Many parts of the real estate industry have been seeing an increase over the last 2 months. The sales of existing homes has risen at dramatic rates. The number of foreclosures has dropped substantially while the number of short sale homes has risen. In all this mix one area that hasn’t seen a rise is the new home market. New home builders have lost out on the increases perhaps because they are a misunderstood market. Here are a few ideas on why a new home might be a better fit for you.
The builders all around the country cut back dramatically on the number of new homes they sold as their existing inventory sat vacant. These builders tried many incentives, including dropping the price of the homes to get the vacant homes sold. During this time millions of families lost their homes and the inventory of existing homes kept rising. Desperate to sell the foreclosure homes, the lenders cut prices to the bone and there were lots of great deals to be found. Fast forward to today and things have changed in the market.
The number of foreclosures is down 12% in my area year-over-year. The huge shadow inventory spoken about for months if not years has never materialized. The number of short sales has increased as the foreclosure market has decreased. The great deals are now very few and far between. Short sales are not for the faint of heart. They are a long, messy process. Some can take as long as 18 months to complete. Most buyers aren’t prepared to wait that long to move into their homes. Short sales are properties that are taken as is which means all the delayed maintenance is left to the new buyers. There are often liens on the homes from past due HOA fees and back taxes. New buyers are expected to pay a substantial portion of those fees and taxes. Short sale lenders are no long willing to take 25% or less of market value for the homes knowing there are buyers scrambling for homes.
In the midst of all of this sit the new home builders waiting on the sidelines. There are several good reasons to consider a new home over a short sale. One, the price of the new home might be higher than the short sale but all new homes are just that, new homes. Buyers don’t need to worry about delayed maintenance, by definition the homes are new so nothing has been deferred.
Two, new homes come with warranties that cover everything on the home. In a short sale the buyer normally has to pay for any home warranty and some warranties have limited coverage. A new home warranty covers everything about the home from the roof to the foundation and everything in between. As long as the damage isn’t intentional, you are pretty much covered.
Three, builders recognize they have to compete with existing homes and do so via incentives. These incentives can include credits that can be used to upgrade and customize the home. Try getting a short seller to replace the countertops in the short sale home. Some of these incentives can include money to use for closing costs or pay down your mortgage. The short sales I have seen of late, don’t include any give-backs to the buyers even when they are asked for. Imagine having someone pay you to buy their home by picking up the tab for your closing costs and buying down the interest rate on your mortgage.
Four, speaking of interest rates many builders have relationships with lenders who can help you get the very best interest rates possible. Because the builders build relationships with lenders, buyers can take advantage of these relationships with things like lower interest rates or waiving of some fees. Again, who else will give you money to buy their product?
Before you as a buyer discount a new home, take a second look at the entire package and you may find a new home pencils out competitively with an existing home. Be sure to take your buyer’s agent with you when you view homes. Many builders are happy to see your agent knowing that they have spent time educating you on the home buying process. Even when you buy new, you still want someone in your corner asking all the right questions.