How much will builders DEAL/Negotiate??

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Submitted by 23109VC on January 28, 2007 - 6:36pm

I've been a member of this forum for about a year...and part of the wisdom of this site has caused me to delay buying...and I KNOW I'm better off for it. How much longer to wait is up in the air....

I am settled at work. I'm not moving from the area..and am hoping to buy a house that I can sit tight in for the next decade or two...or forever. I have found several nice areas of Temecula/Murrieta....that I know I'd be happy in.

I found a home today while looking that both my wife and I liked. The homes used to be selling for $550-600k.... Now they are at the 500-550k mark.

If I buy it now... say at 500-550... vs waiting 6 more months for it to come down to 450-500... but I'm spending $1500-2000/month in rent... am I worse off for buying now vs. waiting?

my othe BIG questions is this...the home we *would* buy.. IF we buy... is priced at $550k. it had a few more extras and a better view than the other home across the street which is $500k. I'm non contingent. I'llq ualify for the loan. I could do a 15 day escrow if they wanted... I'm the kind of buyer they want... and they are at the very last phase...with a handful of houses they are trying to dump. they've landscaped them...they want to unload them.

if i were to lowball them at say $450k... they may just laugh at me..but at $450k it would be an awesome deal. are builders turned off by the "lowball" offer...or would they possibly counter me?

I know they are coop wtih agents..so they would alrady lose 3% if I had an agent...so they are willing to deal somewhat... I wonder how much and how to approach it. I'd never pay what they are asking...but I bet they would negotiate if they thought I'd sign on the dotted line... have any of you played hardball wih the builders lately? the home was built by Richmond American Homes.

any advice... aside from "don't do it".. :)

Submitted by no_such_reality on January 28, 2007 - 7:04pm.

Just two thoughts:

1. How many months with the $100,000 you save waiting for $450K versus $550K pay your rent?

2. Did you see the discussion here and the major papers on the massive $2,000,000,000 fraud investment scam on homes in Temecula/Murrieta?

Submitted by juice (not verified) on January 28, 2007 - 7:13pm.

A few more thoughts:

-Unlike San Diego, those areas of Riverside County (Temecula, French Valley etc.) have tens of thousands of planned homes/homes in progress. Builders should be willing to deal for some time to come. In San Diego, however, I would worry that the lack of new SFR being build will eventually lead to builders less willing to deal because they just wont have the excess inventory. Make sense? For this reason, I wouldn't feel pressured to buy right away.

-Try to negotiate items other than purchase price. You should still try to get the best price you can, but try to be creative. Builders will be reluctant to lower prices, but more willing to throw in options, offer to pay your mortgage for a year etc.

Submitted by mydogsarelazy on January 28, 2007 - 9:05pm.

We live in a 2 year old home in Murrieta in a very nice area with excellent schools. Across the street from us is a beautiful house, over 3,000 sq ft which has been renter occupied since new. The renters are very meticulous and it is in excellent shape. The owner/speculators put it up for sale just at just under $600k close to a year ago, and it has not sold. Currently they are asking $485k and I know that they offered it to the renters for $450k.

That gives you a picture of how much one house has come down.

By the way, drop me an e-mail if you would like the address.

JS

Submitted by PerryChase on January 28, 2007 - 9:30pm.

If I buy it now... say at 500-550... vs waiting 6 more months for it to come down to 450-500... but I'm spending $1500-2000/month in rent... am I worse off for buying now vs. waiting?

We've all been brain-washed into thinking that renting is "throwing money away." You need to seriously rethink this logic then the buy/rent decision will come by itself.

We are just in the first year of a downturn in real estate. 5 years into the downturn would be a more appropriate time to think of buying.

Submitted by juice (not verified) on January 28, 2007 - 10:16pm.

Yes, you will likely be worse off if you buy now:

1. It is highly likely that home prices there will continue to depreciate. Even if they stay flat, you lose. One reason: Your down payment could be earning interest elsewhere instead of being invested in a depreciating asset.

2. The 1500-2000/month you are currently spending in rent will just be lost to interest, or at least most of it. The portion that goes towards principal plus the tax savings don't add up to much initially and are quickly wiped out by the added cost of owning a home. And although we may think we own our homes, the banks actually own them until the mortgage is paid off and in many ways renters are in a much more secure position, although it may not appear that way by traditional measures.

3. You might be able to afford a home closer to the coast in the next couple of years, assuming you'd rather live there than Temecula.

4. If you were to buy next week, how anxious would you be as a new owner that prices would drop? It's somewhat comforting to be on this side of the equation, but picture yourself as a new owner. The news continues to get worse (assumption), a neighbor sells for 50k less than you bought, another up the street is a short sale and could go for 75k less than you paid. How upset will you be if the home you bought for 450 drops to 350 in 2 years?

Submitted by juice (not verified) on January 28, 2007 - 10:26pm.

