So agent beware if your buyer(s) “just wanders into an new constriction’s sales office” and regsiters on their own; as I was working with one agent for many years who’se brother and sister- in law did just that!

That cost the agent about $30k in lost commissions andf the strife from within the family made for a tense 4th of July celebration!.

It’s better to find out which developer(s) pay commission and deal with that issue straight on before this same situation happens to you!

Why a New Home May Cost Less Than Expected

It may be time to look at new construction for homebuyers who need help finding suitable existing homes for sale.

Homeowners continue to hang onto their low-rate mortgages rather than sell, keeping existing homes off the market.

Meanwhile, homebuilders (nationwide) have hundreds of thousands of unsold dwellings in their inventories.

Many homebuilders offer incentives to prod buyers into signing purchase contracts: According to the National Association of Home Builders, 57% of builders offered some kind of incentive in February.

Even first-time buyers, who tend to have lower housing budgets than move-up buyers, could benefit from shopping where new houses or condominiums are going up.

Believe it or not, a few builders pursue first-timers. D.R. Horton is one; it reported that 65% of homes it sold in 2022 cost less than $400,000.

Understanding how new-construction deals work differently from existing home sales can help you find savings behind the sticker price.

Builders prefer incentives to lower prices

The NAHB says 31% of builders reduced prices in February by an average of 6%. That signifies distress; builders don’t like to trim prices.

“You can’t just blindly reduce prices,” Sheryl Palmer, CEO of Taylor Morrison Home Corporation, said. “I think the more you just reduce prices, the more the consumer expects us to do.”

Plus, cutting prices in a housing development can infuriate customers who bought earlier, at higher prices.

Using incentives can decrease the total cost of the buyer’s contract while making it appear they paid the same as their neighbors.

Palmer added that customers mostly need “help on the monthly payment and help with cash to close.”

Builders across the industry have landed on that same conclusion, focusing on financial incentives to sell homes.

According to the NAHB, in November:

  • 29% of builders paid closing costs or fees.
  • 27% offered options or upgrades at no or reduced cost.
  • 26% paid to reduce the buyer’s interest rate temporarily.
  • 24% paid to reduce the buyer’s interest rate permanently.

Negotiate lower closing costs, such as rate locks

When you get a mortgage, you incur thousands of dollars in fees known as closing costs.

But because large homebuilding companies either offer mortgages themselves or are affiliated with their preferred lenders, they can employ creative financing.

The builder can pay some of the closing costs while holding the line on the home’s price. It’s a way to hand you a quiet discount while standing firm on price.

With construction delays rampant, one type of closing cost has become prominent: the fee paid for an extended rate lock.

Normally, a lender guarantees your rate for 30 to 60 days free or for a relatively small fee. Lenders often charge to lock a rate for more than 30 or 60 days.

But what if a builder doesn’t complete the house on time? In that case, it might extend an expiring rate lock without charging a fee.

Construction delays aren’t the only reason for a builder’s lender to offer a free or inexpensive extended rate lock.

Extensions can help buyers who need to sell their current homes first.

Look for discounts on upgraded amenities

When you shop for a new house that’s under construction, the builder tries to upsell you with customized amenities and fancier materials: a kitchen island, gorgeous tile in the shower, windows that are ultra energy-efficient.

Ideally, both sides benefit from upgrades, with the builder making a profit on markups, and the buyer paying less than it would cost to get the work done later as a renovation.

An eager-to-sell builder might throw in such upgrades free or for cheap while holding the line on the home’s base price.

In exchange for discounts on upgrades, the builder is likely to ask for a bigger deposit.

After all, if you cancel the purchase after the builder installs your upgrades, the builder might have to cut the price to attract buyers who don’t share your taste.

Secure a lower interest rate with a buy-down

Paying to reduce the mortgage interest rate, temporarily or permanently, is one of the keenest affordability tools that builders can wield.

A lower interest rate translates into lower monthly house payments — something that has remained at the top of buyers’ minds since last fall, when the 30-year mortgage climbed above 6%, then stayed there, for the first time since 2008.

\With a temporary rate buy-down, the builder pays some of the buyer’s interest for the first one to three years.

The buyer has a discounted monthly payment during that period.

A permanent rate buy-down, also known as paying discount points, reduces the interest rate for the mortgage’s full term.

Therefore, the rate discount and monthly savings tend to be smaller than on a temporary buy-down.

But the savings can accrue big-time over the years.