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How To Buy and Sell a Home at the Same Time

How To Buy and Sell a Home at the Same Time

by | Jan 4, 2023 | Blog, Buyers, Homeowners, Homes, Villas and Condos, News, Real Estate News, Sellers

How To Buy and Sell a Home at the Same Time

How To Buy and Sell a Home at the Same Time

 

Buying a house while simultaneously selling your current home is always a treacherous tight wire to traverse—but in today’s high-priced, high-interest-rate housing market, it’s both a blessing and a curse.

The good news for home sellers is that over the past year, demand for homes has driven prices through the roof, pushing home equity to record levels. Homeowners are essentially sitting on a pile of cash, which would definitely come in handy if they start shopping for a new home.

Yet any homebuyer out there today will also face steep mortgage interest rates, which have more than doubled over the past year to the 7% range. This has raised the cost of housing by around 70% compared with a year earlier, according to a recent analysis by Realtor.com® Chief Economist Danielle Hale.

Most sellers who move would need to get a new mortgage, at a higher rate. It’s no wonder, then, that many are deciding to stay put.

“Two-thirds of homeowners right now are sitting on a sub-4% mortgage, and about a quarter are sitting on a sub-3% mortgage,” says Lisa Sturtevant, chief economist of the Bright MLS. “And so you can imagine existing homeowners, even if they wanted to move, are really reticent to give up their very favorable mortgage rate. It’s like golden handcuffs where you’re locked in.”

Still, it’s worth noting that some home sellers might be able to justify and absorb the higher interest rates since their home sale will likely bring a windfall of cash. And in theory, that money could go toward making an all-cash offer on their next house—and getting a very good deal on it, too.

“With home prices still high and buyer competition thinned out due to high mortgage rates, it may be a good time for some sellers to make a move, especially those who may not need a mortgage to make their next home purchase,” says Hale.

Still, an all-cash offer is a lot of financial eggs in one big basket. Is it worth the risk?

If you’re one of these homeowners sitting on a nice chunk of equity and looking to sell your house and buy another at the same time, there are ways to navigate today’s current financial terrain to your advantage.

Should home sellers buy or sell first?

The first question most home sellers ask themselves is: Should I buy or sell first? Each decision comes with its distinct pros and cons.

“Buying first gives you an opportunity to move out before putting your prior home on the market,” Hale says.

This helps a seller avoid the headaches of living in a home that is for sale, which means keeping it in pristine condition and being ready to vacate often (and at short notice) when buyers want to stop by for a tour.

On the other hand, “Selling first lets you know just how much you’ll make on the sale before shopping for your next home,” Hale says. “But it may mean finding a temporary place to live in between.”

Hale suggests asking yourself the following questions if you’re planning to sell and buy at the same time:

  • Where do I want to live next?
  • How disruptive will it be to have the home I live in on the market?
  • Can I handle the possibility of two mortgage payments—and if so, for how long?

While buying first allows you to avoid the annoyance of finding temporary living quarters and moving twice, it’s definitely more risky financially.

If your old property does not sell quickly, you could end up paying for two properties at once. This is a particularly strong possibility right now, since homes are lingering longer on the market than they did last year, and the market is bound to get even more sluggish if mortgage interest rates remain high and as we glide toward (and beyond) the holidays.

Options for sellers who want to buy first

For those who do want to buy first, “there is some risk, but also some great upside if done correctly,” says Mark Hardy, managing partner at Churchill Morgage in Orange, CA. “There are bridge loans that will allow for short-term use of equity from your current property to serve as a down payment for the next property if this is needed. This can position you to make a noncontingent offer and secure a much better price or better terms.”

Current rates on bridge loans range from 6% to 16% with the idea that you’re paying off the loan as quickly as possible, as soon as your original house sells.

Homeowners who want (or need) to sell quickly (because you’ve bought a new home or for other reasons) also have many new options today for getting a sale through fast.

“One bright spot for today’s sellers is that there is much more innovation in the real estate landscape and ways to get assistance with buying and selling at the same time than ever before,” Hale says.

Options for sellers who want to sell before buying

For homeowners who prefer to sell first, one way to avoid moving into temporary accommodations is to negotiate a lease-back from your home’s buyers—where they agree to let you remain in your current home, paying rent, until you find a new home you want to buy.

Just keep in mind that, even after your home sells, it may be a while before you see that money.

