Everyone loves a sale. Unlike the newest cell phone, reduced cost laptop, or low cost vacation promotion, a new home sale is seldom an impulse purchase. Understand that new home builder sales, incentives, and promotions exist in both hot and down real estate markets. However, when you’re seriously considering buying a new home, these weekend promotions can save you significant money.
Incentives and Promotions Take Many Forms
Simply look back to the hot market of the early part of the 21st century to verify that even in strong sales periods, builders offer incentives. Contractors were offering microwave ovens, HD TV’s, and free upgrades of $5,000 or more, while some offered free cruises and new cars.
The most common promotions involve new home builder “upgrades.” Custom new homes typically offer specified dollar allowances for many interior quality features. When buying a new home, look for builders’ promotions that offer either the dollars you need or the upgrades you want when comparing properties.
For example, an upgrade allowance for carpeting may not fire you up if your brother owns a flooring company and has promised you superior pricing. However, a counter top upgrade to fine granite may be a much desired feature.
A home sale that involves a purchase price discount is always welcome. If you’ve done your homework and are considering similar homes in identical price ranges, this promotion could be a deal maker. Should you have available cash or income qualification challenges, this incentive, even if just a weekend promotion, may allow you to buy the property you want at a sale price.
Analyze Promotions and Incentives Carefully
Be aware that all incentives are not created equally. Many apparent wonderful benefits may have strings attached that lessen their value. Examine all the terms and ramifications of home builder incentives. Here are some promotion examples that might save you money.
• Home builder financing and closing costs. Some contractors offer the ease and speed of their own home buyer financing. Always conduct your own independent search for good mortgage terms. You might find that you will pay a higher interest rate for the “convenience” of builder financing. However, if your builder offers equal terms, you may enjoy a more rapid and stress-free closing on your new home with “in-house” financing.
• Free or specific dollar value upgrades. Upgrades that don’t destroy your bank account are always welcome. However, always remember that smart contractors build in reasonable profit for all home building components. Therefore, that $5,000 upgrade allowance is only costing your builder $2,500 to $3,500.
Note: Consider asking for structural upgrades rather than shorter term allowances. Structural upgrades include additional rooms, cathedral ceilings, fireplaces, etc., which add value to your new home. That carpeting upgrade will only last you four to eight years, while that additional room will add value forever.
• Fast closing discounts. To keep their construction loan interest and cash flow under control, home builders often offer discounts for fast closings. However, be sure the home’s price has not been increased only to reflect the offered discount. If the fast closing discount is substantial and real, you can save money on your mortgage, bring less cash to closing, and/or occupy your dream home faster and at a lower cost.