First, thank you for all your great contributions regarding the post last week concerning buying in San Elijo! The answers given prompted my friend to visit the Sales Rep at the complex and share her concern of the market in an attempt to negotiate on a price.
Looking past the “sell sell sell” standpoint of this rep he finally gave her the “bottom line”. I confirmed asking him “is that all you can do?” and he replied “that’s all my managers will let me do”.
I’m unfamiliar with one of these options and would be grateful for all of your opinions.
According to the rep, Shea Homes cannot alter the base price of the home; which is $441,000.00. They can nonetheless, out of the blue, offer more incentives. In his words, this was “to be on par with some of the other communities who INITIALLY advertised their homes at exploded market prices and are having to come down now” According to the rep, this gives buyers the impression that these other communities are discounting their homes, when really they are just selling them for what they should have been selling them for in the first place. Do you smell B/S?
Just a reminder, the numbers we are talking about is a $441,000.00 base price with $39,000.00 in upgrades for a total of $480.000.00.
The rep stated there is a law in place (I did ask him twice if this was a real law) that they (Shea) cannot offer more then 6% of the base price in incentives. With that said, the incentive on upgrades cannot exceed $20,000.00. He proceeded to suggest 2 options while dancing around the subject that “He can’t do this for everyone and she is special” basically, typical sales crap.
Option 1:
Shea already “through in” the “dream kitchen” package which is $5,000, so her additional incentive discount towards flooring or what not would be $15,000.00 for a total price of $465,000.00
Option 2:
3-2-1 Buy down which I had not been familiar with. The Rep explained Shea will buy some of the mortgage back which resulted in your mortgage payments being smaller for the first 3 years. Year one you would be paying 2%, Year two, 3%, Year three, 4% and year four and five it bumps to 6 and 6.25% (or your locked in rate at time of signing). There are qualifications for this such as FICO must be 660 and you have to have 20% down (which she does).
The savings with the 3-2-1 Buy down would be $15,000.00 and he felt he could “swing some things” to get about $10,000.00 incentives thrown in on top of that resulting in a $25,000.00 discount on the home or a total price of $455.000.00.
I should point out, that when we left this guys office. He literally was chasing us to my car (probably sensing my friend’s urgency to get the hell out of there and wait). I figure if the throwing in of incentives is just starting to happen one should hold off until they get even more desperate.
As always, your comments and opinions are much appreciated!
With regards to disconting prices, I have been told that they can indeed do it but they really try not to for a number of reasons. First, it pisses off buyers who paid more for the same house in earlier phases. Second, builders negotiate prices for upgrades and get good deals due to the volume of business. $25,000 in upgrades will actually only cost the builder, say, $15,000, making it a better approach than slashing prices. Third, options don’t appear in comps but a discounted house price does. Over time, this lowers all of the home prices, including phases that are not yet built.
If I were your friend, I would demand a lowered price plus incentives. Are there any homes that are built or being built that are not sold yet? They really up the incentives on unsold inventory, including price reductions and many times options are already included. EG: The builder will add granite and tile floors even though it is unsold knowing it will be easier to sell that way. Find out when Shea’s fiscal year ends; they will be in a rush to close as many homes as possible to make the year look better for stockholders. For many companies, December is the date! If your friend has 20% down and is non-contingent, they should be salivating to get her business.
Note: If this is the Calico Bluffs development in Old Creek Ranch, I do not think that is considered San Elijo Hills. It is right next to it though.
Good luck with your purchase. It appears the $460k price for Larkspur is a little high unless it is at least a plan 3. They were quoting similar prices for the larger units during summer. Maybe it is all in the overpriced upgrades. Anyway, price apart it is a good design and your friend might enjoy at least the good taste in design Shea Homes seem to have.
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