“Getting the proceeds from the sale of your home can take some time, maybe longer than you expect,” warns Hale. “So if you’re trying to time the purchase and sale of a home, be sure to allow enough time for the proceeds from your home sale to be in hand before you schedule your closing purchase.”

Should sellers make an all-cash offer if they can?

If you’ve built up some sizable home equity and your home sale gives you enough to make an all-cash offer on your next place, that’s an attractive prospect in today’s high-interest-rate environment. It can also get you a deal since all-cash offers typically result in a 3% to 4% discount over a financed offer, Hardy notes.

An all-cash offer might also be tempting to try since it will likely set you apart from any competition you may have from mortgage-backed buyers. That said, you should not feel the need to funnel all your proceeds into an all-cash offer if that makes you uncomfortable or stretches your finances too thin.

“Don’t pay in all-cash because you think you have to be the most competitive offer,” Sturtevant says. While all-cash offers ruled during the ultracompetitive market last year, that’s no longer the case today.

Another option that’s less risky but still helps your offer stand out is to finance a smaller portion of the property.

“If there’s an opportunity to put 50% down, it makes it a little bit easier to swallow that bitter pill of a 7% mortgage rate if you’re financing a lower loan,” says Sturtevant.

Hale adds that “with mortgage rates near two-decade highs, minimizing the amount of borrowing you need to do to buy a home can make a big difference.”

Another option is to make an all-cash offer, then get a mortgage on your home later once interest rates go down.

An alternative to all-cash offers: Become a certified homebuyer

Homebuyers without as much equity built up in their home have other ways to keep their offer on new homes competitive. Hardy points to the strategy of becoming a “certified homebuyer,” which allows sellers to close quickly, without the need for a loan contingency.

Similar to a mortgage pre-approval process, the process of becoming a certified homebuyer requires proof of income, assets, employment, identity, and credit score. The difference is that all financial documents are reviewed by an underwriter, which gets you conditionally approved for financing.

“We’ve found this is a great way to help a seller feel very comfortable in accepting our client’s offer and secure terms quite close to what a cash offer would receive,” Hardy says. “The end result is that a buyer can better use the cash—and can now reinvest as desired—and has also purchased a new property at a much better price.”

 

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ready to make a Move?

Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

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Ways To Lower Cost of Buying New-Construction Home

Ways To Lower Cost of Buying New-Construction Home

by | Jan 3, 2023 | Blog, Buyers, Homeowners, Homes, Villas and Condos, New Construction, News, Real Estate News

Ways To Lower Cost of Buying New-Construction Home

Ways To Lower Cost of Buying New-Construction Home

 

While buying any home is an expensive endeavor these days, buying a brand-new home—where everything is in pristine condition—will understandably cost a bit more.

Recent data from the National Association of Home Builders and the U.S. Census Bureau found that the price for a newly built home currently hovers at a national median of $436,800. Compare that with a preexisting home’s median price of $396,300, and it’s clear that buying brand-new might set you back tens of thousands of dollars extra.

Many homebuyers may find the added expense of new construction well worth it, due to the money they stand to save on renovations and repairs that might crop up in an older home. But homebuyers should also know that they can lower the costs of new construction right when they make the purchase through some smart negotiation tactics.

1. Buy into the community early

If your timeline is flexible, one prime opportunity to score major savings is by being one of the first people to purchase in a new community—even before the homes have been built—when developers are particularly eager to get buyers on board.

“There are pre-construction pricing opportunities that will likely allow you to purchase a home at a lower price,” says Bill Samuel, owner of Blue Ladder Development. “Since the potential pre-construction savings amount varies for each development, it is in your best interests to call around to every development to find the best deal.”

Samuel suggests prospective homebuyers create a spreadsheet of the different developments in their area and ask the sales representative for each development about the specific bonuses on offer.

Another potential benefit of “getting in on the ground floor” is that people who buy into a project early tend to have built-in equity by the time they close due to natural price increases as the builder sells more and more properties in the community. Translation: Your home will probably already be worth more than you paid once it’s finished.

2. Minimize the number of upgrades

Similar to a car, new-construction homes have “base models,” which come with the bare minimum. But if you want any fancy bells and whistles (think: high-end kitchen countertops or a custom paint job), this will typically jack up the price.

Homebuilders will generally have a list of what is included in the base price of a new-construction home, often referred to as the “specification level.” Beyond that, many builders offer personal selections or options that a buyer can choose to add for an additional fee.

