Mello Roos – Do builders remove it in a down market?

[BobbyD]

Gang, I was not here in SD during the previous down market(s) during the 80s/90s. But I get the sense that Mello Roos comes and goes depending upon if the builders can get away with it in an up market where buyers will pay it.

Historically, in a down market will we see builders remove Mello Roos at a development and pay the city for the infrastructure costs? As we all know there are plenty of new developments out there where homes are not selling and if they removed or greatly reduced the Mello Roos and/or HOA, they would sell more homes.

I am curious to find out if they can remove/reduce the existing Mello Roos that is imposed on new homes in a development. I do not know what the legalities/regulatory issues are between the master developer, builders, and the city? Can anyone shed some light on this from your experience, expertise, or previous down markets?

Thanks,

BD

[PerryChase]

Even if developer could, why would they remove Mello Roos? Most buyers don’t look at the property tax liabilities until after they buy. Builders would simply lower selling price.

[no_such_reality]

I think Mello Roos actually go up in a down market.

Builders are less willing to finance the fluff and instead attempt to shove more stuff into the bonds the community carries.

[Anonymous]

It has gone down (certainly not gone) in at least one of Irvine’s Portola Springs communities, Decada.

SCHB

[BobbyD]

Thx SCHB. I have also seen it be reduced in one development here in SD as well.

[sdcellar]

Which development, BobbyD?

[Diego Mamani]

Aren’t Mello Roos set by local governments? Cities, counties, etc., won’t approve new developments without the M-R to pay for new roads, utilities and schools. I don’t think the builders have a choice. Is there anybody here familiar with a County Assessor office and property taxes?

[sdcellar]

I was told that Mello-Roos can be paid off in one big chunk rather than paying it on an annual basis. If so, then it seems like a builder could certainly do it on behalf of potential buyers. Whether they would or not is another question. I’d also assume they could pay some portion of the assessment.

[BobbyD]

There is a nice gated community in Escondido called “Ranches at Vistamonte” near the Wild Animal Park. Very nice new homes (3,700-4,500 sq ft) with large lots in the 800s. They used to be priced in the low millions ($1M – $1.2M). We used to live in the development next to it. It is a very nice area and very quiet. They have had a tough time selling the homes and in addition to lowering prices have also either lowered or removed the Mello Roos.

It is built by a smaller “boutique” builder called New Urban West that is based in Santa Monica. http://www.nuwi.com

So far that is the only one that I have seen that has lowered/removed the MR. I had the same understanding that MR can be paid in a chunk as well and therefore a builder could pay it as well as the buyer.

[debshultz]

debs

New urban West is a very good builder and not at all surprising that they would do something like this. I’ve looked into them when I was considering a development called Belcaro up in Santa Clarita.

[outtamojo]

This would seem like an excellent idea if the builder would agree to it- the builder would still get a “higher” selling price and the buyer wouldn’t get stuck with useless upgrades. I would love for builders to pay off my MR.

[BobbyD]

I moved to SD from Ohio in 98 and remember seeing then a lot of developments touting “No Mello Roos!”, so my assumption is that the builder can pay it off and use the lack of MR as a marketing incentive to sell homes.

I think that they pass those costs onto the buyer in an up market when they know they can get away with it and people will pay it. But the builder will absorb the costs in a down market when they know that they can not get away with it and it is a detraction for buyers.

I bet as the market gets worse for new homes, we may see builders reduce or remove mello roos. Hopefully . . .

[IONEGARM]

Pardee Homes just dropped Mello-Roos at a development in Ventura (for new home purchasers not previous purchasers), I wrote about the change in my blog today.

 

http://rehq.blogspot.com/2007/01/pardee-homes-party-is-over.html

[BobbyD]

IONEGRAM,

That is very exciting news. Hopefully these knucklhead builders here in San Diego will catch on and do the same.

BD

[debshultz]

debs

I suggest everyone do a cut and paste on the article and send to the folks at Del Sur:-)

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