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Is it true that this cannot be applied if the buying party hires a realtor?
I just came back from a sit down, and it did not go well. They are not budging on lowering the base price. They claim that houses built from the ground up cannot be discounted, usually inventory homes are.
Those are 2 issues that concern me. But if this is normal, I'd feel more at ease.
There is no such thing as a price that cannot be negotiated, especially in real estate. They may have done their credit check on you already and know how much you can get, and rates based on the information returned. Car dealers do it all the time, and they are usually 90%+ correct. 'Still, they can negotiate, it's not like there is a mad rush to purchase big ticket items lately. It does not make sense, but many businesses actually raise rates/fees when they are loosing money. They think they can make up the difference using this method. It works for a while, they reality hits them, and many go out of business. This practice does not jive in the country's economic condition, tell them that.
Maybe I'm the only one still confused, and if so, I apologize, but I'm still not sure that I'm getting the OP's question.
Let me just state what I think you've said so far and you can tell me if I got something wrong:
You're trying to buy a new house from a home builder (Ryland) who will eventually build the house on what is now a vacant lot in a development somewhere. You're dealing with a salesperson who has quoted a price for the plan you want on the lot you want. Attempts to negotiate the price lower have been refused. But she countered her refusal with an offer to give you some upgrades on the house for free or at a reduced price.
There is something called Community Partners Program which is like a Ryland coupon for 3% off which also includes a charitable donation to your employer which I'm guessing is a non-profit hospital. Oh, and the 3% is a discount on upgrades to the house, not the listed price. And if you want a realtor representing you in the transaction the coupon deal is void.
If I got it right, this is what I think: First, the whole CPP sounds like a program to move inventory while simultaneously getting the builder a tax deduction for charitable contributions. It's a marketing ploy. Secondly, I think they're specifically aiming this program at people who most likely aren't all that sophisticated/experienced in personal finance and real estate. Thirdly, the charitable donation to your employer is like a magician distracting you with his left hand while he makes your twenty dollar bill "disappear" into a hidden pocket with his right. It really does nothing for you other than maybe give you a nice warm feeling because the non-profit you work for got a few bucks. It's a distractor from the business deal and I would just ignore that if it were me. If Ryland wants to give money away to someone they can, but it has nothing to do with selling homes other than as a market gimmick.
The 3% being limited to upgrades tells me that upgrades have the most profit for the builder and they can easily afford to give you a "discount" by just cutting a little off something they are already getting a large profit from. The same for the salesperson's offer to give you something extra on upgrades. It's also a nice way to keep the upgrade side of the business rocking and rolling during a slow time. They have trained monkeys throwing up houses, but perhaps the custom work requires a better skill set and they want to keep those guys on the payroll while they wait for a better market.
The fact that they won't do this program with anyone who has a realtor tells me that they want to keep you in the dark about how not such a great deal this is, and they definitely don't want to share any commissions. The first part is like the police telling you "come on down and talk to us, and no, you don't need to bring your attorney". The second part shows that Ryland wants every penny for themselves, and they don't want to leave any money behind on the table when the deal is concluded.
Here's what I would offer as advice: Buying a house is not just a lifestyle decision, it is also a business deal in which you are going to commit yourself to a lot of debt for years. You either need to know what you're doing, or have someone you can trust give you good advice so you don't overspend for what you're buying. You may have made the best decision in the world on where your future home is located, it's floorplan, lot placement, etc. You may have done a great job on the lifestyle choice. But I think you're in a bit over your head on the financial transaction that comes with it.
As in all other sales, neither the salesperson nor the manufacturer (Ryland) is interested in your economic welfare. I'm not saying that they're thieves, just that the only thing they're interested in is making money by selling somebody a house. After they've sold the house and the money's in their bank, they forget about you and move on to the next deal. Don't trust them to give you advice that is based on anything but maximizing their sales and profits.
It's clear that you don't know if you're getting the deal of a lifetime or if you're being ripped off (hey, you're asking advice from complete strangers on the internet! ). You should go and find someone credible and reliable who has real knowledge and experience in such things and ask for help.
They typically do not discount homes that are being built...they discount homes thay have paid to build and are trying to move quickly. They have to pay property taxes on those homes.
Yep, they call that carrying costs. It's why car dealers try and move cars right at the end of the year so they don't have to pay the tax for it being in their inventory, or why they will put incentives on the slow movers because they're paying floor plan interest every month.
I'm sure Ryland's carrying cost for a piece of dirt is a lot lower than it would be for a pile of bricks and sticks shaped like a house. There's motivation to sell the ones that are just sucking money out of the bank, but why wouldn't there also be an incentive for some discounting one they build on order? They're assured of the sale the moment they break ground, they minimize the finance costs (assuming builders finance their inventory) and their exposure to market risk. I wouldn't offer a coupon deal like the CPP, but if I had a fish wiggling on the line wanting to buy my dirt and pay me to build a house there, it would make sense to come back with some incentive to set the hook and make the deal.
Last edited by DrLizardo; 09-01-2009 at 02:26 PM..
Basically instead of giving 3% to a Realtor, Ryland is giving some to you and some to your employer as an incentive for your employer to push you to their product and for you to not use a Realtor.
Builders hate to reduce their base price and will fight it at all costs. It is much easier to negotiate for freebies or extra upgrades. Unless you don't plan to upgrade your house at all, which is extremely unlikely (or foolhardy given what most base price houses come with) then I don't see what the problem would be to take the money off the upgrades. If you were buying an Inventory or used house then bargaining down the sales price is your best, and just about only, tactic for a good deal but built new houses work differently.
It has been years since I negotiated a home purchase, and I see they've refined their sales strategies. They control the negotiation and sales price the same way car dealers have been trying to do for years. The packaged incentives keep all the power on their side of the table - it's a take it or leave it game. I bet it is pretty darn difficult to try and do any real negotiating with a salesperson who only has authority to work the sales program and not stray outside the boundaries.
And the "contribution" to the employer is a kickback for huckstering marks into the sales office.
Stuff like this is why I buy used cars now. Look for a motivated buyer who already ate the depreciation, fixed all the bugs, and got shafted by the sales program.
This has my curiosity peaked. I wonder if there are multiple discount incentives available. It might be possible for a buyer to get some negotiating strength, "Well, X offers the same thing you did, and they threw in a free irrigation system and a fully sodded back yard for half price." What's the worst that could happen? They tell you to go buy a house from X or they pull another discount out of their pocket.
Last edited by DrLizardo; 09-01-2009 at 02:56 PM..
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