Every homebuyer is an individual with distinct circumstances.
Each has a different reason for moving, various reasons for preferring newly built homes or existing homes and unique financial considerations.
A November 2012 study by Builders Digital Experience (New Home Source is the flagship product from Builders Digital Experience) and Metrostudy shows that more than half of all buyers are shopping for new homes:
- 35 percent of homebuyers consider both new and previously owned homes for their purchase;
- 19 percent have a strong preference for a new home; and
- Those who desire a newly built home typically want a home that they can personalize and that no one else has used.
When you’re looking at new homes with client, it’s important to share with them the possibility of purchasing a home that’s newly built but already complete, one that’s almost finished and can be completed within 30 to 60 days or a ground-up home that could take four or five months or as long as nine months before it’s ready to be occupied. Those options expand choices for buyers depending on their timeline for moving.
Why Quick Delivery Homes Exist
“Builders need to keep up with the construction flow in their communities, so sometimes they’ll build a few spec houses to keep their staff working,” says Carlie Moreno, a Realtor with Century 21 M & M in Vacaville, Calif. “Other builders do it deliberately so they can compete with existing home sales for buyers who want to move fast.”
Spec homes usually have some optional features above the base model. “The upgrades are usually the ones that the salespeople at the community have identified as the most popular with other buyers,” says Mario Negron, owner/broker of Re/Max Prestige in Houston, Texas.
Dondi Hopkins, a Realtor with Coldwell Banker Residential Brokerage in Plantation, Fla., says some builders in her area build all spec homes and allow only a small amount of personalization by buyers during the final phase of construction.
Moreno says some quick delivery homes result from failed sales transactions in which the first buyers either changed their mind or couldn’t complete their financing. “If the home comes from a failed sale, then usually all the options will have been chosen and put in place by the builder, so buyers won’t able to make their own choices.”
However, that may be a plus for some buyers. “Some people love the idea of a newly built home, but they don’t want to make all the decisions in a design center,” says Negron. “A quick delivery home is perfect for those kinds of buyers.”
While most buyers like the ability to personalize a home as much as they like within their budget, some don’t have the time to wait to build a new home to their specifications. Negron says many buyers of quick delivery homes choose them because they need to move fast. Sometimes they’ve sold their current home and don’t want to rent a place while waiting for construction on a new home; others are relocating and need to get settled to start a new job.
If your buyers are looking at existing homes and think they don’t have time to buy a newly built home, you should discuss the option of a spec home that’s ready now or one that’s ready in 30 days. In a market with low inventory, quick delivery homes can give buyers more choice than if they just look at resales.
“Unless they’re paying all cash, most buyers need to arrange financing, which takes at least 30 days or longer,” says Moreno. “A newly built home that’s ready in 30 to 60 days is almost as fast a transaction as buying a resale.”
One more reason Moreno cites for someone wanting a spec home is that sometimes buyers get tired of shopping for a home, particularly if they’ve lost out in multiple bidding wars. “Sometimes buyers just want to make a decision and do a quick close and move,” she says.
Price Comparisons: Spec Homes and To-Be-Built Homes
Some buyers assume that a spec house, particularly if it’s the result of a failed transaction, should be a bargain or that they have more leeway to negotiate the price. Realistically, the price and whether negotiations are possible depend on local market conditions, the pace of sales in the community and how close a community is to being complete.
“Preconstruction prices are usually the best prices because builders want to draw in buyers and buyers are making their choices without the benefit of physically seeing a model or what the community will look like,” says Hopkins.
Hopkins says a former model home can sometimes be a deal when a builder is getting ready to close out a community. “You can sometimes negotiate more on a spec house, especially if it’s one the builder wants to sell fast, but the builder still won’t go below the base price,” says Negron. “You can ask for closing costs or ask for the builder to cover the cost of some of the upgrades that have already been completed.”
Moreno says the price of a quick delivery home depends a lot on the model and optional features. “If you’re looking at the lowest-priced model with bottom-line upgrades, it will be more competitively priced than a larger model with a lot of options,” says Moreno.
Make sure your buyers are comparing the options that are included in the spec home with the cost of adding those features to a to-be-built home so they have a clear picture of the value of the property.
Whether your buyers are in a hurry, don’t want to make too many design choices or are looking for a bargain on a newly built home, a quick review of builders in your area and their inventory of quick delivery homes could result in a fast sale for you.
Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades.
She writes for regional, national and international publications in print and online for a variety of audiences including consumers, real estate investors, business owners and real estate professionals.
Her work has appeared in The Washington Post, The Washington Times, Urban Land magazine, NAREIT’s REIT magazine, National Real Estate Investor Magazine and online at Bankrate.com, HSH.com, The Motley Fool, DailyFinance.com, Insurance.com, Fox Business, MSN, Yahoo, Investopedia.com, MoneyCrashers.com, GetRichSlowly.com and in numerous state and local realtor association publications.