5 years from now may be a good time to buy, but a more immediate goal might be to at least wait it out until at least this Fall to see what happens. It's not as if things are suddenly going to take off between now and then, and they are very, very likely to get much worse according to almost all measures, or at least those not affiliated with the NAR. If you think that most folks here and most of he experts are wrong, then I say you should buy now, and there is a chance that you will be right. Otherwise, where's the compelling argument to hurry up and buy?

Submitted by farbet on January 29, 2007 - 10:00am.

Pick the House with the inentives. Then deduct 20%.
YOU are non contingent. Don't be a WIMP. I would get an agressive agent. Go for it. Peace of mind.
Then again Temecula has a lot of short sales. You may get a better deal with a house 2 years old. Get an agressive agent who will tender the price you want and find the distress properties.

Submitted by farbet on January 29, 2007 - 10:01am.

Pick the House with the inentives. Then deduct 20%.
YOU are non contingent. Don't be a WIMP. I would get an agressive agent. Go for it. Peace of mind.
Then again Temecula has a lot of short sales. You may get a better deal with a house 2 years old. Get an agressive agent who will tender the price you want and find the distress properties.

Submitted by outtamojo on January 29, 2007 - 10:48am.

Ask if the builder will pay all or a portion of the Mello-Roos.

Submitted by RottedOak on January 29, 2007 - 3:25pm.

One strategy you might want to consider is buying the $500K unit across the street and getting the builder to throw in the "extras" from the house you like. Of course that will depend on what those extras are. If they are things like nicer appliances, light fixtures, or other easily replaced items, then it should be no problem getting them. Even something like better flooring or countertops isn't out of the question. But if it is a three-car garage vs. two or something like that, then obviously there isn't much they could do. And of course the view isn't a negotiable item, so if that is really important to you it might be a deal breaker.

Other items you could stick them for:

  • If there is anything left to do in terms of finishes (carpet, paint, trim, appliances), then go for the highest-end items the builder offers. From your descriptions it sounds like these might be "fully finished," so maybe there's nothing to do here. But see below for some items you could ask for even if the builder considers the unit done.
  • Interest rate buydown - since interest payments don't contribute anything toward your equity, getting your rate lowered is a big plus if you plan to stay in the house. Since you plan to stay put, I would go for points to lower the long-term rate, not just a 3/2/1 shorter-term buydown.
  • If any appliances are not included, such as refrigerator or washer/dryer, get them thrown in. Of course make sure to get quality brands.
  • If you plan on re-painting any rooms, decide on the colors and have the builder do it.
  • Have the garage (if present) finished out. Garages are often "unfinished" in terms of painting, sealants for the concrete, etc. We had this done on a place we bought and it made our garage look lots better than the neighbors.
  • Nothing says a "finished" house can't have trim added for baseboards, crown molding, etc. - assuming these aren't already present and are something that suits your taste and the style of the home. This will be easier to get if the builder is still working on similar units in the area (whether in the same development or nearby).
  • Pre-pays of HOA fees and Mello-Roos are OK, but these don't really add to the value of your house they way physical upgrades do, and they create "adjustment shock" later when you have to start paying. The big exception would be if you can get the builder to completely pay off any Mello-Roos, so that in the future you can market the house as "no Mello-Roos."

These are all ideas to use if the builder won't give you a significant price break. I'm a big proponent of getting the lower price if possible. That lowers your interest payment and your property taxes (an important point in California, where the purchase price is critical for the tax assessment), and you can pursue any upgrades you want with the unspent money. The only item above that I would consider really worthwhile as a "hidden" concession is the interest buydown, and then only because you indicate a plan to stay in the house a long time, so that savings from the lower rate would add up.

Submitted by Cow_tipping on January 29, 2007 - 3:27pm.

1. Make an offer for 25% below asking.
2. When they accept it, disappear and come back in with an agent and offer another 25% under that.
3. if they accept, run from there to a different builder and offer them somewhere around your new discounted price.
4. Repeat till you run into a wall.
Back in 2002 I offered the same way on a beazer house. I found 5 that they wanted to unload and offered them the cheapest price per sqft they were selling another house for and converting it to this one's sqft. They argued back and forth and finally settled on ~2500 more cos it had a crawl space. My realtor pointed out that power lines were visible near that house. It wasn't under them, but I could see them. I pulled out and bought that other house with all discounts from this one applied to it.
I then cancelled 2 days before close cos I didn;t like some of the things they did in construction.
Cool.
Cow_tipping.

Submitted by dgilmsandi on January 30, 2008 - 4:12pm.

Ok, so how many of the people that are waiting it out have actually invested in real estate? Those that chase the market never catch it, because by the time you think it's hit bottom the market has started to rebound. One more thing to consider is that while rates are low they will go up one day and even if prices stay level or even drop several percent an increase in rates means you are paying more for your home. As a homeowner you get added deductions on your income taxes, too.

