How to lowball a builder

[sheilawellington]

I’ve been lurking for a while, and would like to say thanks to everyone for the very informative comments.

How do I go about making a credible law ball offer to a builder? I fear that if I make a verbal offer to the sales agent, he’ll just say no. Some background: This development has been around since the early 90s in the far western San Fernando Valley. The builder has a good reputation for quality.

When I checked in 2004, they had some new homes starting in the high 900s. I thought that was too high. Over the next two years, prices got even higher. Then last December, an all-cash buyer saw a semi-finished 2475 sf house listed for $1,150,000 or so, and offered $750K. He got it and closed escrow in mid January! So, at least I know that they are flexible.

I think the original buyer had cancelled, and the builder found itself with a finished house sitting there. Well, today they have a similar situation: a finished 3780 sf house (minus the flooring and landscaping) listed for $1,345,000. The sales agent has hinted it can go for $1,100,000. It has all sorts of nice upgrades and a great view of the mountains.

I want to offer $800K for the house as is now (withut the flooring). Do you think it’ll fly? My plan is the following: write up a formal “offer to purchase” (where to find a form?), and include a cashier’s/official check for $50K as earnest money, as well as a pre-approval/commitment letter from my bank, and an offer to close escrow in two weeks. I have excellent credit and close to $675K in cash, but I’m not sure yet how much to put for a down payment.

What do you think of my plan? Any experience lawballing builders? Any comments are greatly appreciated!

[sheilawellington]

I found the "offer to purchase" form online, in case anybody needs it:

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf

 

[sheilawellington]

I found the "offer to purchase" form online, in case anybody needs it:

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf

 

[sheilawellington]

I found the "offer to purchase" form online, in case anybody needs it:

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf

 

[sheilawellington]

I found the "offer to purchase" form online, in case anybody needs it:

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf

 

[sheilawellington]

I found the "offer to purchase" form online, in case anybody needs it:

http://filelibrary.myaasite.com/Content/2/2822/7943294.pdf

 

[raptorduck]

In my experience, builders are easiser to lowball than REO banks. It all comes down to how many buyers are looking at those houses and how long the builder has been carrying them. I think builders are the group most likely to respond favorably to low ball offers. They are not emotionally attached to the home, they need to turn inventory. Their financial performance is measured in part by inventory turnover.

One thing to realize about the builder is that your low ball offer will impact his other homes in the area. So, get creative. Are there things you can ask the builder to pay for, such as closing costs or Mello Roos tax, that won’t lower the comps for his other homes too much? Those things can effectively lower the price you are paying while preserving his comps at the same time, not to mention your own after you buy. To that end, a builder will rather give you more upgrades than lower the price if he has lots of homes still in the area to sell. You can use that to your advantage as well.

[raptorduck]

In my experience, builders are easiser to lowball than REO banks. It all comes down to how many buyers are looking at those houses and how long the builder has been carrying them. I think builders are the group most likely to respond favorably to low ball offers. They are not emotionally attached to the home, they need to turn inventory. Their financial performance is measured in part by inventory turnover.

One thing to realize about the builder is that your low ball offer will impact his other homes in the area. So, get creative. Are there things you can ask the builder to pay for, such as closing costs or Mello Roos tax, that won’t lower the comps for his other homes too much? Those things can effectively lower the price you are paying while preserving his comps at the same time, not to mention your own after you buy. To that end, a builder will rather give you more upgrades than lower the price if he has lots of homes still in the area to sell. You can use that to your advantage as well.

[raptorduck]

In my experience, builders are easiser to lowball than REO banks. It all comes down to how many buyers are looking at those houses and how long the builder has been carrying them. I think builders are the group most likely to respond favorably to low ball offers. They are not emotionally attached to the home, they need to turn inventory. Their financial performance is measured in part by inventory turnover.

One thing to realize about the builder is that your low ball offer will impact his other homes in the area. So, get creative. Are there things you can ask the builder to pay for, such as closing costs or Mello Roos tax, that won’t lower the comps for his other homes too much? Those things can effectively lower the price you are paying while preserving his comps at the same time, not to mention your own after you buy. To that end, a builder will rather give you more upgrades than lower the price if he has lots of homes still in the area to sell. You can use that to your advantage as well.

[raptorduck]

In my experience, builders are easiser to lowball than REO banks. It all comes down to how many buyers are looking at those houses and how long the builder has been carrying them. I think builders are the group most likely to respond favorably to low ball offers. They are not emotionally attached to the home, they need to turn inventory. Their financial performance is measured in part by inventory turnover.

