I love to sell new homes. There is something about them… like a
new car they feel great. Maybe it’s a throw back to my youth, where I
got my start with real estate, selling tons of new homes on a site in
Germantown, MD that most considered “too far” out. Today it is like
downtown! Yes I love to sell new homes.

Charlotte is the 9th
largest new home market in the nation… Pulte, Ryan, Shea, Orleans,
Toll Brothers, Wieland all the national builders are here. Yet a new
puzzling and disturbing thing happened this past week from a major
builder. The “house” lender did not fund the deal for 7 days after the
closing… for the uninitiated, my buyer lived in the house for a week,
and didn’t own it. How did they do it? It is the symbiotic relationship
the house lender has with the builder, and a disregarding of good
business real estate practices, combined with a jittery lender hold
lots of sub-prime paper. But it DID close.

But that is not the
biggest problem. By far, the biggest problem is that New Home Builders
generally get way too much money for their house. Once you’ve added
options, sometimes $50,000 or more, you can be way, WAY, above market
price for your home. worse, many of these builders depend on Option
Sales to make their profits, so they are selling options all the time.
The downside is that it may take several years for your house to be
worth what you paid for it. The flip side of course is that if you have
to move in say a year, you’ll take a bath on it.

This
contributes to foreclosures when folks have to sell and can’t get their
money out. It’s compounded of course when they used the easy credit of
old to help people buy homes they couldn’t or shouldn’t afford. And it
means you’ve given the first several years of appreciation to the
builder. They created a market, it felt good , and you bought. I am to
the point where in most of these communities I recommend only buying
inventory- already built homes- these are typically available at market
prices.

Another major problem is bad lots. Every community has
them, and the builder would like you to take it from him. These lots
are, by most definitions, dogs. Yet they have to sell them. So here is
how they do it. They only release so many lots at a time. Then, as they
near the end of that “phase” (a totally artificial precept)they create
urgency to sell the last of the lots, by telling you, “There are only
two left in Phase I”–they don’t mention they are the ugly ducks, the
runts of the litter. And people buy them. I train my buyers agents what
to look for– it is their job to be sure it is some other persons bad
luck, not one of our clients.

What do these lots look like? They
may be entry lots, first ones in–these will ALWAYS be less valuable
and harder to sell. Why? Because everyone in the community has to pass
that way, everybody will want to be further back. This is why so many
models are first in, loaded with features and at the end, they are sold
at a discount. Either that or pre-sold to an investor early on at lower
prices. Thy may back to the road, the bigger road, or some other
obstacle/feature difficult to see on a plot map.

Still I love
new homes, but I love getting my buyers deals on inventory homes even
better! If that means occasionally getting into a fight with the
builders, so be it.
Just part of the job. :)