How To Guides

Home buyers who are having difficulty finding homes that meet their needs may want to consider new construction.

Instead of selling their homes, homeowners continue to hold onto low-rate mortgages and keep existing properties off the market. Homebuilders still have thousands of unsold dwellings in their inventory. Many homebuilders offer incentives to encourage buyers to sign purchase contracts. According to the National Association of Home Builders (57% of builders offered some type of incentive in February).

Even first-time buyers who have smaller housing budgets than those looking to move up could still benefit from buying condominiums or new houses in areas where they are being built. Believe it or not, some builders are interested in first-timers. D.R. D.R.

Learn how new-construction deals differ from existing home sales to find savings behind the sticker price.

According to the NAHB, 31% of builders cut prices by an average of 6 percent in February. This is a sign that builders are in distress. They don’t like to reduce prices.

Sheryl Palmer, CEO, Taylor Morrison Home Corporation said that it is not possible to reduce prices blindly in an earnings call with analysts. I believe that the consumer expects you to reduce prices more than you do. ”

Customers who purchased earlier and at higher prices can be upset by a reduction in housing prices. Incentives can reduce the cost of a buyer’s contract and make it look like they paid the same price as their neighbors.

Palmer said that customers need help in making their monthly payments and cash flow to close the deal. All builders in the industry agree with this conclusion. They are now focusing on financial incentives for homes to be sold.

According the NAHB, November:

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  29% builders paid closing costs and fees.
  

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  27% offers options and upgrades at no or lower cost.
  

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  26% was paid to temporarily reduce the buyer’s interest rates.
  

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  24% payment to lower the buyer’s interest rates permanently.
  

You will pay thousands of dollars in closing costs when you apply for a mortgage. Large homebuilding companies can offer creative financing because they either have their preferred lenders or offer mortgages. While the builder may pay some closing costs, they can still keep the price of the home. This is a way for you to get a quiet discount but still keep your price.

Due to construction delays, one type closing cost has been prominent: the extended rate lock fee. A lender will usually guarantee your rate for between 30 and 60 days for no additional charge or for a small fee. Many lenders charge extra to lock rates for longer than 30 days or 60 days.

What if the builder fails to complete the house in time? It might be possible to extend the expiring rate lock and not charge a fee.

A lender may offer an extended rate lock for builders if there are delays in construction. Buyers who have to sell their homes first can get extensions. Chuck Vander Stelt is a Valparaiso real estate agent. He says that a builder may offer an extended rate lock in order to allow the buyer to sell their home quickly for top dollar.

The builder will try to sell you extras when you’re looking for a house under construction. This includes a kitchen island, beautiful tile in the bathroom, and windows that are extremely energy-efficient. Both sides will benefit from upgrades. The builder makes a profit on the markups and the buyer pays less to have the work done later.

A builder who is eager to sell a home might offer such upgrades for free or at a low price while still keeping the base price of the home, according to Andy Sachs, managing agent for Around Town Real Estate, Newtown, Connecticut.

Vander Stelt states that in exchange for upgrades discounts, the builder will likely ask for a larger deposit. “To really make it clear that this [purchase] was a certainty.” The builder may have to reduce the price if you cancel your purchase after installing your upgrades.

In the company’s latest earnings call, Taylor Morrison executives spoke of their “deposit strategy”. Erik Heuser, chief corporate operations officer of Taylor Morrison, said that “our teams have done great job using deposit as part the overall negotiations.” “So, if we offer additional incentives, then we have requested more deposits. ”

Builders have the best affordability tool: the ability to pay to lower the mortgage interest rate temporarily or permanently. A lower interest rate means lower monthly house payments. This is something buyers have been thinking about since last fall when the 30-year mortgage was above 6%.

Ryan Marshall, president & CEO of PulteGroup said that rate buydowns are still among the top incentives to our customers during a recent earnings call.

The builder will pay some of the buyer’s interest during a temporary rate cut. During that time, the buyer receives a monthly discount.

Permanent rate buydown (also known as paying discount point) reduces the interest rate for the entire term of the mortgage. A permanent rate discount and consequently the monthly savings are usually smaller than a temporary buydown. However, savings can accumulate over time.

Bill Wheat, executive vice-president and chief financial officer at D.R., stated that “we do use mortgage rate buydowns as an ordinary course” and that many of them are for the lifetime of the loan. Horton on a recent earnings conference.

The complex areas of closing costs, upgrades, rate reductions, and other aspects are all part of a development’s sales process. A good agent will know how to negotiate the best deal for the builder. If you try to negotiate a deal yourself, you’ll be overwhelmed. Get the assistance of an expert buyer’s agent.

Vander Stelt states that the value of a realty agent is their ability to speak realtor-speak to builders. We can discuss the buyer’s needs and show the buyer’s situation to builder in a way that is more appealing. ”

It’s not going make the builder mad that you have an agent representing you

Sachs states that most builders don’t have any problem with agents as they are the ones who will be telling the public about the great developments being built.

When a developer asks you for registration the first time that you visit their site (online or in person), be sure to mention your agent to ensure they get their commission.

Builders offer different price breaks depending on who they are trying to attract, what their sales numbers are for that week or month, and the direction in which mortgage rates are moving. An experienced real estate agent will be able to identify the incentives offered by builders and how to negotiate.