MLS Deception

Multiple Listing Service (MLS) is the database typically used by Realtors and appraisers for various purposes. It is commonly used to list homes for sale, and verify property values for a specific comparable. Builders will sometimes use MLS on their inventory homes to increase exposure, and this will also establish some comparables for a new neighborhood. Builders in Texas find this helpful because Texas is a non-disclosure state as it pertains to home sales. When a home is sold in Texas, you are not required to disclose the sales price unless it was listed on MLS. 

KB Home has some questionable practices regarding their use of MLS in regards to Quarry at Iron Mountain. KB Home has been very effective at manufacturing an artificial market value on home sales through some of their actions with this tool.

The most obvious thing noticed when examining KB Home’s use of MLS for the Quarry at Iron Mountain, is they have only listed Estate homes on this service. This is despite the fact KB Home previously had Liberty series inventory homes, and currently has an Empire inventory home. This selective listing practice is caused because KB Home is trying to preserve the comparables produced by the Estate homes, and leverage this when selling the lower series homes at a premium price and profit for that series. One speculation of KB Home’s current pattern of behavior is starting new neighborhoods with nicer homes, and then introducing a lower series that will command a higher price and profit margin because of the homes around it. Without the nicer homes introduced first, the lower series homes would sell at a lower price, resulting in a lower profit for KB Home.

Incorrectly Listing the Property Resulting in a Falsely Inflated Sold Price per Square Foot

Another documented technique they have done is list an incorrect lower square footage of the home. This will produce an artificially inflated price per square foot for the home listed. The listing below shows a home that sold with the square footage incorrectly listed by 456 square feet, resulting in a sold price per square foot inflated by approximately $19.00. 

Non Disclosure of Factual Information to Protect Profits

This next technique used is quite deceptive. 1210 Bluemist Bay was an inventory home listed on MLS bought by a KB employee on November 8, 2007. This purchase occurred at the same time KB Home knew of the discontinuation of the Estate series. This home contained almost every upgrade available through the design center, making it more of a showroom than inventory home.   During this time the home had an ask price of $494,638, and was negotiated by the KB Home employee to a purchase price of approximately $409,000 (see below for calculation). However, the sold price of this transaction was never listed on MLS. The listing was cancelled on 11/27/2007 which was 19 days after the purchase. KB Home possibly cancelled this listing to avoid this deflated comparable from becoming public knowledge, especially with six more Estate closings occurring before the announcement of the discontinuation of the series. At this time the Estate homes were selling upwards of $115-$125 per square foot.