New Home-Buying Tricks
To Get You Into a New House,
Builders Help Sell the Old One;
Showing Off Hardwood Floors
By RUTH SIMON
September 16
Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one.
Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper. Others are offering to make payments on the buyer's old mortgage (or the new one) in an effort to close the deal.
There is also renewed interest in so-called buyback programs: The builder, or a broker, agrees to buy your current home, for a preset price, if it turns out that you can't sell it.
The offers are coming both from local builders and national firms. For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.
In Phoenix, Lennar Corp.'s U.S. Home division is offering a program in which customers who sell their homes through Coldwell Banker pay 3% instead of 6% commission on the sale of their current home. (To make up for that, Coldwell Banker is paid a 3% commission for the sale of the new home.) In Detroit, Toll Brothers Inc. will make principal and interest payments of up to $2,500 a month on a buyer's new mortgage for the first six months, or give the buyer a credit equal to that amount at closing.
"Everyone is trying to be creative," says Larry August of Pacific Pride Communities, a central California builder. With so many homes on the market, selling an existing home is a "huge obstacle for anyone looking to purchase a new home." In some cases, Pacific Pride is making mortgage payments on customers' old homes for as long as six months.
The new spate of offers means that prospective home buyers have another variable to consider. On the one hand, some of these deals can put valuable extra cash in the customer's pocket, or make a deal happen that might otherwise fall apart. However, buyers need to pay attention to the fine print and make sure the terms fit their needs.
For example, special-financing offers typically require that the customer go through the builder for their mortgage. Buyers need to first check whether they can get financing that better suits their needs, and carries a lower cost, somewhere else.
Buyers may also be able to use these deals to negotiate other perks instead -- say, fancier appliances or a lower mortgage rate. "If they want some other feature or benefit that is of the same or less value, we would be willing to look at that," says Kira McCarron, chief marketing officer at Toll Brothers.
The growth of such offers comes as home sales have stalled in much of the country. Builders have already started tapping their usual raft of incentives, ranging from free swimming pools to subsidized closing costs. In some cases, they have even cut prices. The National Association of Realtors recently said it expects home prices to fall during the rest of this year.
For builders, the housing downturn has translated into slower sales and higher cancellation rates among prospective buyers who get cold feet. This month, Beazer Homes USA Inc. said that in July and August, orders fell 49% from the previous year's levels, and cancellations climbed to 50% from 26% in the same period in 2005. KB Home said this month that orders for new homes fell 43% in its fiscal third quarter.
The kinds of help builders are offering varies from market to market, and even from project to project. The best deals are typically offered on homes that are already completed, or near completion.
In the Northeast, K. Hovnanian Homes, a unit of Hovnanian Enterprises Inc., often pays to have a customer's existing home appraised (a move also designed to ensure that the property goes on the market at a realistic price). In some cases, the company will also arrange for the customer to get a lower mortgage rate, pay brokerage commissions on the sale of the existing property or pick up several months of mortgage payments.
Some builders trumpet special deals on their Web sites or in ads in local newspapers. Other offers are made quietly, on a case-by-case basis. For months, Fran Carroll, a mortgage broker in California, has been telling her builder she may not be able to close on her new home because she can't sell her current one, even after dropping the price by $151,000. The builder, Shea Homes, recently offered to pick up the mortgage payments on the new home for three months.
When Ms. Carroll balked, it boosted the offer to include mortgage payments and homeowners' association fees for six months, though she isn't sure she will accept the offer. Like many builders, Shea is making promotional offers, but extending them to people already under contract "is not a common practice," says Eric Snider, national vice president of sales and marketing.
Some builders are also increasingly willing to accept contracts that are contingent on the sale of the buyer's existing home. "We've moved from selling homes, to helping people buy," says Bob Moesta of Lombardo Homes, a builder in Detroit that this year started doing this under some circumstances.
Erickson Retirement Communities, which develops and manages communities in 10 states, has taken hand-holding further in its "Moving Home" program in Michigan. When Elizabeth Kramer decided to move into Erickson's Fox Run community in Novi, Mich., Sharon Baksa, Erickson's "relocation counselor," gave her the names of three real-estate agents who could help her sell the four-bedroom Colonial she had lived in for more than 40 years.
To make the home more attractive, Ms. Baksa recommended that Ms. Kramer pull up the carpet that covered the home's hardwood floors. She also recommended a mover and a service that could help with packing and unpacking, and helped pay for installing air conditioning for the buyer of Ms. Kramer's home.
"It was a huge undertaking and they made it easier," says Ms. Kramer, who sold her home for $235,000 in August. Erickson says it is now rolling out some of the elements of the program in other markets, including Massachusetts, Illinois and New Jersey.
Real-estate brokers say they are also starting to see renewed interest in guaranteed-buyback programs. In these programs, the seller is typically promised a preset price if the home doesn't sell within several months. Berkshire Hathaway Inc. unit Reece & Nichols, a Kansas City, Kan., real-estate broker, says it has already done 10 to 15 buybacks for builders this year, compared with none last year.
But in a cooling market, buyback offers are often greeted with a skeptical eye by sellers, who think their home is worth far more than they are promised. At Long & Foster Real Estate Inc., a mid-Atlantic broker, agents meet with three to five customers a week to explain its buyback program, but only one in 10 signs up. The others "aren't willing to believe what the actual number is," says Danny O'Sullivan of Long & Foster.
Some builders, he says, are now considering whether to make up the difference between the initial listing price and the guaranteed sale price.
