I live in Las Vegas and currently it is a buyers market.
I was flipping through a local real estate publication and I noticed alot of ads with homes being sold with “builder incentives”. Can someone please explain exactly what this means? ???
Builder incentives usually means the builder is giving the buyer something to make their homes more attractive. Some examples are buying down the interest rate, offering to furnish, etc.
A lot of times homebuyers are first time owners. Builders (and investors) will sometimes throw in a washer&dryer, fridge, or some other necessity to spark interest.
Builder Incentives is a code word that means the builder is having trouble selling their houses. Therefore, they are forced to do something (lower the price, throw in extras) to move their inventory. When you see this, it also means that all those people who gambled on pre-construction are in trouble. Frequently, the people who bought pre-construction now have their property at a higher price than the brand new units the builder is turning out. Can you say UPSIDE DOWN? This is the way many speculators go broke during a real estate downturn.
Mike
They can do all sorts of things like include an extra parking spot, get an upgraded kitchen with better applicances, pay for a year’s worth of condo fees, all sorts of things. Best one I saw recently was actually a buyer’s broker incentive. They were offering the buyer broker a 5% commission. Usually on a co-broke situation, the buyer’s agent gets a split of the commission which for this area would be 2-3%.
These units were priced from 600-900k. Too bad I didn’t have a client interested in the unit.
Some of the ads placed are offering $10,000 and $15,000 builders incentives.
Is this cash back to the buyer?
I agree with Mike!
With the “cash back” its usually included in your loan, but the “builder” gives it to you. Just like financing closing costs.
Hello,
You should read this:
http://www.legalwiz.com/freearticles/cashingoutyourequity.shtml
See you,