New Builds!!

Should you buy a new build? What do the incentives mean? This can be a great way to become homeowners with a low interest rate! 

Transcript

SPEAKER_01 0:00

Hi everyone and happy April. Welcome to the Beth and Banter Arizona Real Estate Edition. I'm Amy Batten with Waterstone Mortgage.

SPEAKER_02 0:08

And I'm Ryan Batten with West USA Realty.

SPEAKER_01 0:10

All right. On today's episode, Ryan, let's talk about new builds. That has been a really, really uh popular conversation over the last four years with these elevated interest rates. Um, and I know you're seeing a lot, and this is obviously in the Arizona market that we are coming from. Um I know you've seen a lot of really impressive concessions being given by builders.

SPEAKER_02 0:33

Yeah, so I think long gone are the days of uh, you know, sellers in the resale market and builders in the new home market uh dictating terms. Right. So now uh believe it or not, the buyers are in complete control. They they are in the driver's seat. Um, things now this is I'm gonna start out with this one. This is gonna blow your mind. Because I think the average person walks into a new build and they think, oh, that's what the home's selling for? Okay. That's the price.

SPEAKER_01 1:03

Well, that definitely used to be the case.

SPEAKER_02 1:05

But now it's not with some of these builders. You can actually say, Yeah, I know you said you got it listed for $400, but I'd like to pay $375.

SPEAKER_01 1:13

Yep.

SPEAKER_02 1:13

And they will consider it now. It it is that is wild. Trevor Burrus, Jr.

SPEAKER_01 1:17

Well, they're trying to get rid of some of their inventory.

SPEAKER_02 1:19

They are, absolutely. And then, you know, also uh most, if not all, of these builders have, as you're well aware, uh their own in-house mortgage teams. Um they or they own the mortgage company. They own the mortgage company, right? So they can control quite a bit on that end. Um and I've seen several communities offering for, you know, uh quick closes, homes that are already built that maybe the previous buyer fell out on. Um they need to get they need to offload it, right? They're not making any money. And so, you know, I I saw just a just the other day a rate at 30-year fixed rate at 3.99%.

SPEAKER_01 1:57

That is crazy. So just to give you some something to compare it against, right now, current fixed interest rates um are anywhere from 5.75 to 6.5%, depending on what your loan program is, credit score, how much you're borrowing, how much you're putting down, you know, all of those details factor into the interest rate. And they're offering 3.99. Now you do have to qualify for that. I know they have a minimum credit score requirement, um, and they do not offer any down payment assistance. So those are the only, you know, not even negatives, but those are the two negatives when it comes to looking at new bills.

SPEAKER_02 2:31

Good. You're talking, you know, let's say on average, like two points lower.

SPEAKER_01 2:34

That is, yeah, that's incredible.

SPEAKER_02 2:36

Yeah. And and so what does that mean, dollars and cents in a payment?

SPEAKER_01 2:40

Uh 2%. I mean, obviously the price point does change that. Yeah. Um, but I would say uh at least five to six hundred dollars.

SPEAKER_02 2:50

That's crazy.

SPEAKER_01 2:51

Three, three to six hundred dollars, again, depending on price point.

SPEAKER_02 2:54

Yeah. No, that that's wild. So it's huge, yeah. Um, you know, and there are some other nice things that come with new builds. So um while yes, I do feel like at times maybe they kind of slap these guys together a little quickly, right? Um, and some of the the craftsmanship uh can wane as a result. Yeah. That being said, um you're gonna get front door to backdoor one-year warranty on the house, right, for anything and everything. Um you're also gonna get you get minimum five years, but you can register like your AC unit, get 10-year warranty on parts and labor. Um, same with the roofing. Uh roofing's 10 years, I believe, and then structurally, uh a 10-year warranty. Where, you know, in the resale market, you're not going to get that. No. Right? You you it you most likely get a one-year warranty, and it's gonna handle if you have a uh fridge on the fritz or absolutely. You know, something like that. So there's some peace of mind that comes in into play as well uh with with new builds.

