballers out there. I have friends that put down my 500k house. Tell me b.s like 1.2 is the going rate. Just because they wanted to buy for 1.2M in Corona on an arm. They soon will be in this boat too unless they start selling crack. Funny thing is for some who did this at the right time have enough equity to pay cash in my neighborhood.

riverfun
12-15-2006, 04:56 PM
The real problem is easy money. When you had to put 20% down and had to prove it was your money prices wern't so high on houses. Remember when you saw somebody driving a Jag or MBZ and thought they must be doing well? (before leases) or had a really nice boat? all any body cares about now is "how much is my monthly payment?" WTF does that matter! Ask any truly wealthly person and they care about final cost (and if they dont they did not earn their money somebody else did)

Wheeler
12-15-2006, 05:07 PM
is there anywhere to read on the different kind of loan options out there?? me and the wife want to buy our first house within the next year or two and dont want any one on ***boat reading stories like this about me
I would suggest, find a motage broker, who is, a mortage broker and not, a realtor who is playing, as a broker.

catman-do
12-15-2006, 07:38 PM
.Besides that they have to pay property tax for what they bought not what house is currently worth.
!:hammerhea
Not true, you can have an assessor come out and re-assess your property if the market drop and lower your taxes.
I read this same articel a few days ago. There are a few valid points they have. The appraiser had to get comps 3 miles away, and any legit expierienced appraiser would know to get model match's in the same complex to get a true value. Another point is that a value of something is based upon what someone would pay. At that time the guy was willing to pay that so in turn that was his value. Now what many new home builders are doing is offering incentives. So essentially a home worth 450k is being sold for 540k with 90k of incentives built in. These incentives many builders will pay .30 on the dollar while claiming full value. Its good for the builder to inflate their books. Also many builders are currently dropping prices to make their sales for the fourth quarter and hopefully not have to report losses over their previous projections. The guy did buy in OC though and no matter what the value will come back

OCMerrill
12-15-2006, 09:34 PM
Why would they have an attorney?
They bought the house and unfortunatley the market swang. The Home builder is doing what ever they can to break even and not loose there ass.
Also they make it sound like they just bought a couple months before the builders lowered there price.....Did they do a 1 year arm or are they just pissed because you now can get more for less? :hammerhea
My thoughts exactly. :mad:
Lawyer up because housing prices drop. What a bunch of crap. Poor "Loan Gambling Babies".
Morons that finance houses the risky way are taking exactly that....risk.
Does the builder get a percentage of the appreciation on all those "Homeowners" if prices continued to rise?
Buckle down, get a second job, hopefully someday the market will turn up.
Or do a short sale and get a big freakin 1099.

77charger
12-15-2006, 09:37 PM
Maybe i should sue gm cause they offered better prices shortly after i bought my truck.LOL

OCMerrill
12-15-2006, 09:48 PM
Maybe i should sue gm cause they offered better prices shortly after i bought my truck.LOL
:idea:
That very thing happend to me. Two weeks after I bought it BAM another $1500 in rebates. :argue:
I should Lawyer up?:hammerhea

CA Stu
12-16-2006, 09:58 AM
I think the developer should lawyer up and sue everyone that had their home's value increase! Where's his share of that? :hammerhea
Thanks
CA Stu <--5.75 fixed, 30% LTV :idea: