How does the real estate situation of the Brown family work?

August 18, 2013 6:32 PM

We watch some fascinatingly crappy reality TV shows in my household, but nothing as fascinatingly crappy as the show "Sister Wives" - the one that follows a polygamist family. This season, the family is building and moving into brand new houses in Las Vegas, one of each wife, and I'm curious about how the process worked.

So, first a caveat - I'm not from the US (though I live here) and I have very little experience with the process of buying real estate in this country, let alone in the state of Nevada. Also, I know that this is reality TV and not a lot of it is "real", but I'm curious nonetheless.

In the show, the family found four contiguous plots of land (one for each wife) in Las Vegas. They went to the bank and got loans pre-approved for each wife and so construction started. This was a custom construction - the houses were being built according to each of the wives' specifications.

Soon enough the houses were ready, but they couldn't move in - they needed approval from the bank first. Now this is my question: how does this work? How does a bank approves the construction of four custom houses and then, once the houses are ready, requires another approval for you to move in? I mean, what happens if you're rejected then? The bank is left holding a custom built house? In a depressed housing market like Las Vegas?

Sorry for the silly question based on a silly TV show, but the debates about this around my house have been endless.

posted by gertzedek to Society & Culture (13 answers total)

IANARTVW (not a reality tv watcher) but my guess is it goes like this

- you get loans for the land
- this means the bank owns the land and you make payments on it
- this usually means you need some level of insurance on it to the bank's specification, not your own
- so when you build a house
- that house becomes a thing that you are taxed on (by the town and/or state) and increases the value of your land, a lot
- in order to get insurance on this house, you need to have it inspected
- if the bank owns the house (because they lent you the money) or it owns and is making you insure the land the house is on, it has to make sure that the house basically isn't a hazard, is built to code, has all the proper fire safety things, water shutoffs, etc
- if it turns out that you haven't done this stuff, then you get a chance to do this stuff before you move in. It's not like "oh you failed the inspection, I guess you move to Colorado instead" it's more like "The inspection revealed this stuff, go fix it"

You are right the bank, under no circumstances, wants to own a custom built house in Las Vegas. However they also do not want you custom building some wackadoo house with no railings on the stairs and radon pouring into the basement. So they inspect.
posted by jessamyn at 6:38 PM on August 18, 2013 [5 favorites]

I watch way too much Sister Wives (in fact, I just finished their book, which was a pretty good read). You might find the answers you're seeking on the Television Without Pity forum for the show, where people often analyze the Browns' financial situation. I could be wrong, but what I've gathered from watching is that they weren't approved for financing until "recently" (in terms of the chronology of the show). There were multiple references to the wives watching their credit and talk of how nothing was guaranteed until the loan underwriting. Perhaps they put some kind of deposit down with the builder? On the TWOP forum, there's been quite a bit of speculation about how much TLC might have been involved in contributing to home ownership situation, as well, given that some members of the family have previously declared bankruptcy and all of them are currently unemployed (or small business owners, I guess, with the jewelry line) at the time of filming.

So how about Meri and that wet bar?
posted by PhoBWanKenobi at 6:50 PM on August 18, 2013 [2 favorites]

A theory from TWOP (p. 377, message 11284):

The word on the street is that the builder is carrying their financing by offering a three-year, interest only (high interest) loan. At the end of three years they have to qualify for and convert to conventional financing. If (when) they cannot, the homes revert back to the builder and he gets to sell them to someone who actually has an income.

and some responses:

The builder kind of makes out in that he has someone paying the interest or paying him some money and he's gambling that in three years the housing market will be better and he can unload those barns.

and

Yup -- he gets them built and occupied so that they don't sit empty and get vandalized, covers the property tax, and waits out the market.

Just theories, of course, but I do think it's notable that none of the other properties in the development have been built. I imagine it's a desperate time to be a builder in Vegas.
posted by PhoBWanKenobi at 7:17 PM on August 18, 2013 [1 favorite]

the family found four contiguous plots of land (one for each wife) in Las Vegas. They went to the bank and got loans pre-approved for each wife and so construction started. This was a custom construction - the houses were being built according to each of the wives' specifications.

Two things.

Firstly, the fact that this is happening in Las Vegas is not a coincidence. Nevada is a big place, and most of the state is relatively recently developed in terms of real estate. The Las Vegas area is sprawling, with lots of land available for purchase. Also, Las Vegas is one of the places in the US hardest hit by the implosion of the housing market. During the housing boom, people were creating new real estate developments like CRAZY. And now none of it is worth anything. There are also plenty of people who got caught with their pants down, holding a bunch of land that was perfect to plunk a sprawling subdivision on in 2006 but which they can't give away in 2013.

Secondly, I'm pretty sure all the "we went to the bank and got four separate home loans" thing is BS. The whole thing was probably paid for by the show. In fact, I'd even guess that the bank part is basically a commercial for some bank which is underwriting the show. The financing for the houses may or may not come from that particular bank, but they've almost certainly paid for the family to "apply for loans" there.

In real life, buying land and building four custom homes at the same time is multi-millionaire territory. It's absolutely not something that would be within the means of a normal person. I don't watch Sister Wives so I have no idea where their money comes from, but unless they're immensely wealthy there's no way they could actually afford to do this.

One of the more insidious things about shows like this is that the network funds a certain type of lifestyle for the participants. It's especially sad in cases like this, the Jon & Kate Plus Whatever people, and the Duggars, who would all almost certainly be in dire financial straights without the benevolent arms of TLC to turn to.

Re the pre-move in approval I have no idea.
posted by Sara C. at 7:59 PM on August 18, 2013 [2 favorites]

Secondly, I'm pretty sure all the "we went to the bank and got four separate home loans" thing is BS. The whole thing was probably paid for by the show. In fact, I'd even guess that the bank part is basically a commercial for some bank which is underwriting the show. The financing for the houses may or may not come from that particular bank, but they've almost certainly paid for the family to "apply for loans" there.

Just a note, the bank hasn't been featured at all as a part of this plot. It's referred to (mostly as a source of anxiety, particularly for some of the wives) but hasn't been seen, or referred to by name, while other aspects of the move (the builder, the realtor) have been featured.
posted by PhoBWanKenobi at 8:03 PM on August 18, 2013

I haven't seen the show, but it sounds like a situation involving a construction mortgage or similar instrument. In a traditional home mortgage, the bank is lending you money to buy an existing home, with the loan secured by the value of the property. Here, the bank is lending you money to buy a home, with the mortgage secured by the eventual value of the completed home. Just as the bank wants an appraisal in the first scenario to make sure that the house really exists and is worth as much as people think, the bank an inspection of the construction process to make sure the home really got built and isn't defective. Here's a forum thread of some home inspectors discussing construction loan inspections which may be of interest. Note that in that thread, they are discussing inspections at each stage in the construction process, used because the bank isn't going to pony up the money for the drywall if the foundation hasn't even been completed yet.
posted by zachlipton at 8:35 PM on August 18, 2013 [5 favorites]

I have too many truly talented friends that work in reality tv. I could lie to you and tell you I've never worked in reality tv myself, but uh, that would be a lie.

Sister Wives is very profitable (never watched it, tho - this true!) and I have NO doubt producers at TLC negotiated the deal with the contractor and are guaranteeing or paying the rent/mortgage as part of the family's compensation.

The build and mortgage drama drives a storyline, so there you have it.

It's all scripted and the writers likely (I don't know anyone on this show) don't get paid scale, FYI.

Interesting fun fact: The family may only live there during shooting, or not at all! It depends on their contract with TLC!

---

There once was a simply gaudy renovation/build at the end of my favorite hike in LA. The rest of the block was tasteful, so this large house up on a slight hill w/ a huge lawn and a godawful Grecian Statue stuck out like a sore thumb. It was for sale by Sotheby's (on behalf of the contractor, I'm guessing) for about 2 years.

One day, I see film trucks out front. In short order, I'm flipping tv channels and catch exterior shots of the house on a Kardassian show. The interior shots on the show did not match up with this house to my eye, and also, I know for sure the house was empty in between filming.

In short, the Kardassian people never ever lived there.

Also, friends have mentioned the same house was used for a Bachelor show or similar, during the same time frame.

All throughout intermittant filming on the property, the Sotheby's For Sale Sign was displayed.

Someone eventually bought it for reals, maybe a year or two ago, and they put in some burly privacy landscaping right away.

So, this house was for sale and unused from 2006 to 2008, in 2008 filming started up and continued off and on until the property sold in 2012. Nobody lived there regularly during 2008 and 2012.

--

My point is that Sister Wives Family may not actually live in those homes. Like the comedy ARRESTED DEVEVELOPMENT, these could be houses built to look real for external shots, and the interior shots for Sister Wives could be filmed in other dwelling(s) entirely.

And that's how fake a popular reality TV show can become.

It's (somewhat) compelling drama to give these folks "flashy" new homes this season. That is all.