SPEAKER_01 3:58

Absolutely, yeah.

SPEAKER_02 3:59

So um so you can negotiate price.

SPEAKER_01 4:01

You can you can You can possibly negotiate price. You can, depending on the builders.

SPEAKER_02 4:06

Yeah, depending on the builders. Um you are going to also, in all likelihood, most of them are offering concessions towards your loan closing costs. So that's you know, just to put it in perspective, typically that's two and a half to three percent of the purchase price that you would have to come out of pocket with ordinarily, that you're not having to, the builder's paying that for you. So um that's a that's another unique thing. Um, you know, and and honestly, I've I've even I've had conversations with sales associates at some of these new builds, and they have told me, hey, you know, normally we don't uh offer a fridge and washer and dryer, but we're willing to throw that in too to kind of incentivize you guys. Um I'm telling you, if you're a buyer and you've been kind of sidelined by these rates, uh a lot of these new builds, they're they're eliminating that excuse. They're getting rid of it.

SPEAKER_01 4:54

I don't mind at all that they're bribing our buyers. You know, I love so much when the buyers come to me, you know, from our radio show or from this podcast, um, and they say, Amy, we don't want to cut you out. Like we really love this new build, but we want to see if you can help us. And I say, absolutely not. The incentives that they're offering you, unfortunately, uh, you know, a lender on the street, if you will, they can't match it. So the only time that we become a resource is if the builder's lender has to decline your loan, then a lot of a lot of times we can jump in and they will give the concessions, at least the amount for your closing costs, uh, to the new lender in order to get your loan closed. They really want to sell these homes. Uh, but ultimately you're always gonna be better off going with the builder's lender financially. This is not always the case, but it is the case in today's environment for sure.

SPEAKER_02 5:45

Yeah, you know, and and another thing that I hear a lot from our clients um regarding new builds. So a lot of the new build uh construction is taking place kind of more on the fringe, on the outer on the outer rings, if you will, of of the metro area. Um and they're like, I don't want to, I don't have to commute 45 minutes to work or an hour to work. And I I get it, nobody does, right? Um, that being said, we all started out in life. We all cut our teeth, we all had to earn our way. Um, and this is no different, right? So you buy a home, let's say you live in it for three, four, five years somewhere in that ballpark. Uh maybe you've built up some equity as a result of that. And now you might have an opportunity to move closer into town. So yeah, for a short period of time, you can you can you can be finite. Um, you you use this opportunity where you can get in, you can, you know, and these are these are new communities. So uh the earlier you get in, the more appreciation you typically realize in these homes. Um you have an opportunity for that growth. And again, you can parlay it into a home that's closer into town, um, more convenient for you and your family.

SPEAKER_01 6:53

So yeah, I agree. I think that there's a lot of benefits with going with a new build. Um, but if you know, if you don't want to live in the areas that the new builds are are being built, or um, gosh, I'm trying to think of another reason. Uh the, you know, one of the big downsides to purchasing a new build is, you know, you have to do all the landscaping. And sometimes you have to do all the window coverings. And when you're a first-time home buyer and you're kind of just, you know, getting in, um, it's difficult living with a complete dirt backyard. We see it all the time. You know, we we sell houses 10 years after they're built and people still didn't do the backyard. Um, so that's the only downside I would say to a new build is, you know, there is a lot of other money that you have to put out or you have to, you know, not have a backyard to enjoy. Um, I personally love buying resales where everything's already done, as long as there's little things that, you know, if I want to tweak it or if I want to change the flooring or the cabinets or whatnot, I can do that. Um, but the one thing you can't change is location. So that is one of the struggles the new builds are having is, you know, we live in the West Valley. So they're, you know, Northwest surprise. I mean, it's out to 200th Avenue.

SPEAKER_02 8:05

Yeah. Yeah, it is. Yeah.

