Melissa Ballman:
New construction homes are the best deal in Utah right now. I am giving an update for December of 2022 and why new construction may make the difference between you getting into a house or not. So stay tuned.
Hi, this is Melissa Ballman and I’m a real estate agent here in the Greater Salt Lake City area. So what that means, if you’re looking at making a real estate move, I’d love to connect with you. Shoot me a text. Send me an email. Do what you got to do, but get in touch with me. But first, today I am talking about new construction homes in Utah.
I actually spent the week with clients here, looked at some existing homes and new construction homes. And let me tell you, we were pleasantly surprised with some of the stuff we learned about new construction this week. So I wanted to be sure that I shared it with all of you because it really could make a difference whether you can buy a home right now or not. And a lot of people have the feeling of why not make it new construction if I’m going to buy.
Okay, so before I jump into the nitty-gritty, I got to give you my disclaimer. And that is every situation is different, every builder is different. So the one thing I find across the board though is that you do have to use the builder’s preferred lender to get some of the stuff that I’m talking about today. But in addition to that, understand that every builder and every mortgage and every person is going to be different on qualifying. So they’re going to take into account things like credit score, how much your down payment is, if the home is a quick move-in for the builder, things like that. So you definitely want to reach out if you’re considering it to get all of the details for yourself to see if you qualify.
Okay, so if you tried to look at new construction since the market took off in 2020, you know it was very difficult to get with a builder. I can’t tell you how many calls I had with people saying, “I tried to reach out to the builder and nobody ever returned my call and nobody called me back.” Well, things have changed with this market shift, and I want to share with you some of the incentives I found out about this week and through the previous couple of weeks that builders are doing.
They’re really trying to kind of fight back against the Fed with the rising interest rates and make things more affordable. They have a lot of buyers who have not been able to qualify for the home, so they have more inventory available. They have homes that are sitting there near completion or completion not sold. So let me tell you, the wheeling and dealing has started.
One of the things that the new construction companies, the big builders have been doing is offering closing cost or rate buydowns. And they’ve been doing that for a while. It’s been a couple of months. And they’ll say, “Hey, we’re going to give you X amount of dollars towards buying down your rate or closing cost,” and some are now doing a percentage of 2% to 3% of your sales price back in closing cost or rate buydowns.
Now, in addition to that, and you can sometimes get both the buydown and they are doing fixed interest rates, and most of the time they’re better than what you can get on the free market, if you will. We did take a dip in interest rates on yesterday, on Thursday, so it’s going to be kind of interesting to see if these deals that the builders are still offering on interest rates are better or not. But like yesterday I found out in FHA as low as 4.875% interest rate. Conventional loans, depending on the builder, they’re doing 4.99% to 5.5%. Some are doing 6%, and that’s on a fixed 30-year mortgage that they’re doing that.
And what some of the builders have done is they took a huge amount of money and bought so much of a rate buydown. So some of the builders, it’s like, let’s just say arbitrarily it’s $5 million. And once that $5 million is gone, then they cannot offer those fixed incentives. Or some of them are like, “Hey, the next 25 houses sold and that’s it.” Once those are sold, they can’t do it. But either way, it’s a really good deal.
The other thing is you’re getting negotiations now. I can tell you I was talking to one of the builders agents and immediately I told her, I said, “Look, that’s over my buyer’s price range. They’re not comfortable doing that.” Without any hesitation responded back to me and said, “Oh, we can get it for lower. I think we can get it for this or that.”
I’ve also, with talking to the model home agents, there’s some builders that these homes are coming back on the market because they’ve fallen out a contract and they used to put on their price sheet a set amount. Well, some of these homes, the builder’s not even setting an amount. So it’s almost like, “Hey, let’s get a price. Let’s see what we can do,” and not sticking to their guns like they have the last couple years. I mean the last few years you were on waiting list and lotteries and hoping that your offer got picked out of them and highest and best and all these crazy things are now going away.
The other thing is they’re more flexible with negotiations on new construction. Some of them have been putting blinds in, whereas before you had to do that yourself. A lot are doing the front yard landscaping, whereas the last couple years that was usually left for you. I had a couple of builders tell my clients this week, “Hey, if that’s important to you, write it in the contract and we’ll negotiate,” like adding stairs to the deck or putting blinds in the house and various things. So as a buyer, with those fixed interest rates and the closing costs, that can make a huge difference to you in being able to qualify for a home or not.
I mean, if you do the simple math and just a $500,000 sales price and they’re offering 2% towards your closing cost or towards a rate buydown, that’s $10,000 that you’ve just saved yourself either in a down payment that will cover the closing cost or buying down that interest rate so it makes your payment more affordable each month.
So there’s some great deals out there with new construction. We looked at existing homes, and let me tell you, some of the existing homes were the same price, if not more, than the new construction homes that we looked at and took a lot more work. And I’m talking anywhere from Layton down to Pleasant Grove. We found this to be true with existing homes and new construction homes.
Now, I’m not saying that existing homes are not negotiable right now. They definitely are. Most homes are going for under asking price and the sellers more willing to work with things. So I’m definitely not saying that. The biggest difference is that rate buydown and being able to fix at a 4.99% interest rate versus what we’ve been seeing, even 5.5%, 6% with the prices dropping yesterday.
So if you’re thinking about, “Should I buy right now? Can I afford to buy? What’s my best option?” Reach out to me. I’d love to connect with you. I am always here to help. But as always, make it a great day.