Benefits Of Home Builder Incentives Program

Home builders love to play the Incentives Game. In the peak of the last building boom, Centex Homes was giving away a free year of house cleaning, Ryland was giving away flat panel televisions, and there was even a builder in California giving away a mini-cooper with a home purchase. Why would a builder do this? It is just another way to channel the buyer's emotions. The more emotional ties you have to the house purchase, the less you will negotiate on the price.

When I was a new home salesperson, I felt like Kurt Russell in the movie Used Cars. We always had a sales incentive to compete with the builder across the street.

The competition would give away a PlayStation 2 and then we would give away stainless steel grill! Remember the ace-in-your-pocket for a good negotiation is to know what the other builders are giving a way. Builders hate to lose a sale, especially to their direct competitor.

When the builder lets you select a dollar amount free upgrades, I would elect for structural upgrades. They tend to have the best re-sell value. Examples are a bonus room, vaulted ceilings, a front porch, a balcony or an exterior front (elevation) that has more curb appeal. In a future article I will talk more about the best upgrades on a new home purchase. For now I want to stay on topic of winning the incentives game.

Remember, builders have padded margin into the upgrades. When the builder talks about incentives -push to get a dollar amount of the incentive. When you cannot negotiate any further (this can take days and weeks), try to move the incentive to another arena:

1. Land - If you negotiated $5,000 in free upgrades that is great. Just keep in mind that the builder makes a profit on every upgrade so you probably only came out $3,000 ahead on the negotiation. Now turn the tables and ask to trade the $5,000 discount on the lot premium for a corner lot or cul-de-sac home site. A larger lot is better for your long-term appreciation. If the builder developed the land which is not likely in this economy - they could swallow the cost a little easier. If the builder bought the land from a developer they might be hurting to allow a $5,000 discount. Land is my favorite incentive trade, but if they will not budge you still have another play.

2. Financing - Remember that $5,000 is only $3,000 in the world of free upgrades. An expensive carpet will only last 4-7 years. Why not buy down the interest rate with the builder incentive money and enjoy paying $125 less per month for the next 30 years! How about coming to the closing table with less money. Even if the builder will only give you $4,000 on financing incentive instead of $5,000 of upgrades, this still may be the best choice.

Just one word of caution, the larger builders has their own mortgage companies. Just make sure that the $5,000 is not wasted buying down an over inflated rate of 7% down to 5.75%.

Via hhhomes.com

HOME BUILDERS AND THE INCENTIVES THEY OFTEN OFFER

Just like any other market, home builders and those in the industry know that there are highs and lows. There are times when it is impossible to keep up with the demand, with buyers constantly coining in. Then, there are times when things are slow and it seems impossible to get even one or two new houses built. When this happens, incentives are offered to encourage people to take a second look at one or more of the lots in the community.

Upgrades Within the House Itself

As the buyer looks around the design studio and sees all of the different ways to customize his or her new house, there are tons of different options to choose from. Most people come into the studio with a budget and don't want to venture too far away from the amount of money they plan to spend. Home builders may offer to give a buyer some extra money to spend on the property. In some cases, specific upgrades are offered, such as granite countertops or the as opposed to linoleum in the kitchen and bathrooms. Other times, the buyer is just given an extra amount of money that can be spent however he or she chooses.

Buyers like the idea that they can make customized changes to their living space and they do not have to come up with the money to cover the costs. It gives them the freedom to pick and choose options that they may not have been able to consider when they first started looking into buying a new house.

Via hhhomes.com

Upgrades to the Property

Different lots often come with specific premiums. They may be larger than other lots in the community or back up to a common area as opposed to another house. Either way, the buyer is going to pay more for this lot than one of the others. As an added incentive, home builders may offer a special lot with a reduced premium or with no premium at all. Other home builder incentives include things like special landscaping in the front or backyard, or even the addition of a pool.

Other Incentives Unrelated to the Property

In some instances, financing through home builders' company will give a buyer a better interest rate or even reduce the amount of money needed for a down payment. If a person is right on the edge of being about to afford a certain house, this type of discount can make a huge difference. This type of offer is usually written down so that potential buyers have an opportunity to figure out the details and see if this is an offer worth taking advantage of. The incentives and upgrades often correlate with the company's desire to sell the houses or complete a property. There is no guarantee that when you walk in to check on a specific model that the discounts will be offered.