Let's make a deal: Builder incentives on new-construction homes

New-construction homebuyers are flocking to low-down-payment  guaranteed loans from the Federal Housing Administration for financing, and those that opt for conventional loans are getting deals from sources other than builders, experts told The Examiner.
Some builders, however, are stepping up with financial incentives — including cash and special mortgage packages — to help them attract buyers.
K Hovnanian, for example, is offering a promotion that matches the current homebuyer tax credits.
The program, which lasts through Feb. 16, gives first-time homebuyers $8,000 and move-up buyers $6,500 in cash to put toward closing costs or to upgrade some of the home’s features said Dee Minich, senior vice president of sales and marketing at K Hovnanian.
Craftmark Homes, a luxury homebuilder in Maryland and Virginia, is offering an identical program until Jan. 31.
NV Homes’ Web site advertises a $1,500 “Heroes Welcome” bonus to veterans and active duty military personnel. The cash can be used for closing costs or builder upgrades. In Maryland, Lennar is offering up to 6 percent of the sales price toward closing costs.
Some of the incentives being offered by local developers may come with restrictions, said Brandon Green, president of Brandon Green Cos. in the District and a real estate broker. For example, the developers may insist on owner occupancy, and “some go so far as to put restrictions in the deed that prohibit resale for a period of time or give the developer the right of first refusal.”
These builders, he said, have a whole subdivision or complex to market, and they want to maintain the character and image they created, “at least until they sell out the project.”
Pulte Homes, which also markets under the Centex and Del Webb brands, prefers to offer buyers “value pricing strategy” rather than individual or temporary incentives said Pulte corporate communications manager Eric Younan.
Pulte puts packages together, he said, “that offer a great house with great features at a great price.” Pulte’s financing division is currently offering a new home mortgage at 6 percent with a 20 percent down payment.
Real estate industry professionals have complained for months that because of the huge volume of foreclosed homes and short sales being used as comparables in assessing market value, many appraisals are coming in at a level too low to justify the mortgages needed. This has caused a lot of sales to fall apart, often at the last moment, because it affects a buyer’s ability to finance the purchase.
Minich said a low appraisal doesn’t have to kill the deal.
“By the time the appraisal has come in the buyers are usually ready to move, so we try to come up with a settlement that is palatable to both of us. Sellers of existing homes may not have any flexibility, but we have the leeway to cut our profit a bit and get it off the books.”