Production Home Builders: What I'm Seeing...

Home builders: We’re dealing!

Homebuilders?are offering incentives we haven’t seen in a decade.

The average re-sale home seller has 1 home to sell and can hold out for a few weeks for that one buyer in these slower times…

A publicly traded home builder needs to sell hundreds of homes per month and needs to keep the cashflow moving for the analysts. They can’t tell their investors they are going to wait to move these homes until Spring, there is opportunity cost.

These public companies also have an in-house mortgage company making it much easier for them to manipulate interest rates in the buyers favor and/or take a loss as a mortgage company, knowing they are taking a greater profit on the build.

After all, they have huge margins, most of their devolopments today penciled at much lower prices when they bought the land.

WHAT I’M SEEING FROM SELECT BUILDERS:

• Price Discounts
• Buy down of interest rates (lowers the payment more dramatically than price)
• Once non-negotiable on terms. Some are offering less standard contingencies.
• For the reasons above, new construction sales are a much higher percentage of all homes sales than we have ever seen. (Was 10%, now 20%)
• Many builders have changed their sales model to not allow their reps to “cross-sell” different communites. This subtle management nuance combined with a shallow buyer pool has created greater motivation for these neighborhood reps to advocate and negotiate with their managers for incentives.

MY PERSONAL EXPERIENCE: In the last 2 weeks…

I signed a contract for a new construction home with buyers who have been looking for a couple years in Dublin.

We were able to negotiate $47k off the purchase price/lot premium and get a $15k incentive to buy the rate down almost 2% lower. ($560k to $513k) We kept the options lean but his was one of the lowest priced homes I have seen sell in that neighborhood in the last couple years despite higher prices.

I haven’t really seen builders negotiate much in 10 years. It really caught me off guard.

Interested in a deal on new construction, keep in mind:

• These are the largest production builders often in the $400-$800k range, not custom builders.
• It is community dependent… not all builders have the same incentives for every community.
• Custom builders aren’t doing this, this is for the larger subdivision style production builders with mortgage companies.

There are multiple levers to pull when negotiating:

1. Purchase price.
2. Lot premium.
3. Financing/rate buy-down incentives.
4. Random contingencies/terms that may have never previously been considered by the builder.

I don’t expect this to last…builders are trying to get through the end of the year and I think the next 30 days are the pinnacle of their motivation.

Much of the builder’s potential inventory today is not listed for sale on Zillow/Realtor.com, MLS, etc…

Reach out to me for any thoughts on builders/locations/possibilities as all builders and locations are different.

DON’T CONTACT A BUILDER OR WALK IN TO A MODEL HOME WITHOUT ME, YOU WILL FORFEIT YOUR RIGHTS OF REPRESENTATION!

I take the time to write about what I am seeing in the Columbus real estate market every few weeks. This is NOT a templated marketing newsletter…it offers tips/tricks and observations you won’t see in your news feed. Unsubscribe at anytime...

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