Minimizing the amount of extras selected during your new home build is going to be one of the most significant ways to realize savings. Samuel suggests prospective buyers spend time touring the model home in any development being considered.

“Review the list of extras being offered while touring the home to see what you are happy passing on,” says Samuel.

However, keep in mind that if you do think you might want these extra features someday, you’ll probably get a better deal by adding them during construction than you will if you decide to renovate later on. This is for two reasons: One, builders buy at scale, so they get better deals with suppliers and can pass those savings on to you. Two, it saves the cost of demolishing or removing whatever items you are ultimately going to replace.

Basically, it’s always cheaper to build a new home the way you want at the beginning rather than retrofitting it down the line.

3. See if you can negotiate the sales price

While sellers of existing homes are nearly always willing to negotiate the sales price of their home, this isn’t always the case with builders. But you can try.

“Some builders won’t negotiate under any circumstances, but it is always worth a shot,” says Cliff Johnson, vice president of new homes at Realtor.com®. “Builders have [reasons] to keep prices close within the community to ensure they don’t end up with other upset buyers who discover their neighbor got a significantly better deal, though they purchased a home around the same time.”

So while you might be able to negotiate down the price of a new-construction home a little, be wary of trying to lower it too much, as that could ultimately work against you.

“Lowering the sales price, especially in a community where the builder has more homes to sell, is not a great strategy, nor is it good for the appraisals in the community,” says Kimberly Mackey, founder of New Homes Solutions and a sales and marketing management consultant specializing in residential homebuilding. “If the home values start to fall in an area, it isn’t good for the builder and the surrounding property values.”

As a result, a better bet might be to try to negotiate savings in terms of builder incentives (more on those next).

4. Find out what builder incentives might be offered

Builder incentives are basically promotions that developers use to attract buyers, and may include things like money-saving financing options (e.g., builders help with closing costs or buying down the home loan interest rate) or premium upgrades (e.g., installing high-end kitchen countertops for a fraction of the usual price).

Typically, favorable financing can be a boon to buyers during tough financial times when money is tight, whereas premium upgrades benefit buyers who long for a more custom, luxurious home without paying big bucks. Developers tend to offer more incentives during the beginning and end of a project, or during economic downturns that may slow the pace of sales. But it’s always worth asking what incentives can be offered.

One prime time to find incentives is near the end of the year.

“Sometimes a builder will provide incentives at the end of their fiscal year which is late fall of the end of the calendar year for most builders,” says Bob Seeman, vice president of sales, new homes for Realtor.com. “They want to show strong results for the whole year and the summer buying season has ended, so the incentives are often in place to extend that buying season.”

5. Go for the in-house designer’s suggestions

Another cost-cutting tactic for homebuyers is to take advantage of professionally curated “bundles” suggested by the builder’s on-staff designer.

These upgrade packages or bundles of popular features and color choices offered by some builders can save buyers money by keeping them from overspending in the selection center. Also, by offering these packages, the builder can buy premium materials in bulk and pass the savings on to the buyer.

“These bundles can keep a buyer from overimproving a home and assure them that the colors and selections will look great together,” says Mackey.

6. Be flexible on your home’s location

Don’t mind if the house is situated on a (slightly noisier) corner lot rather than tucked into a quiet cul-de-sac? Then this could help you snag a lower price that won’t affect your quality of life there.

“One easy way to get a lower price is to accept a lot that isn’t in a prime location,” says Seeman.

Similarly, if the developer has numerous projects in the works that you’re willing to explore farther afield, this flexibility could work to your advantage as well.

“If the buyer is flexible, they may find that they can get a better offer at a nearby community, depending on how that community is [selling],” Seeman explains.

7. Hire a real estate agent who knows about new construction

It is important to note that not all real estate agents have experience or understanding of new construction, and it can be a slightly different experience from purchasing a pre-existing home. So having an agent who knows this niche can save you money as well.

“I recommend that buyers work with a real estate agent who has received additional training in new construction,” says Mackey. “Buyers should ask their real estate agent to pull the comps before they make an offer on a new home so they can see the sales price others are paying in that neighborhood to put their minds at ease over the values there.”

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ready to make a Move?

Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

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What Is a Single-Family Home?

