Trade in your OLD house for a NEW ONE!

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Services for Real Estate Pros with Coldwell Banker Global Luxury CalBRE# 01379585

Wow!  I say this today and thought it was worth passing on.  Credit goes to CNNMoney.com

Trade in that old house

Home builders are finding creative ways to sell new houses in the middle of a slump.

By Les Christie, CNNMoney.com staff writer

June 5 2007: 9:36 AM EDT


NEW YORK (CNNMoney.com) -- In a bid to boost home sales, builders are looking to the auto lot for tips on how to move merchandise in a sagging market: they're taking trade-ins.

It's a rarely used business model in the U.S. that addresses concerns for both buyers and developers. For the buyer, a trade-in eliminates juggling a new home while waiting to unload the old one during a slump.

"It's a way to move the market," said Steve Melman, the Director of Economic Services for the National Association of Home Builders (NAHB). "It addresses one of the main reasons that would keep you from buying a house."

Few homeowners can afford to keep up two homes: they're on the hook for two sets of mortgage, maintenance, insurance and property tax payments. And now the market is getting more competitive. Inventories jumped 6.5 percent month-to-month in March, according to broker ZipRealty, which surveyed 18 major markets.

Interest rate rises could pressure housing recovery

If individuals buckle under the burden of double home-ownership, the problem is compounded for new-home developers: the number of properties they're trying to sell rises. Trading in an old house for a new one begins to make sense for both parties.

"We've used it when markets get a little tight, and people have trouble selling their old homes," said Mick Pattinson, president of Barratt American, a Southern California-based home builder.

Pattinson said his parent company has been using trade-ins for years in the United Kingdom, where it is based, and Barratt American is currently offering to take trade-ins at a new development in Perris Valley, California. House prices there start in the upper $300,000.

Here's how Barratt's program works:

"Rule #1 is that the new home has to be a minimum of 20 percent more expensive than the old," said Pattinson. "We then do an appraisal, sometimes two, and see what we have to do to recondition the house for sale. Then we make an offer."

According to him, these offers tend to be quite fair, an average of 92 percent to 95 percent of the appraisal value.

"But if the builder has a big incentive to get rid of inventory, it can be even more," he said. In addition, Barratt is prepared to close within 30 days and the seller doesn't have to market the home through a real estate broker, saving the 6 percent or so commission cost.

"It's a simple program," said Pattinson. "People are surprised when they learn about it. And doing a trade-in gives them a great deal of certainty as to what the final price will be."

The high trade-in value makes it pretty close to break-even for the buyer. And, according to Melman, many of the developers combine the trade-ins with other incentives or discounts.

With their construction expertise, builders can quickly remodel the old home for a reasonable cost and sell it for more than it would have fetched in its old condition. Many builders also have a sales staff to market the home, so they don't have to worry about third-party broker commissions.

According to the latest NAHB survey, about 10 percent of builders nationwide use some form of trading program. About a quarter of them said trade-ins were either somewhat or very effective, compared with 19 percent who said they were ineffective.

New home prices plunge, sales soar

The steps appear to be working for builders and homeowners. New home sales soared in April, up 16.2 percent compared with March. But the incentives took some of the profit out of the deals: The median price of homes sold fell 10.9 percent from April, 2006 to $229,100 and was down 11.1 percent from March.

The use of trade-ins only began to heat up last summer, according to Melman, when more markets fell into a swoon.

"Up until then, people could sell their houses pretty easily," he said.

Now, in many cases, they don't have to. Just trade them in for a new model. 

www.ronpickett.com

 

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Rainer
113,591
Provadus Home Loans
Provadus Home Loans - Marietta, GA
Technology bringing you home.
Amen, I hate to say, it but it make work.  More people are starting to seriously purchase now that rates are beginning to rise.  Great post!
Jun 05, 2007 03:36 AM #1
Rainer
24,623
Ron Pickett
Coldwell Banker Global Luxury - Laguna Beach, CA
REALTOR® Coldwell Banker Laguna Beach
Open Home Mortgage Thank you for you comments.
Jun 05, 2007 05:59 AM #2
Rainmaker
238,761
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate

Ron - Pretty sad commentary that, "In a bid to boost home sales, builders are looking to the auto lot for tips on how to move merchandise".  Knowing what great reps auto dealers have, it's sad to see builders sinking to this level.  Well, desperate times call for desperate measures, I suppose.

Jun 05, 2007 06:54 PM #3
Anonymous
miriam
hi. how do  i  trade in  my  home? where do i  go on  the  internet  to look  for builders or  interested trade in home agents? thanks. email : luxemp@yahoo.com
Apr 13, 2008 03:38 PM #4
Anonymous
ricky
Do you have a list of builders that are offering the trade-in program?
May 08, 2008 02:09 PM #5
Anonymous
please help

hi. how do  i  trade in  my  home? where do i  go on  the  internet  to look  for builders or  interested trade in home agents in northern VA? thanks please email at enigmatismus@yahoo.com

Nov 14, 2008 09:39 AM #6
Anonymous
mr.prince

how do the realtor benifit from this idea?

Nov 21, 2008 04:25 AM #7
Anonymous
BP

I live in Northern VA.  If anyone has a list of builders that are currently doing "trade-ins" I would love to see it. 

May 24, 2009 09:02 AM #8
Anonymous
BP

I live in Northern VA.  If anyone has a list of builders that are currently doing "trade-ins" I would love to see it. 

BP  - please email me at lakelinebernie@tmail.com

May 24, 2009 09:03 AM #9
Anonymous
Barbara Ann Strong

How do I trade in my home for a upgrade bigger home? Please refer me to a source in Flint MI ASAP, I am eager to learn more about trading in homes.

 

Thanks,                                                                                                                          Bstrong-810.789.9942

Jul 16, 2009 12:59 AM #10
Anonymous
Doug Hensley

Is there a list of builders who take homes in trade in Northern Kentucky

Apr 17, 2010 03:20 AM #11
Anonymous
Pattie Hensley

If anyone has a list of builders in Northern Kentucky who does home trade ins please email me. We are adopting a child, plus are raising our grand daughter, and need a larger home. You can email me a list @ pattiehens@aol.com

Apr 17, 2010 03:26 AM #12
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Rainer
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Ron Pickett

REALTOR® Coldwell Banker Laguna Beach
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