May 29, 2007
Buy A Condo Get A Car At 767 Bryant
Last August we were “struggling to rationalize the “value” of [767 Bryant].” Since then we've seen remodeling, reductions, and now…free cars. From a craigslist post for 767 Bryant (courtesy of a “plugged-in” tipster):
If you sign a contract by Wednesday, May 30 AND close the purchase by June 30, 2007, then you'll receive your choice of a 2007 Toyota Prius (BASE MODEL EDITION) or Mini Cooper (BASE MODEL EDITION). Offer available to principals only. Qualifying purchases are for condominiums with prices starting at $629,000.
Our tipster is left wondering how this gets factored in to the ‘real’ selling price (think comps and market statistics). And we'll add: there's nothing like watching the garage fill up with new cars if one of them isn’t yours.
∙ Inside 767 Bryant [SocketSite]
∙ Take Two For A Few Of The Condos At 767 Bryant [SocketSite]
∙ 767 Bryant: A Sales Update (And Reduction) [SocketSite]
∙ Developers offering Prius or Mini Cooper this weekend [Craigslist]
First Published: May 29, 2007 4:00 AM
Comments from "Plugged In" Readers
Quite obviously a great way to reduce the price without reducing the price. Coincidentally, as a potential buyer, this is one of the dumbest incentives you can fall for. Why? Because it benefits everyone involved at the cost of the buyer.
Developer is indifferent because they net the same from the sale, but at least don't have to deal with current owners feeling like they got ripped off. Owners/agents are happy because this keeps comps up (and commissions higher). Lender is indifferent, but as long as the deal goes through, larger loan = more commission for the broker (depending on pay scheme).
What about the buyer? They pay $700K for a place worth $670K. They finance a condo and a car with 30-year money. They pay interest and taxes on both the real estate and the car. Basically they overpay for the real estate, the car, the loan, and taxes. But at least agents can say the market is healthy.
Any rational buyer should demand a price decrease and decline any incentives, if only for the purpose of lower loan amount and property taxes.
Posted by: Dude at May 29, 2007 9:44 AM
It's interesting to note that this is the same kind of shenanigans that developers starting pulling in Sacramento nearly 2 years ago. Now those tactics no longer work and their prices are falling big time. Wonder if we'll see a similar pattern.
Posted by: anon22 at May 29, 2007 10:33 AM
Yeh, incentives like this are a terrible financial deal for buyers. It baffles me why anyone falls for it - or perhaps they don't?
Posted by: Amen Corner at May 29, 2007 10:36 AM
If this is widely advertised and disclosed in their offering documents and the MLS, this will not "keep the comps high" - an appraiser will discount the sales price to the cash equivalent price of $700,000 - $30,000 = $670,000 and it is doubtful that they will be able to finance the car in their loan. These gimmicks never really get a lot of traction around here as (1) it's pretty hard to slip a $30,000 asset into a transaction without anyone noticing; and (2) it only makes some sense if the buyers want a new car and like one of those two models.
Posted by: Miles at May 29, 2007 11:26 AM
I very much doubt the lenders will be indifferent.
Posted by: Salarywoman at May 29, 2007 11:30 AM
1. An appraiser will do whatever it takes to get the loan done or everyone involved will find someone else who will. The appraiser need only look at the last transaction to find the comps, while ignoring, of course, the two years of free HOA, the appliances and the upgrades that got thrown into that deal.
2. I'm sure if the buyer wanted a Chrysler or anything else that kept the comps artificially high, that buyer would be accommodated. The selection of the cars was just done to appeal to try to capture the cool factor of those models. The reality is that the developers are going to do whatever they can to unload the thing without dropping the price. If you want a different car, why would they care.
And never underestimate the desire of someone who has no clue how they are going to make even the first payment to get a free car thrown into the deal. Theirs is falling apart and probably has 20 unpaid parking tickets and they couldn't get a car loan to save their life. That person then becomes the mortgage holder's problem, so the seller could care less.
Posted by: tipster at May 29, 2007 11:34 AM
Boy tipster, maybe you're right, but I can't believe people would be stupid enough to jump on something as silly as this. As others point out, the car, of course, is not free -- you're just getting it in exchange for overpaying for the condo by $30,000. And for that you pay over $1000 more in sales commission to the agent and you get property taxes that are about $350 higher every year for as long as you own the place.
