The Real Reason to Avoid Homebuilders 10 comments
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Not yet. Something far scarier than a supply glut or slowing economy is staring them right in the face.
It's called regulation and investigation. The real estate industry is riddled with corruption, beyond that even seen on Wall St at its worst moments. Ask anyone remotely familiar with the Mortgage industry. Or anyone who understands the dynamics of a "buyers agent".
Appraisers, Real Estate agents, Mortage Brokers, Lenders, Title Insurers. All in bed together. And conspiring together to make a sale and inflate the price. If you work in the industry you know exactly what I am talking about. Or if you are savvy and recently purchased a home you may have noticed it as well. There are obscene amounts of obscure fees involved in each of these transactions, from title insurance to points on a mortgage. And even more egregious is the bogus appraisals that are determined by the pockets of Real Estate agents and mortgage brokers.
They have been fleecing the average American of significant sums of money, in numerous ways, yet no one mentions them. The financial press loves to harp about the housing bubble, and as a result have helped spark this cool down. But they have missed their call to duty, which is to expose such behavior.
So to my point, I think the most significant headwind of all for the home builders is looming regulation. We know as well as anyone what a bursting bubble can do to an industry, and it starts and ends with regulation and investigation. When big money is being made, corruption is bred. Real Estate markets are no different. You can analyze all the economics and fundamentals, but the real reason to steer clear of these companies is staring right in our faces. Corruption.
Call me a cynic, but I doubt the big home builders were the exception to this. If history tells us anything, we should guess they were leading the charge. Options backdating will be a misdemeanor compared to the things Eliot Spitzer could find were he to divert his attention away from Wall St.
As a disclaimer, I have no hard evidence of this and it is really just a hunch. But as they say, where there is smoke… there is fire.
Disclosure: Author has no position in homebuilder stocks
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This article has 10 comments:
Time will tell. and as i said i have no hard evidence of this other than what i see and hear from those in the industry. I sincerelely hope i am way off here. However, i suspect that such behaviors are more prevalent than most think.
E.g., KB Home, the builder now under SEC investigation, was fined millionls, previously, by the FTC and HUD. They are not the only builder doing these things, but they've been in the news the most about getting caught. Many homeowners complain about predatory lending, seriously shoddy construction, breach of warranty, dishonest practices, etc, going on in real estate. But unless banks are hurt, law enforcement often looks the other way. Another example, the F. Jeffrey Miller case that only this year resulted in indictments. Check this news page for more examples: www.hadd.com/dailynews...
As for real estate agents being stripped of their license, I have certainly read of it happening. I don't believe that people look for this, or even know WHERE to look for this, unless they find themselves embroiled in a dispute of their own, and refuse to take it lying down.
Same goes for homebuilder complaints, bribing appraisers to make the value come in higher, title insurance investigations, IRS crackdowns on down payment assistance programs that are not charities but money-laundering vehicles for sellers and builders, etc.
Way to go, Mr. Church! GREAT article.
makes you say, hmmmmm
Older article on fraud: realtytimes.com/rtcpag...
Newer article on problems with using builder's in house mtg co: realtytimes.com/rtcpag...
Recent article from RISMEDIA about title kickbacks: rismedia.com/index.php.../
Contact me in Oakland County Michigan, if you want hard evidence.
I am a librarian and this is what I discovered. On the same date, the presiding judge put me in a room with another judge, who in his robe, in a standing position exclaimed "ANARCHY", and wouldn't let me speak; the presiding Judge McDonald then paid off his mortgage; my attorney and the judge both paid off mortgages and purchased new real estate without selling their homes within the same 21 day period. The the Judge stated on the record. "Give the [$25,000 Frankenmuth Mutual Insurance] check to her attorney, who then embezzled and converted by depositing without the lawful endorsement at Fifth Third Bank. Now the same Fifth Third Bank is suing this same attorney for a massive mortgage loan fraud scheme involving the very same employees involved in the coverup of the embezzlement of my check. Sure looks like bribes from the builder's insurance co.
The home in question, had improperly mixed mortar which did not bond with the brick and lacked code required wall ties on the 2+ story home. The house was bricked by illegal mexicans. The judge told the builder to sell it for more, which he did as my contract was for $285,000 and the builder sold the home for $411,000 for this severly defective new construction.
Corruption, Organized Crime, maybe even the mafia.