What Is a Single-Family Home?

by | Dec 28, 2022 | Blog, Buyers, Homeowners, Homes, Villas and Condos, News, Real Estate News, Sellers

What Is a Single-Family Home?

What Is a Single-Family Home?

 

The phrase “single-family home” is something you’ll often see when browsing the market or as you search real estate listings. A single-family house might seem easy to define: It’s single-family housing, right? Eh, not exactly. To be classified as this type of home, there are requirements the structure must meet.

What are those requirements? Let’s take a look.

 

What to know about single-family homes

The legal description for this home is “a structure maintained and used as a single dwelling unit.” So what does that mean, exactly? A single dwelling unit will have these characteristics:

No common walls: This home is a stand-alone, detached property, says agent Chrisoula Papoutsakis. This means that the home doesn’t share common walls or a roof with any other dwelling.

Land: A single-family home has no shared property but is built on its own parcel of land.

“The area around the building is for the private use of the owner,” says Kevin Adkins.

Entrance and exit: A single-family home has its own private and direct access to a street or thoroughfare. This is as opposed to an apartment, which has hallways and a lobby that lead to street access.

Utilities: Only one set of utilities can service this home—and may not be shared in any way with another residence. This applies to heating, electricity, water, or any other essential service.

One owner: This home is built as the residence for one family, person, or household, whose owner has an undivided interest in the unit.

Single kitchen: This kind of home has one kitchen. Adding a kitchen to an in-law suite or carriage house will alter a home’s zoning classification.

 

Benefits of buying a single-family home

The type of home you buy depends on your budget and your needs. A house like this will suit a home buyer who’s seeking privacy. Since it is built on its own slice of land, you’ll have some distance from your neighbors.

You’ll also probably enjoy the extra storage space of an attic or garage in a this house, whereas a multifamily home has shared space.

Typical single-family homes on the market also come in many different architectural styles—whether ranch, Colonial, midcentury modern, Cape Cod—as opposed to the more straightforward design of a condo, townhomes, or apartment buildings.

Affordable housing offers lower housing costs, but these structures are usually not of the single-family type.

 

Disadvantages of buying a single-family home

While owning a single-family home will mean total independence, there are a few factors that can be seen as downsides. Condos, townhouses, or multifamily properties may come with common gyms or pools open to all owners; single-family homes don’t usually have community amenities.

The purchase price of a single-family home tends to be higher, since you’re buying an entire lot, says Papoutsakis. That translates into a larger down payment and closing costs, as well as recurring expenses like insurance and property taxes on the full area.

 

Searching for single-family homes

When you start a search of real estate listings for your family, you’ll see a zoning letter in the house’s description.

A single-family home will be zoned “R,” which refers to “Residential,” followed by a number, says real estate agent April Kozlowski. An R1 rating indicates that the land allows for only one home.

Multifamily residences normally have an R2 rating, which means two residential dwellings can exist on the property, typically in the form of a duplex. And an R3 rating permits multifamily units such as apartments or condominiums.

 

 

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ready to make a Move?

Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

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Florida still top spot for Americans looking to move

Florida still top spot for Americans looking to move

by | Dec 21, 2022 | Blog, Buyers, Homeowners, Homes, Villas and Condos, News, Real Estate News

Florida still top spot for Americans looking to move

Despite cooling US housing market, Florida still top spot for Americans looking to move: study

 

Nearly 25% of U.S. homebuyers are looking to move out of their current metro areas, with many people turning their attention to cities in Florida as their next place to call home, according to a new study. 

“The U.S. housing market has cooled significantly during the second half of 2022 as high mortgage rates, inflation and a stumbling economy deter would-be homebuyers and sellers. But of the people who are still buying homes, an unprecedented portion are relocating to new metros. Many are seeking relative affordability as near-7% mortgage rates and persistently high home prices make expensive parts of the country even more expensive,” Residential real estate brokerage firm Redfin found in a new analysis. 

Redfin found that 24.1% of people looking to purchase a home are seeking to move to a different metro area than where they currently live. The study examined more than two million Redfin users who looked at homes for sale online across more than 100 metro areas from August to October of this year. 

Sacramento came in the top spot for highest net inflow of property searches on Redfin’s website – net inflow is defined as “the number of people looking to move into a metro minus the number of people looking to leave.”

The top metro area where Americans moved to between July 2019 and July 2021 was Sarasota, Florida, according to Mayflower. (iStock) (iStock / iStock)

Half of the top 10 migration destinations on the list are Florida cities, including Miami, Tampa, Cape Coral, and Northport-Sarasota. 

