Examples of what builders did during the boom.

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xsocal land merchant_IHB

xsocal land merchant_IHB

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<p>This is an <a href="http://www.cepro.com/article/have_you_been_burned_by_production_builders/">interesting article</a> about the antics of builders during the boom times.</p>

<p>It looks like some customers are being outright hostile to them now.</p>

<p>I have seen builders have thousands of dollars of work done on their personel residences by subcontractors in order to get the winning bid on tracts.</p>

<p>These costs were then added to each house by the sub to recover their money and the buyer paid for it in the sales price.</p>

<p>Something to think about for those looking at new product these days.</p>

<p>Enjoy!</p>
 
<p>Seen it many, MANY times. Its just very sleazy to me.... How can these people sell such sleazy practices past everybody. Oh well, to be informed is to be well armored.</p>

<p>-bix</p>
 
<p>This is another interesting article on how people are reacting to how the <a href="http://www.cnbc.com/id/22217580">builders treated them during the boom times.</a></p>

<p>Maybe new home sales agents need courses in martial arts!</p>

<p>Enjoy!</p>
 
Hey Trooper



Good side job for you-protect re agents. LOL



We do carry here but I was referring to the California agents and I would never carry in that state and break the law. I am a Law & Order kind of guy!!



Enjoy
 
<p>"Another builder told someone else I know that buyers today aren’t just low-balling, they are making truly ridiculous offers, like half the asking price."</p>

<p>Um, if that's the only offer... It's not ridiculous, it's the market. It's still a waste of time though.</p>
 
<p>But what can a builder do if the sales volume isn't there, and the only offers are below the cost of their initial investment? I've been mulling this over recently because I finally got the job I've been waiting for in OC, and now I'm getting close to buying. As I look at the historical pricing of prior "phases" in various developments, I can see a 10%ish price reduction in various homes (VoC, Woodbury) and wonder, did the builders reduce as far as they could in a race to sell the existing liabilities and get the hell out, or are they hedging - meaning that they may have a little more to give?</p>

<p>I'd hate to end up like many of those people in VoC that bought, and then saw the 100K price reductions on subsequent phases just months later.</p>

<p>I guess my question is "what will /would/can the builders do now that we are in the middle of a correction?"</p>
 
<p>Builders will do whatever it takes to make sales happen. </p>

<p>Publics have quarterly and annual gaols so depending on what their quarter end or fiscal year end is they will deal to make their numbers by these dates. The bonus paid to managers is based on meeting these projections. These days just keeping their jobs may depend on hitting projections. </p>

<p>If their construction drops to zero then there are layoffs or divisions are closed. Builders have to build and sell to survive. </p>

<p>They will deal on standing inventory more than those partially completed homes since standing inventory homes cost the builder more to carry and maintain. They usually pay for association dues on unclosed units after the first coe in a phase. There is usually a maximum number of inventory allowed by the banks before the banks will allow the next phase to be started. </p>

<p>Standing inventory is not a builders friend. </p>

<p>Your best deals will be if you can close near a quarter or year end on a standing unit if you are a non contingent buyer. </p>

<p>Remember that the builder quotes retail price on included options but pays wholesale so if they include $30k of options it really cost the builder 20 t0 45% of that amount depending on what type of option. Flooring at design centers usually has a 10-20% rebate to builders so they save that amount by including flooring upgrades listed at full price. </p>

<p>Good hunting.</p>
 
xsocal - Funny<p>


I have a vague memory of you telling of a series of offers you made for a client. Are you comfortable making extreme low ball offers for your client? This is a real question, and I am not trying to set you up.
 
<p>Awgee</p>

<p> </p>

<p>Good morning.</p>

<p>I have no problems making low offers for my clients. I also have no problem telling clients what they need to list for if they want to sell. </p>

<p>The transaction that you are referring to is closing next week. The asking price at time of offer was $749000 and we settled at $668500. I believe we started in the $650 range. The buyer is comfortable and the seller had considerable equity so all parties seem to be happy.</p>

<p>We made offers on 3 properties with 7 or 8 counters to get agreement. We were limited since the buyers wanted a single story with low or no dues around $700K and I actually listen to my clients needs.</p>

<p>Have a great weekend.</p>

<p> </p>
 
I have no problem with submitting low ball offer eithers. I just have to constantly remind sellers that I am doing my job for my buyer. To avoid bullets, I just have to turn on all the charms that I got and also to get everyone to laugh during the negotiation process. It does work!!!!!!!!!!!!
 
So what do you guys think about this possible offer to a builder on a new construction home. If the builder has been selling the home for around 1.05 million in prior phases (after initially selling them for 1.2 million in the initial phases) would an offer of 1 million even be "low-ball"? Since this would put the builder down about 200K+ from the initial offerings of the same home?
 
