Government shutdown costs family $10,000 and dream house

This is the full CNBC article about my clients that I wrote of earlier.  The TV segment was much shorter, but at least their story is getting told.  Still a travesty.

Government shutdown costs family $10,000 and dream house.

I did an interview as well, but they did not use any of it 🙂

 David Madaffari

Government Shutdown – Buyer’s Remorse

With the current government shutdown, the rural development program run by the USDA has also been furloughed as well.   This has been a major blow to business as homebuyers relying on those loans to close on time have had to essentially play a waiting game until the USDA re-opens for business.   While it has been a major inconvenience for most homebuyers, the shutdown of RD has literally cost one of my clients close to $10,000 out-of-pocket in order to prevent being homeless next week.

The story goes like this: my client has a beautiful 8-acre property under contract in Central, LA for an incredible price.  The plan was to get a RD 100% loan for the property and then use the proceeds from the sale of his home to build an addition for his family of 7 to live comfortably.   The catch here is that we closed on his current home two weeks ago and negotiated occupancy after closing until the 17th of October, the same day we close on his new home.  The shutdown of the government and USDA, though, has stopped all loan processing and thus leaving my client and his family facing the prospect of being homeless on the 17th since the now-current owners of the home need to move in.

The only solution left to my client in order to close by October 17th is to switch to a higher cost FHA loan.  What looked to be a $0 out-of-pocket deal has turned into roughly a $10,000 transaction in which he now has to pay the 3.5% down payment, FHA’s fees, AND a much higher monthly PMI payment.  Ultimately this will significantly delay the addition to the home since he will not have all the cash to complete it, leaving his 5 children to bunk together in 2 bedrooms instead of each having their own as he promised them.   Until they save all that money again, they will never be able to enjoy the future they envisioned would be theirs by the end of the year.   Where my buyers were once excited and gracious has been turned into an inconvenient and costly situation – one that will be hard to forget.

This is a travesty caused by our very elected officials whom we as a country have chosen to represent our interests.  I am sure this is just one of many examples around the country of the hardship and costliness this shutdown has had on ordinary Americans.  Congress and the president’s inability to do their fundamental jobs – compromise – is hurting the very lives of the people they were elected to compromise for.   I pray for a swift conclusion to this mess, and also for the collective conscience to re-examine what we really desire in our elected officials.  I have a feeling that this is not it.

 – David Madaffari

Hidden Grove off Coursey to be built by DSLD

The Baton Rouge Business Report had an article updating us on the status of Hidden Grove, a highly anticipated 52-lot subdivision in the heart of the Parkview area off Coursey Blvd.  You can read about it here:

DSLD buys 52 lots off Coursey for $2.5 million.

Proposed restrictions for the subdivision drawn in 2010 have been floating on the web for some time, and I had them linked to my website due to the amount of requests I received from potential buyers.  Those restrictions had some really specific design and development codes that I thought were going to be a very nice compliment to the area.

At roughly $215,000 per acre and .13 acre lots, that puts each lot at roughly $25k-$25k each (some irregular shaped lots are larger). It remains to be seen whether individual lots will be allowed to be purchased and held or if homes must be built in a certain time frame.  I hope that DSLD will take consideration of the original plans for the subdivision because I believe they can make a hit and reach a different clientele.

What are your thoughts on this new development?

– David Madaffari, Realtor

Home Size vs. Lot Size – What Creates Value?

Everyone knows the old real estate adage of “location, location, location.”  But once you have the location, what do you do with it?  This is a question that buyers, sellers, Realtors, and developers all have an interest in answering and sometimes they are at odds with each other.   There have been trends in the last decade we have seen lot sizes getting smaller and the homes are getting larger.  The article below has some good suggestions on why this could be:

Home Trend Watch: Upsized Homes on Downsized Lots.

Certainly here in Baton Rouge, Ascension and Livingston parishes, new developments are following this trend as well.  The idea behind them is similar to what the article described, with highly-appropriated homes on small lots at an affordable price.   On the surface, this seems great for everyone involved.  But I do have some serious reservations about the long-term outlook on such developments and what exactly will create value over time.

My concern is that larger land sites in ideal locations will become extremely scarce.  In Ascension especially, even a 1 acre homesite in an existing area is tough to come by at a reasonable price.  Finding new construction on a 1/4 to 1/3 acre lots is becoming a challenge in the high-volume world of spec home building. In my opinion, developers have learned they can sell more homes in the same space as they once used to, and therefore generate more revenue for the same piece of land.  But as these homesites get smaller and smaller, will we see less aggressive rise in appreciation value as their larger-sized competition in a similar area?

Newly developed homes are larger and are featuring great amenities – granite countertops, stainless appliances, tankless water-heaters and other high-efficiency upgrades – at the expense of smaller lots, driveways, parking etc.  But will those things be enough, over a 20-30 year investment period, to make up for the lot size which have traditionally driven appreciation?  In other words, if we continue to create such homogenous developments to where there is little to discern among them, where is the value going to come from?

What do you think has been the biggest contributor to the decrease in lot sizes – buyer demand for smaller lots or developers maximizing returns by selling more homes at affordable prices?