Everyone loves a sale. But unlike the newest cell phone, marked down laptop, or low cost vacation promotion, a new home sale is seldom an impulse purchase. Understand that builder sales, incentives, and promotions exist in both hot and cold real estate markets. However, when you’re seriously considering buying a new home, these weekend promotions can save you significant money.
Recognize Incentives and Promotions …
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 homebuilder “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.
… and Analyze Them 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, but always conduct your own search for good mortgage terms. You might find that you will pay a higher interest rate for the “convenience” of builder financing. If the terms are equal, however, you may enjoy a quicker 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, but remember that a smart contractor builds in reasonable profit for all home building components. That $5,000 upgrade allowance might only be costing your builder $3,500.
Note: Consider asking for structural upgrades such as additional rooms, cathedral ceilings, or fireplaces. A carpeting upgrade will only last four to eight years, but an additional room will add value forever.
- Fast closing discounts. To keep construction loan interest and cash flow under control, homebuilders often offer discounts for fast closing. If the fast closing discount is substantial and real, you’ll save money on your mortgage, bring less cash to closing, and occupy your dream home faster at a lower cost; just be sure the home’s price has not been increased to only reflect the offered discount.