Between the lack of resale inventory and appeal of a Brand New Home, many are looking towards New Construction. However, that isn’t much easier… here is some of what we are seeing right now:
- Drawings & Lotteries – this is where all interested buyers in that community get put into a drawing for lot releases to see who gets selected and what happens to be available at that time. For example, you could have 40 prospective Buyers lined up for 3 Lots (per month)… you could be in for a long process.
- Electronic Bidding – the builder may be advertising a $4,000 lot premium, but it doesn’t end there… all prospective buyers get a chance at a blind auction style electronic bid to see how much more they will pay. In the past week, I experienced one where buyers were bidding $25,000 more just for the opportunity to get that lot… and it was a basic 5,000 Sq Ft lot. In essence, you’re then paying about $30K for a chance to buy when you’ll get no return for that on future resale and could experience appraisal issues now meaning more $$$ out of pocket at closing to make it happen.
- Wait Lists – this one is a little more straight forward, but there are some communities with 100+ people on a waiting list where 10 or fewer lots get released each month. It’s first come, first served with choice. Of course some on the wait list will fall off over time for one reason or another, but we are seeing some buyers wait 3-4 months before they can then start that 7-9 month build. In the meantime, they see base & option prices increase while they sit on the sidelines.
In addition to the above, we are seeing fewer/lesser “incentives” being offered, higher deposit amounts and longer build times. It’s a Seller’s Market, but that doesn’t mean we cannot find success; it just requires diligence and a proper plan.