SPEAKER_01 8:07

It's uh kind of crazy, uh, you know, how far out they're building. Um, so that does play a factor in, you know, whether or not you want to purchase a new build.

SPEAKER_02 8:16

You just reminded me of uh an excellent story. A friend of ours, we helped buy, I helped buy out a KB home out off of Happy Valley, about 170th Avenue, somewhere in that ballpark. Uh she got in, I would say a month, two, maybe three at tops uh ahead of the big run-up from COVID. Yeah. I think she bought this home for like 220, 230, some somewhere in that ballpark. I think it's worth well north of 400 now.

SPEAKER_00 8:42

Oh, absolutely.

SPEAKER_02 8:43

You know, and and it's funny, every time we see her, she's so giddy about it. Like she's so happy and so excited. Like she just can't help herself just bragging about it, which I think is fantastic. That's exactly what we're trying to do for folks is we're trying to help them out, trying to get them to uh invest in themselves, right? Hold an asset. I mean, that's uh I know it it seems like we beat a dead horse when we say this, but you know, this it's the single real estate is a single biggest wealth generation tool that any of us here have.

SPEAKER_01 9:12

Absolutely. But I'm a huge fan of buying and holding. I am not a flipper. We are not flippers, we are real estate investors. So we purchase and we hold long term. What we're seeing right now is especially in the areas that have a lot of new builds, you know, anyone that's purchased in the last, you know, two or three years and they have to sell, um, they're having to compete with the new build communities that aren't completed yet. And with those incentives, they're really struggling with selling even for what they purchased four years ago because of that competition. So you do have to be cognizant. I know some things you can't control. You, you know, divorce situations, uh death, job loss. Um, but if you don't absolutely have to sell in this market and that applies to you because you know you've done some research and you see that your values have not moved, um, I would definitely say wait until, you know, kind of after this.

SPEAKER_02 10:06

100% I would hold off on that, not compete against them.

SPEAKER_01 10:09

Yeah.

SPEAKER_02 10:09

Um, you know, that being said, I can't, I can't wait until we get Powell out and we get the new Fed chair in.

SPEAKER_01 10:17

I'm so excited.

SPEAKER_02 10:19

Very excited to see.

SPEAKER_01 10:20

It's like 29 days from today. I am I'm counting down. Um, I don't necessarily think there's going to be an immediate impact, but I don't care. Um I am so excited to at some point be able to say rates are coming down and be right about it.

SPEAKER_02 10:35

Yeah, no, they I think they definitely are gonna trend that way. Um I still think towards the back half of the year. Personally, I feel like we're we're gonna get three rate cuts.

SPEAKER_01 10:44

I don't disagree. I just hope they actually translate into lower rates.

SPEAKER_02 10:48

Yeah. Yeah. I mean, you know, even if there are 25 basis points at a clip, right? At a quarter percent. Um that's that's gotta impact it at some level. I would say that. I agree. Uh and and you'll see, you know, I think you're gonna see quite a few buyers. Once that happens and that word gets out, they're gonna start rushing to the market. So we plan on being busy in the back half of the year for sure. Yeah. Which is exciting because it feels like like it's not that we haven't been busy, but it's just been kind of a slog a little bit the last couple of years.

SPEAKER_01 11:20

Well, I mean, understandably slow, so everybody's worried about being able to afford just everyday things in life. You know, and they they want to buy a house. I mean, we have so much pent-up demand, it's crazy. But the interest rates have stayed elevated longer than any of us anticipated. Um, so people who are buying now, you're getting a heck of a deal on a house because the people who are selling right now, they're kind of in a position where they have to sell. Yeah. So they're being a lot more forgiving and a lot more generous, honestly, just to get the deal to work.

