Saturday, October 06, 2007

Greed "Coming Back to Haunt" "Investors"

From the Sacramento Bee:

...William Lyon Homes is offering...a 42-inch plasma in each of the 300 homes it's selling in Rocklin, Elk Grove, Fair Oaks and Rancho Cordova. But, for one month, the home builder is also throwing in a bunch of other goodies....Those would be a year's worth of free phone, Internet and premium TV service from SureWest Broadband, along with appliances, furniture, window coverings, landscaping and housekeeping services...Such incentives are becoming increasingly common as builders grapple with a slowing housing market.
From the Sacramento Business Journal:
Standard Pacific Corp. is merging its Central Valley operations into its Sacramento office. About 10 of 35 people in the Central Valley lost their jobs in that transition.
From the Sacramento Bee:
A government bailout will only shift risk from the borrowers and lenders to the taxpayers and future borrowers. It is nothing more than a new taxpayer-subsidized program that will rescue disreputable mortgage banking or brokerage firms at the expense of working families, taxpayers, and lower- and middle-income homeowners. Responsible consumers and taxpayers should not have to pay for poor decisions by a handful of consumers who took out loans they could not afford, nor should they be forced to bail out the lenders who helped these folks dive into the deep end of the financial pool.
From the Stockton Record:
Nervous homeowners in foreclosure or experiencing sleepless nights over the prospect of losing their homes were among some three dozen Record readers who took advantage of a free two-hour call-in Thursday night to speak with financial experts.
...
[Hank] Klor, a tax expert and enrolled agent the past 14 years in Stockton, fielded a call from a middle-aged woman who lives in a home she paid about $475,000 for and soon bought three more homes as investments with mortgages of at least $350,000 each. She told Klor she already had lost two of the homes and the third investment home was in the process of being foreclosed. She felt confident she had enough income to be able to keep her primary residence, although she has no savings.

"She is losing sleep over this. Potentially, she could be on the hook for taxes of over $300,000 in income in a single year," Klor said, noting the income is derived from the forgiveness of debt. "She will have some huge income exposures because of the three foreclosures. She should contact her tax adviser to get some tax relief. There is a legal way to reduce the tax if you meet the IRS rules for being insolvent," he said. "This is an example of someone who got greedy and now it is coming back to haunt her."

4 comments:

norcaljeff said...

I guess builders are willing to do anything to sell their homes....except lower the price. I wonder when they'll get it.

Jacob said...

Very true. If they actually lower the prices then all the other homes they have are worth less, and right now they are tracking those assets at full value.

But things are starting to get better (for the buyers waiting on the sidelines).

According to the media / experts a couple years ago there wasnt even a bubble and prices would go up forever.

Then there would not be a pop to the bubble and everything would just level off.

Then just a small decline and soft landing.

Now everyone is just calling the bottom each month.

I believe that next year the pain will really kick in for the lenders and builders.

We have around 20k homes for sale and lenders are foreclosing on so many homes that it is almost more than actual sales.

Free TVs, cars, trips, etc. I don't see how this will help much anymore especially now that the mainstream media is covering the price declines.

Some homes that I am looking at have dropped 100-150k already, so in a year or 2 we should be back to prices more in line with wages.

paranoid renter said...

norcaljeff,

They are lowering price also. I think you have to ask for it, though. A friend of mine bought in westpark and had to bargain hard to get them to lower the price but they did do it.

andnee said...

I would gladly go back to the days of white appliances, tile countertops, cultured marble (plastic) in the bathrooms and Lineolum on floors IF THEY WOULD CUT THE PRICE!!! I guess the simple fact of income vs. expenses does not seem to matter to anyone anymore?