  1. Sacramento, California: 7,800
  2. Las Vegas: 7,100
  3. Miami: 6,700
  4. San Diego: 6,500
  5. Tampa, Florida: 5,600
  6. Phoenix: 4,700
  7. Cape Coral, Florida: 4,600
  8. North Port-Sarasota, Florida: 4,300
  9. Dallas: 3,800
  10. Orlando, Florida: 3,700.

The study noted that people moving to places such as Florida do so because home prices are often far less expensive than in cities such as Los Angeles. 

TheTampa, Florida, skyline seen from Curtis Hixon Waterfront Park. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images) (Jeffrey Greenberg/Universal Images Group via Getty Images / Getty Images)

“Relatively affordable Sun Belt metros are typically most popular with relocating homebuyers, largely because buyers can get more home for less money. In Las Vegas, for instance, the typical home cost $410,000 in October, roughly half the price of the typical home in Los Angeles ($823,000)—the most common origin for people moving there,” the study said. 

The study additionally found that the majority of people looking to move are from large cities such as San Francisco and Los Angeles.

“More homebuyers looked to leave San Francisco, Los Angeles, New York, Washington, D.C. and Boston than any other major metro. That’s determined by net outflow, a measure of how many more Redfin.com users looked to leave an area than move in,” the study noted. 

A view of the Manhattan skyline with the Statue of Liberty and the Empire State Building from the Tear Drop 9/11 Memorial during the fourth phase of reopening on August 30, 2020 in Bayonne, New Jersey. The fourth phase allows outdoor arts and entert ((Photo by Roy Rochlin/Getty Images) / Getty Images)

The study found that 24% of San Francisco Redfin users were looking to relocate to other areas, compared to 20% of users in Los Angeles, 27% in New York City, 18% in Washington, D.C., and 19% of users in Boston. 

A similar study published by Lending Tree last month found that states with the highest rates of people looking to move out of state lived in high-cost areas, such as New York, Hawaii and Massachusetts.

On the flip side, the states with the highest rates of people looking to stay where they are living include Texas, Michigan, Ohio, Oklahoma and Florida. 

Source

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ready to make a Move?

Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

[formlift id=”36911″]

The Difference Between Short Sale, Pre-Foreclosure, and Foreclosure?

The Difference Between Short Sale, Pre-Foreclosure, and Foreclosure?

by | Dec 20, 2022 | Blog, Buyers, Homeowners, Homes, Villas and Condos, Mortgages, News, Real Estate News, Sellers

The Difference Between Short Sale, Pre-Foreclosure, and Foreclosure?

The Difference Between Short Sale, Pre-Foreclosure, and Foreclosure?

 

If you’re considering purchasing one of these kinds of properties, it’s very important to understand what these terms mean and how the home’s status could affect its sale.

The first rule of thumb: Proceed with caution. The pitfalls for the average buyer are numerous when it comes to a short sale or a foreclosure, according to Virginia Field, an instructor for the National Association of Realtor®’s Short Sales and Foreclosure Resource.

Let’s take a look at these three distinct real estate terms and what they mean for buyers.

Short sale

“A short sale is when the property owner owes more on the mortgage than the market value of the property and is asking the bank to accept a short payoff of the loan,” explains Cathy Baumbusch.

A short sale may or may not be in pre-foreclosure, but the homeowner is asking the bank to let it sell the property for less than what is owed on the loan.

Short sales go through a real estate agent, but they don’t function exactly like your typical real estate deal.

“The biggest misconception the average consumer has about buying a short sale is not realizing how long it takes,” says Field. “It can take between six months to a year to close. Also, people think they are going to get a screaming deal, but they have to understand that the bank is going to try to get as much back as it can.”

Even more frustratingly, a seller can accept an offer on a short sale, but that doesn’t guarantee that the deal is going to close. If the lender is not satisfied with the sale price, the home is not going to close. In some cases, foreclosure makes more sense for the lender because there are fewer costs associated with a foreclosure than a short sale.

Pre-foreclosure

A home is in pre-foreclosure if a homeowner is more than 90 days late on the mortgage payments and the bank has begun the foreclosure process.

“A pre-foreclosure is a property in the process of foreclosure but is still legally owned by the owner. It may or may not be a short sale,” says Beverley Hourlier.

