Are Builder Incentives Bad for Consumers?
Kenneth Harney writes about real estate consumer issues. He's written about the Feds investigating builder incentives. He wrote that the Obama Administration is exploring the legality of the various financial incentives and other lures that builders use to get buyers into the property. Apparently, this may violate RESPA - Real Estate Settlement Procedures Act - which prohibit consumers being compelled to use specific realty firms, title companies, builders or any other affiliate in the real estate transaction.
There are stories of consumers being pushed into costlier mortgages because the builders insisted the consumer use the builder's chosen lender or lose the incentives. Typically, Harney sites some particularly egregious criminal examples of some very bad behavior by builders and lenders. HUD - Housing and Urban Development - tried to capture the builder incentives under the "required use" language already in the RESPA law. The National Association of Home Builders objected and the court fight resulted in HUD backing down for now.
Maybe the incentives are good for builders and consumers - consumers may be paying less for upgrades and special features; the builder may proceed with confidence building custom houses with a trusted lender managing the loan. That could happen....
The bottom line here, as in most places is that YOU, the buyer, need to understand your options and understand the contract you're signing. It matters when you write your name on the dotted line.
If you have your own buyer agent via a buyer agency agreement, even working with a builder, you have a big advantage. Rule of thumb here: if you don't have a real estate agent, have an attorney. I'm just saying...
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