Posted by: anon at May 29, 2007 12:30 PM
Actually, the seller pays the extra commission. And the buyer can immediately apply for a reduction in their property taxes based on the fact that the price included the car. The real value is that, if your credit is so bad that no one will give you a car loan other than the ripoff car dealers selling crappy used cars at high prices, here's a way to get a new car.
The only real problem this presents is that it brings in people who couldn't get a car loan. Anyone else would be indifferent to the fact that A)they get a car and B)they pay for it. The OTHER residents should be hopping up and down that these kinds of deals are bringing in a group of people most likely to default on their HOA dues.
But those other residents are more nervous about the comps dropping, so they won't say a word.
Posted by: tipster at May 29, 2007 12:59 PM
I would consider buying a 1-bedroom for $629K if it included a free car....make mine an F430.
May be wrong here, but I'm guessing that "starting at $629K" probably refers to #409, a 900 sq. ft. loft originally priced at $677K. So in real terms, already an $80K reduction, or almost 12%. Sweet.
Posted by: Dude at May 29, 2007 1:18 PM
Deserved billions will go to the web company that can bring transparency to real estate the way it has been brought to other markets. (The impulse to maintain upward pressure on prices sure is bringing out all sorts of shady behavior, isn't it?)
Posted by: Matt // Le Blog Exuberance at May 29, 2007 2:18 PM
I can't really figure out the hysteria about this gimmick. I really don't see the big deal here. Is this really that different a concept to the mail in rebate that we are all socked with periodically???
Posted by: wayne at May 29, 2007 2:28 PM
So a sold price gets printed for this property, and when a normal buyer gets the list of comps for a property he's considering purchasing, and this property is included - there will be no mention of this car. 767 Bryant can't sell at the asking but if could look like it did. I'm not talking about this property necessarily, but the concept.
Posted by: SF at May 29, 2007 2:46 PM
Does that mean you will have to pay property tax on your car for the duration of your ownership? What a rig!
Posted by: PMad at May 29, 2007 3:16 PM
So, if the buyer accepts the car in the sale, makes only a few payments, then does a short sale or foreclosure, does the buyer then get to keep the car? What if they sell it two months after "buying" the property?
Posted by: Delancey at May 29, 2007 4:02 PM
If the property goes into foreclosure, does the buyer get to keep the car?
Posted by: John at May 29, 2007 6:02 PM
Title to the vehicle, as personal property, cannot be held in the same manner as title to the condo, as real property. So, I assume the vehicle title would be held by the buyer without any liens or other conditions. Also, some interesting tax issues are raised, such as what is the cost basis for calculating the gain on the property when selling, and is the car a taxable gift?
Posted by: fred at May 29, 2007 6:18 PM
Appraisers also want to keep their licenses. I personally know of several condo resales that fell out of contract in the past month or so because the properties did not appraise. The reason they didn't appraise was that developer incentives had been added to similar units that sold later. These were the comparables and the appraisers discounted their prices accordingly.
I don't think that any buyer at 767 Bryant is going to actually end up with a new car. I think this is a way for the developer to indicate that it is ready to cut a deal without actually advertising "prices slashed."
Posted by: Salarywoman at May 29, 2007 10:34 PM
how on earth would the appraiser know about the developer incentives unless the appraiser was very familiar with the building? The incentives would not have been listed on the public records.
The loan originator, who had no intention of holding THOSE loans, lost a lot of money when the properties didn't appraise. Thus, there will be significant profit motivation next time to hire an appraiser who has much less knowledge about other units' incentives.
Don't worry about that ever happening again: the loan originator will either change their practice very quickly and find an appraiser with less inside knowledge, or the developer will find another loan originator who will!
Posted by: tipster at May 30, 2007 7:32 AM
As a former loan officer, I can tell you that it is common practice to get a 2nd appraisal if the first one does not get the prices that you'd like. Also, I've also seen it where they get comps somewhere in the ballpark and then stretch the price, claiming that its a superior unit (overestimating upgrades as an example). I'm not saying that this is ethical, but it does happen to drive the sale. However, I'd imagine that with the mortgage crisis that is occuring, this may not be as prevalent as it has been over the past several years.
Posted by: SFhighrise at May 30, 2007 7:58 AM
Note that lawsuits against appraisers who inflate things (brought by both buyers and lenders) is a growing trend -- particularly in areas where prices are really dropping. This is basically fraud -- and while everyone smiled and looked the other way when prices were skyrocketing, fingers start pointing when things turn the other direction.
Posted by: anon at May 30, 2007 11:58 AM