Pre-foreclosure doesn’t necessarily mean that the homeowner is underwater, and it doesn’t guarantee that the home will be foreclosed on. In fact, says Field, if homeowners facing pre-foreclosure contact their bank, they have a chance of saving their home.

“The bank doesn’t want the property back,” she says.

“They want you to be able to save it, but you have to take action. Don’t bury your head in the sand and stop opening the mail. Contact your bank right away, and they may be able to find a way to work with you,” Hourlier adds.

Foreclosure

“Foreclosure means the property lender has taken back the property for lack of payment. It’s a process,” says Tracey Martin.

Buying a foreclosure is completely different from a typical home purchase. Generally, foreclosures are bought at auction sight unseen, meaning you could end up with a home in need of serious repairs.

“You don’t have investigatory rights; you’re buying a property as is,” says Field.

Field also explains that experienced investors go into foreclosure auctions with cash and a formula.

“For someone who just wants to buy a home to live in, it’s not a smart idea,” she says.

But whether you’re a seasoned pro or a first-time home buyer, a foreclosure can be a risky investment for anyone. Many foreclosure homes are still occupied by their former owners, whom you would be responsible for evicting.

Furthermore, “if you buy, you assume all liens, IRS liens, and other mortgages possibly tied to the property,” says Kevin Sucher.

Before signing on the dotted line, do as much research about the property as possible and be prepared for surprises. Field suggests investigating websites that sell foreclosures, as they tend to have more guidance for the novice than an auctioneer at the courthouse steps.

Also, when bidding on foreclosed homes, be aware that having the highest offer won’t necessarily nab you the property.

“Servicers will go with the buyer most likely to close. They may take a lower price from someone with better terms,” Field explains. In short, unless you’re shopping with cash, you might have to bid on several properties before you find a winner.

“It can be done,” Field says, “but it requires caution, patience, and ideally guidance from someone with experience buying foreclosures.”

 

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

Ready to make a Move?

Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

[formlift id=”36911″]

What Are Builder Incentives?

What Are Builder Incentives?

by | Dec 14, 2022 | Blog, Buyers, Homeowners, News, Real Estate News

What Are Builder Incentives?

What Are Builder Incentives?

When you start looking for a new home, one of the first things you’ll discover is that the price you see on real estate listings is pretty much always up for negotiation. And guess what? The same goes for newly built homes too, thanks to those cool builder incentives.

So, what exactly are builder incentives? Well, they’re like promotions offered by developers that work just like coupons, giving you a sweet discount on the property you’re eyeing. These days, incentives are all the rage as they aim to lure in buyers who may not have a ton of cash to spare. But here’s the thing, these discounts aren’t always as straightforward as slashing the price tag.

To help you navigate the world of builder incentives and make the most of these awesome deals, I’ve put together this handy guide. It’ll give you the lowdown on the different types of incentives, when and why they’re offered, and some tips to score the best deal possible.

What are builder incentives, and when are they offered?

Builder incentives are cleverly promoted through flashy billboards and online advertisements to grab the attention of potential buyers and hook them in. These enticing offers can vary from “For a limited time, enjoy $5,000 worth of fancy upgrades!” to “Buy before X date, and we’ll take care of all your closing costs.”

These incentives, which are explained on websites, social media, signs, and other promotional platforms used by builders, provide valuable information to the public about the offerings in residential homebuilding.

Incentives can be provided by homebuilders at various stages of a project’s development. Often, they are offered during the initial launch to create excitement and attract the first residents. Additionally, incentives are commonly available towards the project’s completion when only a few homes remain for sale, as builders are motivated to finalize the transactions.

Builders may intensify their efforts to attract buyers during periods of sluggish home sales caused by adverse economic conditions like high interest rates or a recession. To resonate with the target homebuyer, builders adapt their incentives based on what they believe will be most appealing at the given time.

According to Bob Seeman, the Vice President of Sales, New Homes at Realtor.com®, specific incentives are tailored to the economic situation and the target audience of a community. In challenging economic times, lower interest rates and cash at close can assist buyers who might otherwise be unable to afford a specific community. On the other hand, for high-end communities, property upgrades are often a more effective incentive.

While certain incentives are openly advertised, others are discretionary and may not receive widespread promotion. To discover the existence of such incentives, buyers or their real estate agents need to specifically inquire about them.