SPEAKER_02 11:49

Yeah, they're they're willing to work with you. They're willing to sacrifice things in order to get out from under the home uh for whatever reason. Um, you know, we've had we've had clients recently that have gotten $30,000, $40,000 off of an ask price. As a matter of fact, to that point, um, of the homes listed uh in the last 12 months, only 13% of them have sold for asking or higher. All of the rest have sold for lower, the low ask, right? So um, and and you know, that's that's not abnormal. I mean, that could be three, four, five grand, right? Like that's peanuts, quite frankly. Um but what combined with that, what you're finding is that you're able to ask these sellers to, for the most part, cover all of your closing costs on your loan. Um also uh be very, very uh open to making repairs on the home, things that aren't quite how they they should be. Uh it's a vast difference from gosh, just a couple of years ago.

SPEAKER_01 12:52

Oh, I completely agree with that. And I'm not excited for the turnaround when it becomes a seller's market again, but I am because that means interest rates are down. And we can feel like we're giving, you know, just uh better payment options, especially for our first-time home buyers.

SPEAKER_02 13:07

Yeah, no, a hundred percent. And and you know, so supply-wise, just so everybody knows, so we're sitting about 19,000 single-family homes in Maricopa County available for purchase. Uh, and that, you know, that sounds like a lot, it does. But uh the reality is that we are by population, we are the fifth largest city in the United States. Uh really, all Maricopa County, you factor all that in, you're you're probably three and a half to four million people, like in that ballpark. That's not a ton of homes. Yeah. It's really, really not. Now, there are condos and townhouses, and so when you add those in, you're probably more in the mid-20s. Um, but I I would say at the end of the day, it the supply says we're in a balanced market, but where prices and rates are say we're not in a balance market. Yeah, we're in a buyer's market, right? So they're not all aligned, if you will.

SPEAKER_01 14:00

Yes. So, Ryan, really quickly, what is the benefit to someone having a real estate agent on a new build? Because we always preach that. Do not go to a new build community without your real estate agent. It's not just so they can just collect an easy check. Um, what are the benefits of having representation when it comes to buying a new build?

SPEAKER_02 14:21

Okay, so number one benefit, in my opinion, is you don't have to pay your agent to represent you and protect you. The builder's gonna pay. That's right out the gate. That's money you don't have to shell out. You get somebody basically, from your perspective, to work for you for free and make sure that the I's are dotted, the T's are crossed, the lenders, you know, handling everything how they're supposed to, fairly um and honestly. Uh and I would tell you what we should be looking for, just as an example. Uh do a home inspection on a new build. Like I said earlier, uh you know, the the quality isn't always there. Absolutely. And from builder to builder, it's you know, it can vary. Um and a builder's not gonna tell you to get an inspection on their work. They don't they're not gonna mention that to you. Of course not. Um and you know, it specifically if you were to do a build from scratch, as opposed to buy a home that's already built. Uh, there are several intervals. You've got foundation, you've got framing, you've got drywall, all these different points in time throughout the construction process that having an agent there that's been through this hundreds of times knows what they're looking for, knows what the quality should look like. Because you know, once they get the drywall up, you don't know are there beams that are cracked? Um, is is it possible that some of the duct work is is leaky, right?

SPEAKER_01 15:50

Uh yeah, or they don't put outlets where they're supposed to.

SPEAKER_02 15:53

You know, all those kind of things. Yeah. Um at the end of the day, you're you're getting somebody to look out for your best interest. And I gotta be honest, don't get me wrong, the the builders they want to sell you the home, but you're not their client. You're really not, right? And the less they can have to do and still sell you the home, the better for them.

SPEAKER_01 16:10

Absolutely.

SPEAKER_02 16:11

Yeah.

SPEAKER_01 16:12

So have a real estate agent, have your representation, um, have someone that's gonna be there to fight for you. You know, I know I'm a very emotional buyer, so I get really googly-eyed over something that's pretty or, you know, something I want, you know, whether it's a car or a house or, you know, it doesn't matter. So you need someone that is going to be there with you every step of the way that is not an emotional, uh, doesn't have an emotional response to the transaction. It doesn't get googly-eyed over, you know, the the countertops or how nice the bathroom mirrors are. You want someone that's gonna look at the cracks in the uh ceiling or, like I said, a misplaced outlet or things that don't work. Um, you know, we've had ones where flooring has sloped, the foundation has sloped. Um, and had it not been for, you know, the real estate agent, Ryan, uh, you know, looking out for the client, they may not have even noticed it.