To Get You Into a New House,
Builders Help Sell the Old One;
Showing Off Hardwood Floors
By RUTH SIMON
September 16
Home builders have a new trick to try to sell you a new home: They will help you get rid of your old one.
Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper. Others are offering to make payments on the buyer's old mortgage (or the new one) in an effort to close the deal.
There is also renewed interest in so-called buyback programs: The builder, or a broker, agrees to buy your current home, for a preset price, if it turns out that you can't sell it.
The offers are coming both from local builders and national firms. For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C.
In Phoenix, Lennar Corp.'s U.S. Home division is offering a program in which customers who sell their homes through Coldwell Banker pay 3% instead of 6% commission on the sale of their current home. (To make up for that, Coldwell Banker is paid a 3% commission for the sale of the new home.) In Detroit, Toll Brothers Inc. will make principal and interest payments of up to $2,500 a month on a buyer's new mortgage for the first six months, or give the buyer a credit equal to that amount at closing.
"Everyone is trying to be creative," says Larry August of Pacific Pride Communities, a central California builder. With so many homes on the market, selling an existing home is a "huge obstacle for anyone looking to purchase a new home." In some cases, Pacific Pride is making mortgage payments on customers' old homes for as long as six months.
The new spate of offers means that prospective home buyers have another variable to consider. On the one hand, some of these deals can put valuable extra cash in the customer's pocket, or make a deal happen that might otherwise fall apart. However, buyers need to pay attention to the fine print and make sure the terms fit their needs.
For example, special-financing offers typically require that the customer go through the builder for their mortgage. Buyers need to first check whether they can get financing that better suits their needs, and carries a lower cost, somewhere else.
Buyers may also be able to use these deals to negotiate other perks instead -- say, fancier appliances or a lower mortgage rate. "If they want some other feature or benefit that is of the same or less value, we would be willing to look at that," says Kira McCarron, chief marketing officer at Toll Brothers.
The growth of such offers comes as home sales have stalled in much of the country. Builders have already started tapping their usual raft of incentives, ranging from free swimming pools to subsidized closing costs. In some cases, they have even cut prices. The National Association of Realtors recently said it expects home prices to fall during the rest of this year.
For builders, the housing downturn has translated into slower sales and higher cancellation rates among prospective buyers who get cold feet. This month, Beazer Homes USA Inc. said that in July and August, orders fell 49% from the previous year's levels, and cancellations climbed to 50% from 26% in the same period in 2005. KB Home said this month that orders for new homes fell 43% in its fiscal third quarter.
The kinds of help builders are offering varies from market to market, and even from project to project. The best deals are typically offered on homes that are already completed, or near completion.
In the Northeast, K. Hovnanian Homes, a unit of Hovnanian Enterprises Inc., often pays to have a customer's existing home appraised (a move also designed to ensure that the property goes on the market at a realistic price). In some cases, the company will also arrange for the customer to get a lower mortgage rate, pay brokerage commissions on the sale of the existing property or pick up several months of mortgage payments.
Some builders trumpet special deals on their Web sites or in ads in local newspapers. Other offers are made quietly, on a case-by-case basis. For months, Fran Carroll, a mortgage broker in California, has been telling her builder she may not be able to close on her new home because she can't sell her current one, even after dropping the price by $151,000. The builder, Shea Homes, recently offered to pick up the mortgage payments on the new home for three months.
When Ms. Carroll balked, it boosted the offer to include mortgage payments and homeowners' association fees for six months, though she isn't sure she will accept the offer. Like many builders, Shea is making promotional offers, but extending them to people already under contract "is not a common practice," says Eric Snider, national vice president of sales and marketing.
Some builders are also increasingly willing to accept contracts that are contingent on the sale of the buyer's existing home. "We've moved from selling homes, to helping people buy," says Bob Moesta of Lombardo Homes, a builder in Detroit that this year started doing this under some circumstances.
Erickson Retirement Communities, which develops and manages communities in 10 states, has taken hand-holding further in its "Moving Home" program in Michigan. When Elizabeth Kramer decided to move into Erickson's Fox Run community in Novi, Mich., Sharon Baksa, Erickson's "relocation counselor," gave her the names of three real-estate agents who could help her sell the four-bedroom Colonial she had lived in for more than 40 years.
To make the home more attractive, Ms. Baksa recommended that Ms. Kramer pull up the carpet that covered the home's hardwood floors. She also recommended a mover and a service that could help with packing and unpacking, and helped pay for installing air conditioning for the buyer of Ms. Kramer's home.
"It was a huge undertaking and they made it easier," says Ms. Kramer, who sold her home for $235,000 in August. Erickson says it is now rolling out some of the elements of the program in other markets, including Massachusetts, Illinois and New Jersey.
Real-estate brokers say they are also starting to see renewed interest in guaranteed-buyback programs. In these programs, the seller is typically promised a preset price if the home doesn't sell within several months. Berkshire Hathaway Inc. unit Reece & Nichols, a Kansas City, Kan., real-estate broker, says it has already done 10 to 15 buybacks for builders this year, compared with none last year.
But in a cooling market, buyback offers are often greeted with a skeptical eye by sellers, who think their home is worth far more than they are promised. At Long & Foster Real Estate Inc., a mid-Atlantic broker, agents meet with three to five customers a week to explain its buyback program, but only one in 10 signs up. The others "aren't willing to believe what the actual number is," says Danny O'Sullivan of Long & Foster.
Some builders, he says, are now considering whether to make up the difference between the initial listing price and the guaranteed sale price.
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