In certain cases, builders may have flexibility to offer additional incentives to buyers, such as a refrigerator or blinds, especially if these items are not typically included in new construction. These additional incentives serve to motivate buyers further, especially within specific time frames, such as by the end of the month or quarter. According to Mackey, the builder’s sales representatives are knowledgeable about such offerings and are typically eager to assist buyers to the best of their abilities.

How financial incentives with builders work

Builder incentives are often provided in the form of price reductions on the home itself. However, more commonly, homebuyers will come across offers aimed at reducing financing costs. Builders may offer to buy down the interest rate on the home loan or cover a portion or all of the closing costs.

It is important to note that these deals typically require financing through the builder’s preferred lender. Builders collaborate closely with specific lenders to ensure a smooth and timely loan closure once the home is completed. According to Mackey, builders are motivated to sell homes quickly to minimize expenses associated with holding completed properties.

While buyers have the option to choose their own lender, doing so might result in forfeiting the builder’s financing incentives and potentially paying more at closing. Mackey explains that if the builder does not provide the incentive, the buyer may be responsible for covering all closing costs, which typically amounts to around 3% of the purchase price. However, she advises buyers to compare offers from multiple lenders or brokers to ensure the builder’s terms are indeed the most favorable.

Buyers who find better financing terms with an external lender should be aware that if the loan is not ready to close within the builder’s specified timeframe, they could face penalties for delayed closing, which can amount to hundreds of dollars per day. On the other hand, if the builder’s lender fails to close on time, the buyer would not be held accountable for these delay fees.

Regardless of the lender chosen, Mackey recommends thoroughly reviewing the fine print of any incentive agreement, as it may contain important conditions that can be easily overlooked in the excitement of closing the deal. She advises buyers to obtain written clarification regarding the consequences if the completion of the home falls outside the specified date range mentioned in the incentive.

Additionally, it’s crucial to avoid making significant financial changes, such as changing jobs or making large purchases like a car, just before closing the home loan. Such changes can cause delays or even lead to the loan falling through due to mortgage approval issues. It is generally advisable to approach the closing table with minimal recent financial changes that could impact the loan approval process.

Why builder incentives are on the rise today

During the COVID-19 pandemic, the booming housing market saw a surge in homebuyers, resulting in builders not needing to offer many incentives. However, as the market stabilizes, homebuyers are now being presented with more perks.

According to Danielle Hale, the chief economist for Realtor.com, builders face similar pricing conditions as other home sellers. While there is still interest from home shoppers, the increased mortgage rates compared to a year ago have significantly impacted affordability. This, along with higher costs and economic uncertainty, has made homebuyers more selective, aligning demand with supply.

Kelly Zuccarelli, the national builder and condominium program manager for Wells Fargo Home Mortgage, mentions that builders nowadays typically provide incentives throughout every phase of a project’s development or sales cycle.

How to take advantage of builder incentives today

With 30-year fixed-rate mortgage interest rates more than doubling in the past year, currently hovering around 7%, builder incentives are primarily focused on providing buyers with a more affordable monthly payment. One such incentive is a permanent interest rate buy-down funded by the builder, which lowers the monthly payment and reduces financing costs over the loan’s duration. Builders are also offering extended interest rate locks, paid for by them, enabling homebuyers to secure today’s rates and safeguard against future increases.

An intriguing financing incentive to note is that some builders have procured “rate locks” at lower rates than the current market, allowing them to offer loans with rates below the prevailing rates to their buyers. Buyers concerned about interest rates may find it beneficial to seek out builders who obtained rate locks before rates began to rise.

However, it’s important to note that these incentives are typically short-lived, as they are time-limited to provide builders flexibility in adapting to market conditions. Therefore, when buyers come across a favorable incentive, it is advisable to act promptly and seize the opportunity.

Experts in Residential Real Estate in Orlando

If you are buying or selling real estate it’s quiet often the single most important financial decision you make. For the last 30 years we have helped clients buying and selling property in Orlando and the surrounding areas. Put simply, this means the knowledge and expertise accumulated over this time ensures our clients get the best representation possible.

Our experienced agents will help and guide you through the entire process providing valuable support every step of the way.

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Bardell Real Estate are the experts in helping you with your selling, buying or renting needs near Orlando, Florida. Make your Disney area experience a forever memorable one. Call us now to speak to a real estate agent.

 

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