I live in California and there is a new subdivision going up and they are offering 40,000 dollars off the original price on 10 houses that are already being built. They said a lot of people are using that 40,000 to buy down their interest rate....or we could use the 40,000 toward the loan...could this be true or is it just a lie to get us to buy the home??
2007-07-17 08:31:03 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
These types of deals are everywhere right now. Builders need to sell their product, sometimes even at a loss.
Just understand that this does NOT mean you are walking into $40K worth of equity.
The builder isn't in the charity business. They will sell their homes for every dollar they can get. So what that $40K off means is that they can't get more than that new lower price.
And neither could you if you tried to sell it tomorrow. Not next year either. Maybe in 5-7 years.
Any of that $40K you use to pay your closing costs or points will be equity lost. So I wouldn't go into this deal planning to apply those incentives except maybe to cover your basic closing costs.
Otherwise, you'll just end up upside-down for a couple years.
2007-07-17 10:52:55 · answer #1 · answered by Yanswersmonitorsarenazis 5 · 0⤊ 0⤋
the key seems to be the term "original price". What it says to me is that they can't sell them at the original price, so they are reducing the price by $40,000.
Unless you were already bringing $40,000 more than the down payment required by your lender for the terms you wanted, the money never existed, its just a price reduction.
Another problem with price reductions is that they do make the strongest signal to an appraiser that the market is valuing the product at the reduced price, or the seller would not be offering it. So getting an appraisal at the original price becomes difficult.
Homes are worth what a willing buyer will pay a willing seller, but if they are not custom made, they tend to be valued pretty much by the use of comparable sales.
2007-07-17 08:42:14 · answer #2 · answered by John M 7 · 1⤊ 0⤋
If a new builder is offering $40K as an incentive, it means that the value of homes in this area have gone down since they put out their original price list. Perhaps their original prices were way too high for the market as well. In most of the areas in US, home values have gone down recently.
Keep in mind, you are not getting free money, you are just being offered an incentive so that the builder can sell as many homes at possible in this down market.
2007-07-17 08:37:21 · answer #3 · answered by jonmm 4 · 1⤊ 0⤋
lowering home costs by 40k nowadays is not uncommon.. probably you can't sell it at 40k more in the next year or two because of the slowdown of the real estate business.. but i think you can have a little equity there if decide to buy it..
2007-07-17 09:52:23 · answer #4 · answered by just4success 2 · 0⤊ 0⤋
Sure, it's true. I see deals like this everyday in DC area.
Of course, if you wait 5 years - you can get 200K off the price.
2007-07-17 08:57:13 · answer #5 · answered by jck_kerouac 2 · 1⤊ 0⤋
Gimmick!
40K off what?
Car dealers invented that ruse.
2007-07-17 08:35:48 · answer #6 · answered by ed 7 · 0⤊ 0⤋