Robson Homes (Sundrop Circle) - Not Even paying Escrow Fees (Asking the Buyer to) in Santa Clara County ( Is this even legal?)

Asked by Jay, Fremont, CA Thu Jan 31, 2013

Hi, We are interested in the Sundrop Circle - Robson Homes (Seller) in Milpitas, CA. The are 15 homes left and pricing is $760k for the lowest plan (3B Office , 3.5 Bath, 2037 Sq.ft) - the one we are interested in.

In this market, when fixer upper kind of homes (40 yrs old) are going for 600-625, we are worried that we might miss out, if we don't move quickly. Also, AFAIK, Santa Clara County is a Seller Paid Escrow unlike Alameda County.

However, we were somewhat shocked to hear that Robson is asking the Buyer to pay the Full Escrow (Approx 1% or $8000) Lender Fees. This was totally unexpected to us and very hard to digest.

With All these Ridiculous Fees and 0 negotiation even on Upgrades (No Upgrade Credits of whatsoever),
1. Do you think the price (760) for the plan is worth it in this market? Will it at least hold its value or even appreciate?
2. Has anyone worked with Robson in SC County, had this Escrow Situation?
3. Is there any negotiation at all possible?

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Ruth and Per…, Agent, Los Gatos, CA
Thu Feb 7, 2013
Hi Jay

State of California, allows the Seller to ask and negotiate whatever you wish with you as Buyer.
If there are no Government funded programs, or first time home buyer subsidies that you cannot avail yourself to then, there are no options, as you are a bit too late.

I am afraid in this market, if you did not go in with a sharp Realtor, you will negotiate nothing
and the Builder will give your desired home to the next guy who shows up excited and willing.

Hopefully you did, and not go in without one.

Good luck.
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Terri Vellios, Agent, Campbell, CA
Fri Feb 1, 2013
Grace and Jay gave you very good detailed answers.

I want to add that by using the developer's lender may not save you any credits they are offering. The lender fees and points may be higher than what you may be able to get on your own. Using the developers lender helps the developer in that they are familiar with the product.

I can tell you that my experience with new home construction many of the developers pass on the standard and typical fees to the buyer. As you heard they are negotiable. With the heated marked the developer holds the inventory and makes the rules.

As to value, it's a tough one to answer. Prices go up and prices go down and we don't know how long and how far. The best advice I can give you is to pay only what you can reasonably afford for your current and expected future income and lifestyle. If you need to build in a cushion in the event of reduced income, plan on that as well.

Have an amazing day!
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Grace Hanamo…, Agent, Cupertino, CA
Thu Jan 31, 2013
Hi Jay and thanks for your post.

First, please know that it is "customary" (not a requirement) here in Santa Clara that the Seller, rather than the Buyer, pays for the fees associated with escrow. This does not, however, mean that the transaction is "free" to the buyer. Here are the costs customarily paid by the Seller:

1. Title company insurance for the Buyer
2. Escrow Fees
3. County Transfer Taxes

The Seller can certainly ask the Buyer to pay for some or all of these fees, and it's completely up to the Buyer to agree or not to agree to pay the charges. This is the "negotiation" portion of the contract settlement, and it's the reason why we (as professionals) encourage everyone to get their own agent in a new homes situation--its worth it to have someone "on your side" in dealing with the developer's representatives. If you have not yet finalized a contract, then you need to sit down with the agent and work on the contract. If they don't acquiesce to your demands, then you need to seriously evaluate whether or not you want to buy the home. If you're, unfortunately, already "in" the contract, there's nothing you'll be able to do now to renegotiate the distribution of fees and there is no reason that would compel the developer to give you money for title, escrow and transfer taxes.

Buyers will traditionally pay for lender's fees and for title insurance for the mortgage company. Perhaps the lender fees and title insurance costs for the mortgage have been mistakenly interpreted as those fees normally paid by the seller?

Now on to your questions:

1. Will the home hold its value? That's a good question and one that should be answered by your Realtor. If you don't have a Realtor, then talk to the agent at Robson and ask them for statistical information regarding home values.

2. Has anyone worked with Robson in Santa Clara and had this situation? Well, I've worked with Robson before and they did not ask my clients to pay for customary expenses charged to the buyer, but things may have changed. Again, if you have doubts talk to them about these.

3. Is negotiation possible at all? To be frank, the market is very hot throughout Santa Clara right now. By way of example, my clients put in an offer on a home yesterday in which they were competing against 62 other offers...yep, you heard me right SIXTY-TWO offers. So while I do understand that you'd like to negotiate on fees, terms and upgrades, it's probably far more likely that there are people waiting to buy the home you want, so the developer's thoughts are, if you won't buy it, someone else will. Buying the home without upgrades and without the most favorable terms is your decision.

If you have a Realtor who you registered on your first visit to Sundrop to represent you, then allow that Realtor to help guide you in this purchase. If you went to the property without a Realtor and without representation, then I'm afraid you'll need to do a lot of this on your own without help, so use the Robson agent to help you in this transaction. Do keep in mind, however, that given the market, their lack of flexibility in the sale is not surprising. Again, the decision to buy rests with you. If you choose not to buy, then I would strongly suggest working with a Realtor in the future to help you negotiate your contract.

Good luck!
Grace Morioka
Allison James Estates & Homes
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Brad Gill, Agent, San Jose, CA
Thu Jan 31, 2013
Hi Jay,

All great suited for a conversation with the real estate professional you've elected to work with; and if you haven't elected to work with a real estate professional then you are starting to see the value we offer to our clients.

Prices in all areas in Santa Clara are continuing to increase due to an imbalance between the supply for housing and increased demand to purchase...Will it continue?

Only time will tell...however all signs are currently pointing towards continued price increases at least for the short term. And when demand falls and supply increases we'll see prices stabilize...

Regarding the closing costs and possibility of negotiation, new home builders can always ask the buyers to pay all the escrow fees...although customarily in Santa Clara County the seller pays all (but splitting city transfer tax) closing costs, these fees are still negotiable between buyer and seller. So in a sellers market, sellers can ask a buyer to pay these fees... although most home builders are still offering incentives if you choose to work with their in-house lenders that can come close to covering the additional closing costs associated with purchasing new homes.

And if you're opposed to purchasing a home from this new home builder due to lack of willingness on their part to negotiate closing costs or upgrades, given current market conditions, I'm sure there are 10 behind you ready to purchase it!

But then again, I would be glad that you at least don't have to waive all your contractual contingencies in order to purchase this home like many buyers are doing in order to get their offers accepted on resale properties...but that's another conversation you can have with a real estate professional should you choose to work with one.
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Meena Gujral, Agent, Pleasanton, CA
Thu Jan 31, 2013
Hi Jay,

I am sure by now you are aware that this is a seller's market so anything and everything is possible. The sellers are in a position to ask the buyers to pay for what would normally be sellers closing costs.
The sellers know that inventory is very low and there are too many buyers looking for a home.

In this market with demand so high, the builders can be choosy and they are not willing to nogotiate much at all. So if you don't pay them what they are asking for, they have too many buyers lined up who are more than happy to pay the asking price and get into a property.

I am sorry, I know that this is not what you wanted to hear, but that is what the market conditions are right now.

You should make sure you take an agent with you when you go to see new homes. I also provide the buyers with an analysis of how much the homes in the last few phases have sold for and how much the resale homes in the neighborhood are selling for so you can make an informed decision.

So if you are still checking out other builders, make sure you do not go in on your own. The builder will pay the buyer's agent commission so it will not cost you anything to get an agent. You have a lot to gain and nothing to lose .

Meena Gujral
Achievers Realty
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