So Andrea what should buyers do when the foreclosure rate hits record highs?
http://www.mercurynews.com/ci_9245793

Tue May 13 2008, 13:09

Dear NewHomeBuyer, I want to explain in more detail that there are many advantages of having a licensed real estate agent represent you in the purchase of new construction rather than dealing directy with the developer. When you buy real estate in our area, either new or resale, you do not have to pay Realtor commissions. The Seller of the property pays your agent to represent you. Your agent is able to provide you with recent sold comparisons in the area to ensure you are not paying too much. They are also able to negotiate pricing on your behalf, ensure your escrow instructions are followed, help negotiate your loan and protect you legally by following Calif. laws and executing current forms and contracts. Most importantly, your buyer agent can make sure you have been given all the required disclosures you are entitled to receive. If your home has not closed escrow yet, it is not too late to ask the Seller to lower the price. Your agent should be aware of the proper forms to use for this circumstance.

Mon May 12 2008, 15:23

I don't think you can do zero down payment anymore

Mon May 12 2008, 15:11

Is there a chance you can have you builder put a clause in the contract or create an addendum saying in the event builder lowers their base price your contract price should reflect the same? I would go back to your builder on this.

Mon Sep 17 2007, 20:14

HI,
Tks for the additional details. Since the builder has a significant deposit, and builders don't like to lose sales, it is unlikely that you can simply void the contract and get your money back. The reduction in the sales price will probably help get your financing through. From the limited info here, it sounds like the contract will go through, as is. You can keep working w/ the lender to push the builder to give you some additional concessions. Since you are very close to your closing date, you lot and location are set.

Your home might go down again, and maybe not. As Ed stated, if you plan to live in the property for a period of time, things will eventually trend up. Real estate is cyclical. You can't time a market perfectly, so don't hold it over yourself if it does go down a bit. You accomplished a decent milestone in getting the base price adjusted.

It's exciting to move into a new home. Congrats! Enjoy it. While the financial realities of our purchase decisions cannot be dismissed, your home is not simply a financial tool. It is where you will build memories with family and friends, celebrate holidays, take a few pictures and share laughs.

Do your best to see if you have any possibility of negotiating a thing or more in your favor. Don't give up on that agenda.

Good luck.

Mon Sep 17 2007, 14:33

Hello everyone,
I really appreciate everyone's quick response.
Yes, we have given a significant amount to the builder as deposit. We get back the deposit only if we can't get loan approval from the builder's lender, which I think may be difficult. Builder was being fair by giving us this revised base price.

After talking to the lender, we are neogotiating on the closing cost amount paid for title fee etc and lender says he'll check if he can get it credited from the builder. We did get some upgrade credit coz we went with the builder's lender but we have paid few extra for the premium lot.

Closing is approximately 1 1/2 month away.

Any tips or things we should keep in mind?

Mon Sep 17 2007, 14:04

Prices may very well continue to drop. Prices could drop again even after your escrow closes.

I guess it depends on how long you plan to stay in the home. Home prices will again increase in value but it might not happen in the next few years.

The builder didn't want to lose your business and gave you a significant break. Congratulations.

Investmentwise, you need to assess whether future price drops outweigh the potential loss of tax savings that result from paying interest and taxes on your home by not buying the home today. You might want to discuss this option with your tax person or financial planner.

On the other hand, you want to discuss with family members how important it is to be in your own home, a brand new home instead of staying in a rental property. This will place alot of weight to your decision.

Good Luck! I hope this helps.

Mon Sep 17 2007, 12:16

Hi NewHomeBuyer,
How much earnest money (deposit) have you given the builder? The builder may not be willing to refund your deposit. It was great to hear that the builder was willing to adjust the base price. Was the builder simply being fair? Was the builder concerned you might walk (particularly if you had a low deposit)? Would you be unable to secure financing without the adjustment? Is there a mortgage contingency in place? When does it expire? Are you pursuing your loan through the builder"s lender? How soon will you close?

In a market w/ declining values, you could see the loan balance exceed the property value.

Have you negotiated for upgrades or signed any contract for upgrades? If you stay in the contract, see what else you might be able to negotiate in your favor? Depending on any contingencies, you might have the option of getting out of the contract, if that is what you think is best. If you stay, look for upgrades, perhaps a premium lot, buy down on a mortgage, prepaid mortgage payments, etc. You won't get all of those things, and I don't mean to imply that you will. I provided a list of types of things you could look for to offset the potenial losses in a declining market.

If your deposit is large, and you have no contingencies that allow you to get out of the contract, the builder will know that and be less negotiable.

What type of loan you should do may depend upon the costs associated with each. Will the zero down loan be at a higher interest payment?

Good luck!

Mon Sep 17 2007, 12:03

Hi Ed,
Thanks for your quick response.

Our builder has already agreed on giving us this new base price and created the new contract.

We are wondering if we should still wait to close more for the price drop.

Mon Sep 17 2007, 11:39

You should definitely sit down with the sales rep and discuss your options.

You contracted to buy the home at a certain price and now base prices have come down.

You are obviously paying more for the home than it is worth today but you have a contract with the builder. And prices could decline even more befor your home closes.

The builder does not automatically give you the benefit of the base price drop.

If you can not successfully renegotiate the price with the sales rep you will be faced with deciding whether you want to continue with the purchase at the higher price. The builder is not obligated to negotiate the ontract price with you at this point and if you decide not to buy the home, the builder may not return your deposit but you may determine the drop in the base price no longer makes it a good investment.

Good luck.

Mon Sep 17 2007, 11:33