Foreclosure in Frederick>Question Details

John Gooch, Home Buyer in Frederick, MD

Builders are lowering prices, will existing homes, same area, drop below these savings or go for the new one?

Asked by John Gooch, Frederick, MD Wed Sep 26, 2007

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I see this question dates back many years however it is a question that is still relevant to our current market. New Home sales continue to remain fairly strong in communities in the most demand... i.e., Villages of Urbana, Clarksburg, Middletown. In the grand scheme of things, it always makes sense to show clients the resale market first and then take them to their options in the new homes arena - if it's a market that meets their price point. Often times it makes more sense to buy new as opposed to resale even if a home is priced really low. At the end of the day the investment you have to make to bring a house up to speed doesn't keep you much under market values so why go through all the hassle and stress? It has to make economic sense and show a substantial equity position to buy a rehab home. I always support buying new over resale since frequently resale buyers want homes that are no less than 5 years old.

I specialize in New Homes so if you are in that market, please visit my website where you can learn more about how I can serve your best financial interest in a New Home sale. It's always wise to have an agent on your side of the table in a purchase since it costs you nothing and you can have expertise at your side so that you don't feel as though you are being left in the dark.

Cathy Chapman, Broker
Signature Home Sales, LLC
301-514-6839 Cell
0 votes Thank Flag Link Fri Apr 15, 2011
In this Market with the glut of new homes Builders have a large inventory which they are offering discounts and incentives on to keep solvent. New home starts have dropped tremendously and will continue until they can reduce inventory. But does that mean you should buy one.
The buyer should also consider whether the price, time, expense and labor it akes to bring a new home up to being comfortable. An older home that has been well taken care of and has been brought up to date with kitchens, baths and estalished landscaping and in an area that better suits your lifestyle is more than worth considering. Whichever direction you choose, you should engage a Realtor to guide you though the process making sure you get the best possible deal.
0 votes Thank Flag Link Wed Dec 1, 2010
As already stated, builders are offering wonderful incentives as our market is dreadfully slow.
Whether to buy new or resale really depends on what you, the buyer, want. Does the community offer amenities that appeal to you? Are the schools good? Is the commute bearable? Right now, bargains abound because desperate owners are trying to get out of their homes AND compete with new home builders. Take time to become familiar with whatever community you are considering. Visit days, evenings and weekends...then make your decision. Whatever you buy, it will be for far less than if you had bought 5 years ago.
0 votes Thank Flag Link Wed Jul 21, 2010
Great question- I work with various builder and the word on the street is "SELL" . Many are dumping inventory to just pay the loan off as well as not buying land as they are very much over leveraged and cash poor. It is a great time to buy a new home overall as well as an existing one.
0 votes Thank Flag Link Mon Apr 7, 2008
Builders in this area are still highly competitive with their pricing. They have to move product or lay off workers and report to stock holders. They want to sell their inventory.
0 votes Thank Flag Link Mon Mar 10, 2008
I think you can likely get a better deal through a builder but that is really a case by case scenerio. I know I work for some local builders on their spec homes and they are reducing 40-50k to get homes sold. The average resale seller does not have the equity in their home to keep up with the builders and many get offended when very low offers come in. I think finding the right agent to represent you is your best bet. Make sure he/she has the experience necessary to guide you through the buying process. There are fantastic deals out there right now, with the right guidance you may find one yourself!!! Good luck!
0 votes Thank Flag Link Sun Jan 13, 2008
Builders are offering all kinds of incentives to buy right now! It's a great time to buy a new home. Have a buyers agent help you negotiate the best deal for you.
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0 votes Thank Flag Link Mon Oct 8, 2007
Hello John. Are you talking about existing homes in a subdivision in which builders are still putting up new homes or are you talking about existing homes outside the area where new homes are going up?

While I think new is not always better, in the end buyers will buy where they think they'll get the most for their money. If you have a resale and a new home in the same subdivision, you are definitely competing with builder incentives. Builders are in a better position to lower the prices than individual home owners are. Unless the resale has something to offer that the new home does not have, a buyers will probably lean towards the new home. They can also look to the builder should problems arise after the close of escrow whereas it's more difficult to try to get a private owner to take care of a post-escrow defect. Builders have warranties that private owners do not have. On the other hand, an existing home may have landscaping that the new home does not have.
There are definitely areas where the builders are no selling new homes for less than what buyers paid for the same model a year ago and those builder sales do affect the resale values of the existing home inventory. My recommendation would be, don't sell if you don't have to while the builders are still selling their new homes. I would also recommend to buyers of new homes to think about how future sales of homes by the builder might affect the values of the new homes they are buying today from the builder. A lot of buyers of new homes do not think about that when they make their purchasing decision. I know this is going on in one of the master plan communities in my area and I see how this trend affects valuation in that area as I am having trouble coming up with comparable sales that make sense. The same model that sold for $500,000 a year ago, may now be sold for $400,000 less, which of course hurts those who are trying to sell the house they bought a year ago for $500,000. Another problem is that many builders do not report their sales through the MLS, which makes it more difficult for agents representing buyers of new homes to research values. I have even seen $100,000 price differences among new home sales of the same model within less than 6 months.
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0 votes Thank Flag Link Wed Sep 26, 2007
Ute Ferdig -…, Real Estate Pro in New Castle, DE
In some cases, it will be very difficult for sellers that have bought in recent years to lower their prices unless they plan to bring money to the closing table. Both new and existing homes have their advantages. New homes often offer modern amenities (like central air) that older homes do not and older homes offer classic amenities (like original trimming and woodwork) that new homes do not. So you really must ask yourself what you are looking for. So what are you looking for in your next home? What is important to you?
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0 votes Thank Flag Link Wed Sep 26, 2007
What was norm in the past has now become ancient history. There was a time when new build homes increased the price of the existing home values. This topsy turvy market has changed the rules somewhat - to where there are no rules to gauge what will happen.

If your market does not have a glut in inventory - new build or resale home - one should compliment the other. However, in a glut (genuine buyers market) the new build can make for a better deal to the consumer.... I'm not speaking in terms of price alone. If a resale home needs work; it cannot compete with the "like" new build homes.

Each market is unique - from neighborhood to neighborhood. A good agent in your market can tell what your "variables" are.
0 votes Thank Flag Link Wed Sep 26, 2007
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