SPEAKER_02 17:07

Sure. Yeah, no, I had I had a complete horror story. And this is my own, right? Wild. So I bought a new build, the very first house I ever bought. Um, gosh, it was forever ago.

SPEAKER_01 17:19

Uh it was pre-Amy. We don't like to talk about that.

SPEAKER_02 17:22

PA. It was PA. Um, but so I I was just so excited, and I would show up several times a week at the at the home at the site and just kind of check out what's going on with the construction. I and I wasn't a licensed agent at this time, but I walked in one day, and they had several of the workers and like four or five of like the superintendents, the higher-ups there, and they didn't notice me, and I kind of sat back about 10 feet, but I could hear them talking, and they were saying, Hey, we built this house out of square.

SPEAKER_00 17:55

Oh no.

SPEAKER_02 17:57

And to put that in perspective, it's I mean that's not good. That's not what you definitely not what you want. Um, and I go and I just spoke up right then. I said, What do you mean you built it out of square? And they all turned around like they kind of had an oh shit moment, right? If you will. Um I so, anyways, I I did use an agent and I talked to her, and she negotiated, I think, fifteen thousand dollars off of the price of the home as a result of that. And I, well, I, because I was foolish I didn't know, I wanted them to guarantee that it wouldn't affect me selling it down the road. Uh, they they were unwilling to do that. Of course. Um, but here's how they knew it. There's how they knew they had built it out of square. So the tile that we had laid on the floor uh was laid on the diagonal. And as you're going down the wall, right, you have like a half a piece of tile, and then you have a little bit less than half a piece of tile, then a little bit less than that half a piece of tile, and so on and so forth. And pretty soon, so it wasn't, they weren't it looked non-symmetrical, right? It was anyway, so and and that house, it has one, they brought the drywall out to try to cover it up, right? So one of the one of the windowsills is literally like six inches deep.

SPEAKER_00 19:09

Oh my gosh.

SPEAKER_02 19:09

On one side of the house. Just crazy. Oh my gosh. So those things happen in new builds. Um, and and you may not even notice it. Like I just happen to walk in and hear this conversation. You may not be there to hear that conversation. And they may just say, hey, let's just not say anything and hope it gets through. Uh they shouldn't do that, but I wouldn't put it past them, right? And so having somebody there to protect you and make sure that things are being done the way they should be done, um, the numbers are correct, uh, just everything, right? Like all there's so much. It's like drinking out of a fire hose. And especially if you're not a realtor, you're not, you haven't been doing this, it's not your career, if you will. Um, it's very difficult to know what you should ask for, what you can't ask for, what you can't ask for. That's what your agents are for. And again, go back to you don't gotta pay your, you don't have to pay your agent, right? The builder's paying your agent. Yes. Which is it seems weird, right? The builder's paying someone else to represent against them, essentially, right? But still nonetheless.

SPEAKER_01 20:05

To work towards the same goal. The same goal. Not represent against them.

SPEAKER_02 20:08

But still, not, you know, keep them, keep them honest if you're not.

SPEAKER_01 20:12

Absolutely, yes. So if you are interested in a new build, um, want some more information on it, uh, definitely reach out to us anytime. Uh, no obligation at all. We would love to help and answer your questions. Our website is keeping it realistate withamyb.com. And don't forget to tune into our show uh every Saturday on KTAR News 923 FM on Saturdays at 5 p.m. We're on every single week talking about, you know, just real estate. Yep. So thank you so much for joining us, and we hope you have a wonderful rest of your day.

SPEAKER_02 20:44

Bye, everybody.

SPEAKER_01 20:44

Bye.