Evaluate Developer Incentives Carefully

By
Services for Real Estate Pros with Lang Realty FLORIDA SL456703
Posted June 25, 2007

Developers have reduced their prices significantly since mid-2006 in the South Florida market and many offer a variety of incentives for your buyers of New Construction.

Among those incentives are sizable upgrades, reduced down payments, funds back at closing for up to a year of payments, closing costs paid by the developer, one or two years of HOA fees (Home Owner Association or Maintenance), no fees for leasing an investor's unit, and generous commissions and bonuses to cooperating agents.

As a trusted real estate agent, you should help your buyers evaluate each and every incentive. Remember, these incentives come at a cost to the seller. While they may mean less money out-of-pocket for the buyer at closing, they are still part of the overall cost of the property. Ask to see the lender's "Truth-in-Lending" cost sheets and refer to title services for a preliminary HUD statement on the proposed or a similar closing before your buyer signs the developer's contract to purchase.

Evaluate incentives, line-by-line, with the buyer to determine the immediate value and the long-term cost implications. In most cases, the buyer can make a counter-offer to purchase at a lower price if some or all of the incentives are excluded. If the buyer is in a position to do so, it may be advisable to pay all the closing costs.

The lower price, if properly negotiated, will result in lower monthly payments, lower property taxes which are based on market value at closing, and possibly lower insurance premiums. This could add up to a significant savings over several years of ownership.

When considering a counteroffer to a developer, it is advisable to have it drawn up by a real estate attorney who understands the new construction process and is familiar with builders' contracts. If you cannot recommend two or more, ask your broker or other agents for referrals. The immediate out-of-pocket expense to the buyer may be modest and the attorney is likely to insist that his title services be used to conclude the transaction. This should be another benefit to your buyer, who will see you as an outstanding professional who protects their interest well beyond the closing.

Comments (2)

Brad Andersohn
Executive Director of Education at eXp Realty - Fairfield, CA
ActiveBrad - 707.646.1876

Hi Connie, I see this is your first post on Active Rain.  Congratulations!!  I Just wanted to welcome you to our Real Estate Industry Network! 

Welcome aboard, I hope you'll continue to blog, and invite others.  Wishing you all the success our business and this network have to offer.

Enjoy!!

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I hope you'll find this to be a useful tool in helping you get started here on Active Rain.  Please contact me if you have any questions or need anything in the way of assistance. You will meet many wonderful people here. Good Luck to you and your business, and Happy Blogging!

Jun 25, 2007 05:45 PM
Michael Hutchins - Consumer Advocate, Chicago
Michael Hutchins Ent. - Chicago, IL
Hi Connie.  I just wanted to welcome you to the Rain!  I hope you enjoy it here and keep blogging!
Jun 28, 2007 02:25 AM