One thing to realize about the builder is that your low ball offer will impact his other homes in the area. So, get creative. Are there things you can ask the builder to pay for, such as closing costs or Mello Roos tax, that won’t lower the comps for his other homes too much? Those things can effectively lower the price you are paying while preserving his comps at the same time, not to mention your own after you buy. To that end, a builder will rather give you more upgrades than lower the price if he has lots of homes still in the area to sell. You can use that to your advantage as well.

[raptorduck]

In my experience, builders are easiser to lowball than REO banks. It all comes down to how many buyers are looking at those houses and how long the builder has been carrying them. I think builders are the group most likely to respond favorably to low ball offers. They are not emotionally attached to the home, they need to turn inventory. Their financial performance is measured in part by inventory turnover.

One thing to realize about the builder is that your low ball offer will impact his other homes in the area. So, get creative. Are there things you can ask the builder to pay for, such as closing costs or Mello Roos tax, that won’t lower the comps for his other homes too much? Those things can effectively lower the price you are paying while preserving his comps at the same time, not to mention your own after you buy. To that end, a builder will rather give you more upgrades than lower the price if he has lots of homes still in the area to sell. You can use that to your advantage as well.

[Tuba]

The best chances are a standing inventory house, and you must close in the final month of that ending quarter. Some builders start their first qtr in January and some like KB start in December. They all the have same business plans, and this is how many homes closed for the year. Typically they start off with a smaller number for the first qtr and it gradually increases. The very best price reductions come at the 4th qtr when they need to make up those closings for the year. The 4th quarter also see’s the biggest decline in prices that sets the comp for the next phases that are for the next years business plan. Also things to look for are communities that are midway or nearing their end of build out. Also, one last nice trick if you are determined, that follows the above advice. Bypass the agent in the office, and find out the sales manager/director and call them directly and tell them you want your offer reviewed. This way the agent doesn’t get into trouble for presenting your lowball offer, and the director can offer it to the svp or president as a way to make a number for their goal (I’ve seen this happend). Good luck

[Tuba]

The best chances are a standing inventory house, and you must close in the final month of that ending quarter. Some builders start their first qtr in January and some like KB start in December. They all the have same business plans, and this is how many homes closed for the year. Typically they start off with a smaller number for the first qtr and it gradually increases. The very best price reductions come at the 4th qtr when they need to make up those closings for the year. The 4th quarter also see’s the biggest decline in prices that sets the comp for the next phases that are for the next years business plan. Also things to look for are communities that are midway or nearing their end of build out. Also, one last nice trick if you are determined, that follows the above advice. Bypass the agent in the office, and find out the sales manager/director and call them directly and tell them you want your offer reviewed. This way the agent doesn’t get into trouble for presenting your lowball offer, and the director can offer it to the svp or president as a way to make a number for their goal (I’ve seen this happend). Good luck

[Tuba]

The best chances are a standing inventory house, and you must close in the final month of that ending quarter. Some builders start their first qtr in January and some like KB start in December. They all the have same business plans, and this is how many homes closed for the year. Typically they start off with a smaller number for the first qtr and it gradually increases. The very best price reductions come at the 4th qtr when they need to make up those closings for the year. The 4th quarter also see’s the biggest decline in prices that sets the comp for the next phases that are for the next years business plan. Also things to look for are communities that are midway or nearing their end of build out. Also, one last nice trick if you are determined, that follows the above advice. Bypass the agent in the office, and find out the sales manager/director and call them directly and tell them you want your offer reviewed. This way the agent doesn’t get into trouble for presenting your lowball offer, and the director can offer it to the svp or president as a way to make a number for their goal (I’ve seen this happend). Good luck

[Tuba]

The best chances are a standing inventory house, and you must close in the final month of that ending quarter. Some builders start their first qtr in January and some like KB start in December. They all the have same business plans, and this is how many homes closed for the year. Typically they start off with a smaller number for the first qtr and it gradually increases. The very best price reductions come at the 4th qtr when they need to make up those closings for the year. The 4th quarter also see’s the biggest decline in prices that sets the comp for the next phases that are for the next years business plan. Also things to look for are communities that are midway or nearing their end of build out. Also, one last nice trick if you are determined, that follows the above advice. Bypass the agent in the office, and find out the sales manager/director and call them directly and tell them you want your offer reviewed. This way the agent doesn’t get into trouble for presenting your lowball offer, and the director can offer it to the svp or president as a way to make a number for their goal (I’ve seen this happend). Good luck

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