Offering Plan question

Steve,

I would think that the builder, like any other salesman, can offer what ever additional intensives they are legally allowed to offer in order to make the sale.

Nothing is free...It may be more in the line of "incentives". It's like being offered the baseline vehicle and then being offered "air conditioning, 6 CD changer, and other options". Your going to pay for those items in the end.

You have to understand a few things first about a HOA. A HOA was created to be a sales tool of the builder/developer originally. That's how HOA's started. They have since involved into somewhat of a different animal but basically that's what they start as. A developer can purchase say 100 acres for $100,000 (EXAMPLE). They then split off that 100 acres into 100 lots. So far their upfront costs is $100K. They then have to develop this land by clearing it out and setting up utilities. That isn't cheap and may be another 100K. The developer may decide to offer some amenities such as a clubouse/pool/tennis courts etc... That is probably another 100 to 200K. So let's say the developer is now in it for 500K just to keep things simple.

Now comes in the selling of these lots. The developer then offers these lots at 50K a piece. Now, the developer can be the builder or the builder can be a separate entitity. They work both ways. It can also be an individual. (POA). A buyer buys the 50K lot in which to build. The develooper/builder decide they type and size of the homes to be built. They may decide to put condo's on the property, townhomes, or individual homes. All of which have to meet a certain standard. In order to develop this housing standard/requirement they must have rules/regulations. Since they are the investors and control ALL the aspects at this point of the development, they create the documents around their requirements. This is the birth of the Convenants and Restrictions. It is also time they incorporate so they can sell the property. The By-laws are created once residence come in so to continue to maintain the sales value of the homes.

The developer/builder isn't offering anything really "Free". Those are incentives to get people to buy so they can get out. The real money they make is upfront when they sell off and build. The faster they can sell off the property and turn over the HOA to the residents the better. That's because the real expense in a HOA is the continued maintenance of the amenities they installed. It cost more to maintain a pool in 2 -3 years than it is to install/purchase it. That is what the dues paid by the members of the HOA pay for once it is an owner run HOA.

As far as taxes, your barking up the wrong tree in a way. You may want to get a better understanding how your tax system works in your area. It varies state to state. Taxes are based mostly on the appraised value of the property the house sits on. I believe it's done by their own appraisors or information from appraisals when houses are sold. So you may be paying more for your property than you neighbor. You can call the tax assessor's office and get a new appraisal. Keep in mind that the sales price of your home is NOT the same as the tax assessment appraisal. There are different factors involved. They can be close to it in some states but most of the time the actual appraised value of your home is much higher than the tax appraisal. Which is a good thing as you pay less taxes.

Steve,

Your problem is exactly that same as what has been happening recently in our community. We are almost built out. There are only about 3 lots left out of a 90 home community. The community was started in 2004. There have been only a few resales (about a half dozen) in the last 3-4 years. The builders prices have remained about the same, because the builder claims he does not want to have a negative impact on the home values in the community, but, although the floor plans are identical to earlier homes, he now includes a number of "upgrades" for free as an incentive. The problem is, tax appraisers tend to ignore the upgrades, basing home values on such things as the total square feet (heated), number of rooms, number of "fixtures" (bathroom sinks, showers, tubs, toilets, etc.) and so forth. Values also depend on the sale prices of other homes in the neighborhood. (A 1500 square-foot home in a neighborhood where homes go for $250K will be valued higher than a nearly identical home in a neighborhood across town where the average selling price is $200K.)

We recently went through a town-wide reappraisal (required every 5 years) and the appraised value of nearly every home in the community went up by a huge amount, although the appraised values of other homes in the town in other neighborhoods went down. The only recourse was to file an appeal, which most homeowners did, with somewhat successful results.

Conclusion: Your builder isn't doing you any favors given the current housing market.

JEFF,
Please tell me more. What would be the basis for such lawsuits? I am not in the least convinced that the builder is keeping the advertised prices stable for the residents' benefit. STEVE

The reason the developer is keeping the price high is not because of integrity but to avoid a lawsuit from existing owners for misrepresenting values. This has happened many times.

Has it happened many times, really Jeff? I would think lawsuit against a developer for lowering prices, could be quite difficult to win. Any developers can dump their properties (although as I said they do not like to do that); mortgagees sell their property at 10 cents on a dollar and so can I. Could I be sued? Ha.

Well, a basis of such lawsuit would depend on how good of layer you'll find (Jeff)

Well, I was hoping you could come up with a better answer.

The question still remains. When a builder puts home prices in the Offering Plan, is he obligated to sell homes at those price or can he unilaterally decide to drop the prices?
Steve

'question still remains. When a builder puts home prices in the Offering Plan, is he obligated to sell homes at those price..'

Sorry, the answer is 'no' to this question.

It is a free market unless someone passes the law you can't.

Steve, again, citing little bits from the covenants is not very useful. First you have no proof the builder is not following them. And, if you do, then you must consult an attorney. Again, this is a free market economy and if the builder decides to lower the prices he can. And, most likely he can even amend the covenants as long as he is on control. Such is life.

I only bring up the Offering Plan because there must be a reason for its existence.
The builder takes every opportunity to remind homeowners that he is not obligated to do this or that because "it is not stated in the Offering Plan" as if he is only obligated to do what is stated there.
Steve