See also the first episode of a Showtime sitcom a few years w/ Matt LeBlanc called EPISODES. The lead British characters move to LA to develop an American version of their hit British sitcom, and they are given posh housing in a gated Hollywood Hills home by the studio that was formerly used by the studio as a reality TV set, where everything inside the house are props that don't actually work!
posted by jbenben at 9:32 PM on August 18, 2013 [9 favorites]

Best answer: Here's a good recent article on how construction loans work vs. mortgages. Basically, the loan is only good for construction and is expected to be paid off at the end of that; frequently this amount is then rolled into the permanent mortgage, typically 30 years. In this respect it's similar to a refinancing of an existing mortgage.

It sounds like the construction loan was completed and the families [IIRC legally this would be four separate families, as polygamy is illegal in all 50 US states] would then need to obtain their permanent mortgages, which can be a straining and lengthy period even for those with good credit.

Mormon families, it should be noted, have a long tradition of tithing, which for them really means ten percent when at all possible; in return, the LDS church and membership support many charitable operations and even make direct financial assistance available. As a church, and as a community, there are many private ventures designed to grow wealth. For this reason many Mormons make higher than average incomes [but maybe not more overall]. I am personally aware of a tradition of private loans, at low or no interest, as long as they are inside the church family (or at least a blood family); and Mormon families are larger than average, due to the church's views on birth control, so that makes more relatives available to pool money or make those intra-familial loans.

Then, of course, yes, there's what the show here might kick in, covered as production costs, in addition to what the "actors" get paid. But there are cautions here in that they can end up owning a palatial home for which they can't afford the upkeep (maintenance, insurance, taxes), or have tax problems accounting for the home as a gift. I'm sure there are more financial experts weighing in on these transactions than there were just a few years ago.
posted by dhartung at 2:57 AM on August 19, 2013

I too have never seen Sister Wives --- I'm too cheap to pay for cable, which means (thank you, Jeebus!) I automatically avoid a lot of so-called 'reality' shows.

But the way a lot of the real-life families in the Fundamentalist Church of Latter-Day Saints (Warren Jeff's group) do it, is to do what they call "bleeding the beast". For instance: a guy with multiple wives is, per his religion, married to all of them; but he also knows that the US government says more than one wife is illegal. So: all subsequent wives will file as single women with multiple dependant children for every form of welfare and food assistance and anything else they can: they usually claim something like the childrens' father ran off or is 'unknown'. The FLDS despises the US government and anyone who doesn't belong to their church, so they feel totally justified in this "bleeding the beast": it would be unethical to do it to other FLDS members, since THEY are the rightous, true believers; but the rest of us are fools who are going straight to hell and therefore deserve to be ripped off like that.

Anyhow: this results in a pretty decent-sized stream of constant, reliable income; that, plus cheap labor (using their children and/or assistance from other FLDS families), makes it possible for them to build what they want.
posted by easily confused at 3:51 AM on August 19, 2013 [1 favorite]

In real life, buying land and building four custom homes at the same time is multi-millionaire territory. It's absolutely not something that would be within the means of a normal person. I don't watch Sister Wives so I have no idea where their money comes from, but unless they're immensely wealthy there's no way they could actually afford to do this.

Well, sort of. Buying nice land and having four custom houses /built/ for you at the same time is multi-millionaire territory. Buying kind of shitty land, and building four custom houses yourself with, as someone noted, a lot of free labor, is much less expensive. All you're paying for is the materials.

Caveat: I do not watch this show, so it's possible these houses are in fact palatial, in which case, all bets are off.
posted by corb at 5:48 AM on August 19, 2013

Mod note: Folks please do not include more derails on the politics of Mormonism unless they specifically relate to this question. Thanks.
posted by jessamyn (staff) at 6:16 AM on August 19, 2013

Just a note, the Brown family are neither FLDS or Mormon. They belong to the Apostolic United Brethren, which is separate from both. Janelle was raised in a mainstream Mormon family, as was Kody, but both of their families are now AUB as well (his father married her mother), so it's doubtful that any of them would have loans from the Church of Latter Day Saints available.

If you watch the show, though, that's pretty clear, because one of their explicit goals in going on TLC was to present a face of modern Mormon polygamy distinct from Warren Jeffs' sect, and to address prejudices they've faced in Utah (including the court case in Levi, which caused them to flee their old home in the first place).
posted by PhoBWanKenobi at 6:59 AM on August 19, 2013 [1 favorite]

All of which makes it more likely that either TLC bought them these houses to live in as a way to underwrite their lives and make it possible for the show to continue, or that the situation is more like jbenben describes, where the whole thing might be fiction and there is no 4-house compound at all.
posted by Sara C. at 10:47 AM on August 19, 2013 [1 favorite]