This is a market of opportunity and someone on Mad Money said recently, if you buy now in five years time you will be reaping the rewards. I would caution though against an area like Temecula where there is so much ongoing construction that will create added competition when you go to sell.

I think the best deals are going to come directly from a builder or on bank-owned properties. Just realize that when buying from the builder you need to factor in the cost to landscape, install window treatments, and furnish the home and most bank-owned properties are fixers. Builders are hesitant to record "rock-bottom" prices so try negotiating on closing costs, upgrade allowances, HOA credits, or even Mello-Roos payoff.

At the end of the day it always comes down to location so pay special attention to things like lot size, proximity to power lines and major roads, privacy, immediate and surrounding neighborhood, and even floorplan as not all of the models in a development have the same appeal.

In 2007 I sold my primary residence for a record high for the plan at $1.330m (paid $925k in 2004 plus added about $180k in improvements), sold a flip for $430k minus $10k for buyer credit (paid $305k five months prior as an REO, put about $55k into it, market time was only about 3 weeks and had 3 offers), bought new primary residence for $950k as an REO have about $75k in improvements and it's worth a solid $1.2m. Oh, and this follows buying a condo for $565k in 2003 and selling it in 2004 for $835k with only about $15k in improvements. It's about time to buy again!

I'd like to see where all of these naysayers are in 1-3 years time who've lost sight of real estate as a long-term investment.

Submitted by drunkle on January 30, 2008 - 4:36pm.

"In 2007 I sold my primary residence for a record high for the plan at $1.330m (paid $925k in 2004 plus added about $180k in improvements), sold a flip for $430k minus $10k for buyer credit (paid $305k five months prior as an REO, put about $55k into it, market time was only about 3 weeks and had 3 offers), bought new primary residence for $950k as an REO have about $75k in improvements and it's worth a solid $1.2m. Oh, and this follows buying a condo for $565k in 2003 and selling it in 2004 for $835k with only about $15k in improvements. It's about time to buy again!

I'd like to see where all of these naysayers are in 1-3 years time who've lost sight of real estate as a long-term investment."

flipping a property in a year's time is a "long-term investment"?

your post was crap, but that was the kicker.

Submitted by Bugs on January 30, 2008 - 4:48pm.

Drunkle,

We gotta get Rich to do an analysis to see if there's some statistical corellation between how many FBs are losing everything and how many trolls we get coming in here and being stoopid. It's as if these guys are being compelled to include some IQ points when they mail their keys in to their lender.

Submitted by marion on January 30, 2008 - 4:53pm.

I would not buy a home for 450K in Temecula in today's market. Can't you wait at least a year? What's the rush? With the inventory of homes sitting on the market in Temecula and Murrieta at present (and it's only going to get worse), if you buy today you're gonna lose.

Submitted by raptorduck on January 30, 2008 - 6:01pm.

I am with folks here who say wait longer. I am trying to keep my wife at bay to wait until about this time next year to buy, but I may loose and buy this year.

BUT I am being very agressive with "low ball" offers. Don't worry about insulting or pissing off the seller. Make your low ball offer. If they don't counter, move on. It is like fishing in a fish farm, eventually somebody will be hungry enough to bite.

Submitted by drunkle on January 30, 2008 - 6:18pm.

bugs:

are you suggesting that they were on borrowed IQ's? makes sense then, having to turn over their deeds and their brains...

Submitted by drunkle on January 30, 2008 - 6:20pm.

marion/raptor:

check the date of the op. the troll pulled up a year old post for his desperate plea.

Submitted by robyns_song on January 30, 2008 - 9:31pm.

RottedOak, you are aware that the builders jack up the prices of the upgrades, right? Why would you prefer to pay someone 4 times the cost to paint a room than what it would cost to hire someone out/do it yourself? I think by far the better investment would be to have the mello roos paid off and put that money towards doing the upgrades yourself (or contracting them out). $5K a year over 30 years is a much better value than having your rooms painted and new floors.

Submitted by dgilmsandi on January 31, 2008 - 11:43pm.

Drunkle: Flipping a house in a year is not a long-term investment, but for the majority of buyers out there they are looking for a home to live in not flip. For those buyers, they need to realize that real estate IS a long-term investment. It is true that you make your money when you buy and get paid when you sell, but if you plan on holding for several years the market will rebound as it did after the housing slump in the early 1990's and prices will surpass the original purchase price. Case in point, my parents bought a new home in SD in 1986 for $131k and it peaked at around $250k in 1990 or so. They ended up selling in 1992 when the market was softening for $217k and bought a new from builder for $235k which was sold in 2001 for $422k well before prices starting shooting through the roof.

I can send you the MLS listings for the two homes I sold in 2007 if you'd like. Drunkle, I take it you did not make any money from real estate in 2007 and won't be in 2008, either.

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