Some questions on buying a new home

[Alex_angel]

Why is it that a lot of builders won’t even let you into the design center until you put your money down. What if you could only affor $750k on a home and it was priced at $725k. Wouldn’t you want to know how much that $25k can buy you? No one wants a white walled, white carpeted, white applicanced no curtained home.

The sales agents are very reluctant to give up this info. I have asked numerous times at different builders such as Pardee,WL Homes, JL etc… and each time they give me a vague answer as to the cost of extras. They act like they don’t know the exact answer. It is really frustrating to say the least.

[Anonymous]

you wouldn’t want to buy most of the things builder offers anyways. Just those that’ll be hard to add later on, such as additional room/bathroom, wiring, insulation, etc. You certain can request a book of option list with prices shown. If the worst comes to worst, just put a deposit down and get it at that time, and then tell them you want out the very next day. (they have to give your check back)

[23109VC]

99% of the time I have seen a model home – when I ask the sales people HOW MUCH the options cost – they dont’ know..or won’t say. they can usually tell you WHAT items are upgrades, but very few will actually tell you what they cost.

I have had a few exceptions, where they have printed out a pricing sheet with costs for all the options and let me take it with me. My guess is that it’s just too time consuming to get into a long discussion on how much the extras cost – adn unless you have already put money down on the house – they don’t want to waste their time.

if you walked onto the lot at the porsche dealer, and wanted detailed info on how much all the various options costed, and wanted to price out the car – they would happily do it *IF* they thought you were for real..if they figured you were just a looky loo they would politely refer you to the porsche website where you can look all that stuff up.

given the high volume of Lookyloo people at model homes…they probably assume a majority of the people walking in are not going to buy.

I really liked the Lennar homes that were “EI” = everything’s included. you don’t get to pick what color your counter tops or cabinets will be – but there are NO options or upgrades except flooring. so when you walk the models – what you see is exactly what you get – paint, base boards, appliances, lights, fixtures.

it is very frustrating to walk through a model home – think to yourself – wow this house is beautiful. you look at the pricesheet and it has a very affordable number on it. then you look at the “option/upgrade” list andf ind out that virtually EVERYTHING in teh house was an upgrade. I’ve seen RIDICULOUS stuff as options – lights, switches, door knobs… then you find out that to make the house look even REMOTELY like what you saw would be $100,000 or more extra..and you feel like it’s a bait and switch. some models will have one home more basic..so you can see what you are going to get – but still – i like the Lennar EI idea. you get less choie..but you pay less for more b/c they bought in mega bulk…

[Alex_angel]

That is what I don’t like. I want to see what a base home will look like then I can decide what I would want to add. They don’t allow this to happen and you have to imagine it by removing items from the model home. It is very difficult to say the least.

[Bugs]

Options and upgrades are a huge profit center for these builders. Huge, as in 300%-of-cost huge.

As for not knowing? Don’t kid yourself – they know exactly what they’re putting in and exactly what they’re charging you for it. The reason they’re not showing you the detailed breakdown is because they don’t want you to look at what they’re charging you. People are prone to price shop when they can make their comparisons.

Stick around – I’ll bet at some point you’ll be able to buy a shell with no flooring, fixtures or appliances and design your custom interior yourself. The only question for the builder will be how to avoid disclosing that sale price in the public records so as to not piss off their other buyers.

[SD Realtor]

Agreed with Bugs entirely. Also I have personally seen the reluctance of the sales agents at the developers to give the upgrade sheets or the URL to the websites that have the pricing on them. You cannot even get to the design centers unless you pop down a deposit to reserve a home and in some cases have to be under contract. I would urge most people to price shop for the same upgrades so you can get some semblance of accuracy. The advantage I see in using the builders overinflated upgrades is that you get to finance it in the loan you get for the home (at least the incentive portion)… (which for some reason to me seems fraudulent)

SD Realtor

[gn]

“Stick around – I’ll bet at some point you’ll be able to buy a shell with no flooring, fixtures or appliances and design your custom interior yourself. The only question for the builder will be how to avoid disclosing that sale price in the public records so as to not piss off their other buyers.”

