Why giving away TVs or bonus instead of reducing price?

[newbee]

[twistjusty]

[klio]

[femto]

It's all about the "comps". When appraising properties only the sale price of comps is considered, not seller concessions. For developers looking to move multiple properties they have a lot to gain by propping up the price of the early sales through a variety of schemes such as free upgrades, kickbacks (aka "down payment assistance"), and something I stumbled across recently, secret discounts (I blogged about it a few weeks ago ). In the simplest example, If they lower the price on house 1 by $5K the appraised value of house 2 will go down by $5K, and the cost to the seller across both houses is $10K. If they instead give $5K worth of non-price consideration (e.g. free TV, better kitchen appliances, etc.) the price of house 2 stays the same, and the cost to the seller is only $5K.

[Lionel]

Steve Martin (in the Jerk): "Ah, it's a profit deal!"

[B]

So does the common practice of hiding closing costs in the final sales price get rolled into the statistics for "ever increasing" prices that are reported? I would assume they are factored out somehow, otherwise the stat would be total BS.

It's a violation of law to inflate the price for other purposes, but something tells me there is a lot of gray area here. I think builders can get away with quite a bit, including rebates, "landscaping", appliances and furnishings, etc. I am not sure if used-house sellers can legally do the same things (though I would be willing to bet that there is a lot of stuff going on that is technically fraud.

Any stories from the trenches? And what % of house sales these days are arranged with the seller "covering" closing costs (and thereby pumping up the sales price data artificially)?

[CKT]

[femto]

[biliruben]