BRAND-NEW HOUSES AND CONDOS CAN BE GREAT BARGAINS

Many builders of houses and condos have unexpectedly found themselves in local buyer's markets, which rapidly changed within the last six months. The result is an oversupply of new houses and condos, which are competing with reasonably priced resale houses and condos. To cut their inventories, many home builders are offering amazing bargains, both in prices and included features or upgrades. For example, it is not uncommon to find builders advertising no down payments, no payments for six months, landscaping upgrades, upgraded appliances and carpets, easy mortgage qualifying, no closing costs, and other sales incentives. But smart buyers of new homes should understand that builders are very reluctant to cut their asking prices. The reason is that appraisal and mortgage finance problems arise when builders sell below what they sold the same model for a few months ago; the builder can avoid such problems by instead including more features at no additional cost. As house subdivisions and condo complexes gradually sell out their inventories, smart buyers realize the builders and developers become more anxious. The reason is their major profit is in the sale of the last few units. For example, if you see a builder's newspaper ad saying "85 of 100 homes already sold" that really means the builder is highly motivated to sell those last few units, which represent nearly 100 percent of the profit from that project.