Is this b/c in a downturn it’s easier to sell a “shell” ?
Did the same thing ocured during the last downturn ?

[Alex_angel]

On one of the builders web sites in a FAQ someone asks why upgrades are more expensive than buying from a hardware store and they write that they want to make it easy for the buyer. LOL. Am I to believe that they want don’t want maximum profit but instead do this to make it easy for the buyer. Hardy har har!

[Bugs]

There’s no easier time for a builder to install finishes than when they’re in construction. They don’t have to remove existing finishes to replace them so it should be cheaper for the builder to do it then – and it is.

The problem is that those savings don’t get passed down to the buyer. In fact, the builder charges a lot more to do it than the the homeowner would pay outside contractors to do the install for them.

A construction lender could probably do a loan whereby the buyer takes possession of the property after the shell is completed and the costs to finish the interior are fund-controlled while the buyer’s contractors finish up the interior; then the total can be financed under permanent financing. It’s like doing a construction loan, except instead of starting at ground zero they’re starting out with a shell. The interior buildouts of commercial and industrial buildings are completed this way all the time, and there are a lot of lenders who know how to structure such a deal.

Just think what a builder would have to sell the shell for if the buyer had breakdowns on the pricing on the interiors of other units already sold; the buyer could deduct those “costs” and start negotiations from there.

If a builder is desperate to move inventory they’re liable to do anything.

[Anonymous]

I think the key is that you make the sales person believe that you’re serious. Some that I’ve dealt with were good; they point out which option is a rip-off and which is “good value.”
Generally, you would usually want to get many of the options from a third party, after getting multiple bids. Builder quality on many things that are detail oriented, e.g., wood trims, are usually poor compared to those who specialize.

[farbet]

What about “you must use our lenders” part if you want the incentives? Why should a buyer have to go thru this game. They claim they are giving incentives and take it back with the mark up on the mortages. Is this legal?

[SD Realtor]

Farbet I very much agree on that point. In order to get the incentive you HAVE to use the preferred lender. What I don’t know is how competitive the rates of the preferred lender are. None of my clients who I have represented for buying new homes ever does the homework. They simply have ended up using the preferred lender. Is this legal or not? I am not sure but I don’t see why it is illegal.

This is only speculative by me but I wonder if most of the preferred lenders that are used were involved in helping to underwrite the original project development. Bugs or Surveyor would know more on that then I would.

SD Realtor

[Bugs]

“Preferred lender” sometimes turns out to be a mortgage broker working with a line of credit from a lender; that’s how Lennar operated with most of Bressi Ranch and La Costa Oaks. Trust me, they wouldn’t be steering a buyer toward a specific lender if there wasn’t some monetary benefit for doing so. Obviously, if there’s a monetary benefit the borrower is the one who’s doing the paying, although what they’re paying may not exceed typical financing costs if the lender is giving a discount in exchange for the volume.

[Raybyrnes]

What if you reframed the question? Rather than thinking about this from the buyers standpoint consider the builder. If both the preferred lender rate and an outside lenders rate were the same it should not matter to you whether you use their lender or the outsidelender. But now imagine that the preferred lender has a buyer of the mortgage that is willing to pay a premium for that loan. They might then offer a small discount knowing that they are going to be very well paid on the backend because they have a good buyer for that mortgage.

[solman]

Pardee has always given me the printed out price list… I just have to be persistent in asking for it. Their Carmel Valley models have a good 150k of upgrades. They charge enormous margins.

However, using the builder for some options is just plain smart. For example, it costs more to get a contractor to demolish your existing granite/tile countertop, in order to put on a new one. You’re better off choosing what you want from the builder. Also, the builder has an incentive to do a good job: when you go through pre-close inspection, if you find problems (bad wood work?), they have to fix it before you’ll close escrow. Your average contractor may just say ‘tough’, as he has a mechanics lien on your property, and you have to pay or go to court.

Warmington homes (Stonebridge) has a neighborhood called Viscaya, and their models look great. I’ve priced out what it costs to upgrade everything to model, and minus crown moulding, it’s about 40k. Flooring is another 40k. I’ve priced the Pardee homes before, and they need at least 100k before flooring, due to nickel-and-diming.

[Author]

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