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Builder incentives on non-built homes in new development, buyer incentives, home price reduction, HOA fees paid, upgrades, closing costs paid, buy-down on mortgage interest
What kind of incentives can a new home buyer expect/ask for regarding homes that have not yet been built in a new development?
Right now the market is such that there are a lot of builder's incentives to move homes. However, in all articles I've read, there does not seem to be a distinction made between whether a home is a completed spec home, has started construction or has not-yet-been built.
It would seem logical to me that builders would want to use incentives to move spec homes or homes already under contruction. But it's not so clear to me that they have as much at stake if they simply hold empty land in a development.
From what I gather [or maybe it's just common sense?], incentives won't be as high or there is less urgency for a builder to move an empty lot.
I'd be interested like to know what we might expect (what we might ask for, what might be reasonable) if we want to go in that direction.
Yes, Builders are more apt to offer larger discounts and incentives on inventory homes than on "custom" homes.
That being said, they would still be happy to sell a non-spec home than none at all. Every builder and every neighborhood will be different as to what they are willing to negotiate on. Your best bet would be to find a good realtor that deals with builders alot. An offer is an offer to the builder, start off asking for the moon and work from there.
If you just go in and deal with the builders rep yourself their standard answer will be no extra deals on their homes. They usually aren't even allowed to mention the builder will take less than asking. You have to put things in writing most time before they even look at it. And make it attractive to them to accept via terms instead of price.
The best incentives are available for standing inventory, not empty lots. That's what I've found.
As for what you can get, it will vary, but I would suggest you ask for everything you can. If you don't ask, you certainly won't get.
Some of the things to ask for woud include:
All closing costs paid. Use a high dollar amount as a limit with any excess to be applied to an additional price reduction;
Buy-down on mortgage intrest (if using builder's lender);
Upgrades (remember, the true cost for these to the builder is only a fraction of the total amount);
Paid golf membership (if applicable);
A certain time of the HOA fees paid (if applicable); and
The biggie . . . a price reduction on the house.
Each builder is different, especially with the tract builders. One may offer all kinds of incentives, others may be more miserly. You just never know who they are and what you get until you put your requests in a written offer.
BTW, don't forget that the smiling, hand-shaking, cookie-offering agent that mans the sales office is not your friend. They work for the welfare and benefit of only the builder - not you. Don't tell them squat about what you can afford, what you want, or how pleased you are with a particular home. They will use it against you. The bottom line is that they are the enemy so keep your finances and emotions close to your vest. It's none of their business until a contract is accepted.
The best thing to do is to make them think that you're settling for the house and that you're willing to walk if things don't meet your expectations. Keep your excitment concealed, let them think that you're still looking even though you've made an offer, and that you'll pull it back if you find something better or if they don't just accept your offer.
The entire process is just a game. If you don't feel confident in dealing with the builder's agent on your own, of course get a buyer's agent to represent you. However, if this isn't your first purchase and you feel confident in your abilities, you can do it yourself and point out that the builder won't be paying a commission to an outside agent. It isn't rocket science. Under those circumstances you will expect that the true price, before discounts, is really the advertised price less the upaid commission. That is the point on which your offer nd additional discount is based, not the full price of the home.
If they only offer back at a price that just discounts an amount equal to the unpaid outside commission, that is no discount in my book. Just keep trying and continue looking and remember the old saying . . . the person that blinks first, looses. Don't blink and keep on trying . . . or simply walk away to another builder and a better deal.
Thanks, gang, for the responses. This is invaluable stuff!
I hate the negotiating game, but I like the idea of using the "potential" buyer's agent slice of the commission as a negotiating point. I don't mind doing it, it's just -very- stressful. But if it will mean I can squeeze out more value, I'm game.
And it's worth a shot until signing something. If I can't get anywhere, I can try an agent at that point.
The best thing I have going for me is that I'm in no rush to buy anything, it's strictly personal choice.
Thanks again, I really appreciate the comments and ideas.
Anyone actually gone through such a process recently (buying a new home on an empty lot)?
Basically, added up all the options we wanted, added them to the base price of the house, then told the salesman - I want it all for $22K less.
We got $16K less. That was good enough for us!!! (our "real" price)
Good luck, ask for the discounts, they are out there, but they are not publicized necessarily. Also, for us, they gave us the discount as part of the financing - which did lock us into their lender. But, their lender fees were competitive with the banks I'd shopped, and their rate (5.99%) was great.
have fun!! Enjoy looking!
by the way - just signed the contract a couple of days ago!
What kind of incentives can a new home buyer expect/ask for regarding homes that have not yet been built in a new development?
Right now the market is such that there are a lot of builder's incentives to move homes. However, in all articles I've read, there does not seem to be a distinction made between whether a home is a completed spec home, has started construction or has not-yet-been built.
It would seem logical to me that builders would want to use incentives to move spec homes or homes already under contruction. But it's not so clear to me that they have as much at stake if they simply hold empty land in a development.
From what I gather [or maybe it's just common sense?], incentives won't be as high or there is less urgency for a builder to move an empty lot.
I'd be interested like to know what we might expect (what we might ask for, what might be reasonable) if we want to go in that direction.
Thanks to anyone who might give me some insight!
its all bout the money. if he picks the wrong time to complete he will lose money and be forced into an auction.
sometimes they stand incomplete for years.
very very easy to lose money fast in this business.
stephen s
san diego ca
I hate the negotiating game, but I like the idea of using the "potential" buyer's agent slice of the commission as a negotiating point. I don't mind doing it, it's just -very- stressful. But if it will mean I can squeeze out more value, I'm game.
I would caution you to be very careful. If you truely "hate the negotiating game" and find it "vey stressful," it might be the best idea to get a Realtor on your side. Only you know if you can deal with the situation appropriatly or would be better served with the advice of a professional.
Quote:
Originally Posted by DecisionsDecisions
And it's worth a shot until signing something. If I can't get anywhere, I can try an agent at that point.
Well, maybe but it's not a guarantee. Many tract home builders will cooperate with an agent if they first bring you into the housing tract. It's common for them to not cooperate once you've already toured the homes on yuor own. Just be careful.
Of course, if it's a new tract that you're attending with the agent, then everything is moot. They're showing up with you for the first time. However, be sure to remember that once they go with you to the houses, you can't drop them and buy the property without their participation and compensation. They will view themselves as the procuring entity and likely demand their commission, which you will have to pay to them from your own pocket once you've bought the house.
That's a good point. Once one has toured a home "alone", I can imagine it might be hard to bring someone in later (or it will at least cause a bad vibe).
If all you have done is toured the home once, it may not be too late to bring an experienced realtor in. Some builders are more strict about this than others.
If you start making offers and trying to negotiate yourself, you can forget about bringing in a realtor later without having to pay their fee out of your own pocket.
Have you purchased many new or re-sale homes in the past? Have you checked out the neighborhood for people re-selling already? or nearby neighborhoods? In addition to making sure a builder doesn't take advantage of you with all their own contracts, the best thing a realtor can do is search the market to make a strong presentation arguing why the builder should give you $X off the price now or lose the deal to someone else.
Of course you can do all this yourself with the help of your local property appraisers website, Zillow, legwork, and study. All depends on how much time you have and how much you are really saving IF the builder discounts the commission they would be paying to your representative.
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That was good enough for us!!! (our "real" price)