<p>GUI Each sale is unique. </p>

<p>You may want to share the answers to the following questions: </p>

<p>1. Is the home you wish to offer on standing? (completed except for flooring and/or counter tops)</p>

<p>2. How many standing or homes under construction do they currently have. Once a home is "trenched" it is usually considered standing by banks for construction loan reasons? </p>

<p>3. How many homes of that same floor plan are available at this time? </p>

<p>4. What incentives are they offering for "just walking in the door"? </p>

<p>5. Does that home have a lot premium? Is the location better than/less than earlier phase? </p>

<p>6. Are you well qualified, non contingent, and pre approved by a direct lender? </p>

<p>7. From the builders point of view there is little or no emotion involved-"just numbers". </p>

<p>All of these things will be taken into consideration by the builder when deciding to accept an offer. The answers may help you to structure an acceptable offer but in todays market a $200K low offer on a 1.05 mil sales price is a reasonable starting point.. I would have no problem presenting a $200K low offer for a client or myself against a 1.05mil sales price and discussing it with the VP of sales directly. </p>

<p>You should also look at the recorded comps for recent sales for prices but keep in mind these numbers do not reflect options or closing costs paid by builder. </p>

<p>Also keep in mind that the onsite agents represent only the builder-NOT YOU! This is disclosed to you in the documents. </p>

<p>I hope this provides some insight. </p>

<p>Enjoy!</p>
 
<p>XSoCal - </p>

<p>Being a little more (or too) specific, I have recently looked at Villa Rosa in Woodbury. In their most recent phase, they have one home left, and the next phase set for a month or two from now. The home is about 1.08m (and I have discovered via internet research, that the earlier phases of this model home sold for about 1.25m. Thus the builder has already been through significant adjustments just to get to 1.08m.)</p>

<p>However, markets govern, and I am trying to see how "flexible" Lennar can be at this point. I read their 2006 Report/financials, and they seemed somewhat "bleak." But that bleakness may have been priced into the 200K reduction I am already seeing.</p>

<p>So: (1) yes the home is standing. (2) the next phase may be trenched, but not released? (3) the current home is the only one left - until the next phase (4) they assert that the only incentives are 6K if you use the Lennar lender. (5) no particular "lot premium." (6) very-well qualified - 800+ FICO, 20% down, 250Kish household income BUT I'd have to sell my condo first - and I already have 2 buyers lined up...</p>

<p>So, if they are offereing at 1.08m... should I offer 1m? Ask for a huge design center credit? a combination?</p>
 
<p>GUII</p>

<p>Thanks for the information as it helps paint the picture.</p>

<p>The key to the best deal is 30 day or less close based on being in a noncontingent position.</p>

<p>"Buyers lined up" and home closed are two very different situations in todays market, as many others here will agree with.</p>

<p>Are they currently taking contingent buyers on standing homes? If they are it is a 3 day right of refusal contingency which allows them to take a non contingent offer and give you 3 days to release your contingency by showing ability to qualify without selling your current condo as well as having required downpayment. At that time your deposit becomes at risk if you don't close.</p>

<p> Are you willing to make a non contingent offer and have the possibility of keeping your current condo?</p>

<p>I am not suggesting that but simply asking. By being contingent I feel you lose a lot of your negotiating power. </p>

<p>As far as design center and closing costs incentives there are limits set by lenders based on various LTVs. You also pay property tax on gross sales price so any savings that you get as price reduction benifits you the most as far as monthly payments over a long period .</p>

<p>Your benifit by price reductions but it is not in the builders interest due to earlier buyer problems and hurting comps. They will usually try to add options or design allowances to reduce their exposure.</p>

<p>Are you aware that Lennar recently sold a large portion of their inventory to an investor for 40 cents on the dollar? I do not know if Villa Rosa was included. </p>

<p>If I understand you correctly, you are looking at an $80K low offer. If so I would try to split it $30K off the price and $50K in allowance if the lenders approves. That would give you a start on flooring upgrades.</p>

<p>By you being contingent and the builder having only one home avaibable for probably 5 months, if the next phase is only trenched, I would think they would wait for a non contingent offer even if it were less money to them. Time and reducing inventory is more important to the builder then a few thousand dollars. To the average buyer a few thousand dollars is very important. Again the interests of the buyer and builder are at odds. <strong>It never hurts to offer as sometimes things change internally and they may be extra motivated to even have a contingent in place for internal reasons.</strong></p>

<p>I base the above thoughts on 25 years as VP of S/M for public builders and going through the two previous downturns on the builders side of the table.</p>

<p>Good hunting!</p>
 
From what I read of xsocal's post, it seems you would be in the most powerful negotiating position if you sell your condo first and have the cash in the bank. We sold our home two years ago, and I noticed the strangest thing; there are <b>ALWAYS</b> homes for sale in the neighborhood we will purchase in. No kidding. <b>ALWAYS</b>. And there are no less new or used homes for sale now then there were two years ago.
 
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