The Mystery of 2310 PalmPosted on Friday, January 11th, 2008 at 5:04am.
So, while we don't exactly have a scandal to discuss, we'll walk you through the chronology of events, as we saw them, on the sale price at 2310 Palm.
Close readers of MBC know we've been on the trail of the mystery of the final sale price of 2310 Palm for a while. This home was newly built in 2006 (5br/3ba, 3150 sq. ft.), and we rather liked it for its distinctive, authentic-feeling Spanish details. We also noted some strikes against the property when we wrote it up (see "The 1-Year Club in the Trees").
When the home went into escrow in late October, after 443 DOM, the MLS listing was canceled, rather than being posted as "pending," so we feared we'd lose track of the sale price. Alas, a new MLS entry came up in early December showing that the property had closed for $2.325m. (Click on the little graphics here to see screen shots of the MLS posting of the price – the page is, of necessity, broken into halves.)
In comments on MBC several days later, someone noted that property tax records indicated that the sale price was, in fact, $2.2m, a discrepancy of $125k, or almost 6%. Why would the MLS record and the tax records differ?
First, we had to get the public records. The page you need to see (with names redacted by MBC) here notes the "documentary transfer tax" of $2,420.00. (Click to enlarge the closeup or click here if you want the whole page [PDF].) Since the transfer tax on all homes in California is 1.1%, you can use the reported tax payment to calculate the sale price. Sure enough, that tax amount translates to a sale price of $2.2m.
Next, we started asking around. Why might there be a difference?
Here's where your humble correspondent's eyes were opened a bit. Turns out it's not unheard of for the MLS-reported price to differ from the true sale price.
The practice is controversial even among agents, but here's the theory: If a home happens to sell to an agent, or for some reason one or both sides does not receive commissions, you might report the price as if full commissions were paid, to reflect what would have been the price but for the freebies. If you don't alter the reported price, that comp will drag down the neighbors and continuing listings unfairly. So, if no commissions were paid (in a hypothetical case), the MLS-reported price might be boosted by 5% or 6%.
The only problem in such a case is that the MLS now carries a fabricated number. Future comp reports are partly fiction. As a buyer, when you're trying to figure out how much to pay, you might be upset to learn you're being told that other buyers paid more than they really did. As a homeowner or seller, you might be happy that home values are being protected by adjustments like this to reported sale prices.
If that's the sometime practice, the next question was whether the circumstances of this sale involved zero or less-than-normal commissions. (Remember the reported price was almost 6% higher than the true sale price.)
Was the new owner an agent, as someone suspected? No, apparently – completely different field. Did one or both sides waive commissions? No one's talking, but it seems doubtful that both the buyer's agent and selling side took zero.
So who created the MLS entry with $2.325m as the sale price for 2310 Palm, and why?
MBC is certain that the answers are interesting, but now the story has changed.
In recent days, the entry with the sale price has been amended. (Click to enlarge the screenshot.) Now the MLS will tell you that the sale price was $2.2m, same as the tax records.
Oh, the entry is still a little bit bogus. For one thing, the construction date is still listed as 2007, rather than 2006. Also, this entry says the list price was $2.325m, but that's just an artifact of the, achem, adjusted sale price reported last month. But they did plunk in the proper CDOM ("combined days on market"), which mitigates the impression that this was a brand-new home that sold quickly for close to asking.
The reality is that 2310 Palm began at $2.699m in August 2006, and its final sale price is -$499k/-18% from there. The list was $2.399m when it went into escrow.
The lot was purchased for $1.45m in August 2005, meaning the final sale price was just $750k higher. If the home was built for $200/SF, the builder broke even. Do you think it was built for $200/SF?
Reasonable people might look at these circumstances and suspect that someone was trying to hide losses, protect comps – even specific current listings – or avoid reporting data that might show a market in decline. Those are reasonable inferences, but we're not yet sure which facts apply to the mystery of 2310 Palm.
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