Homebuilders Try All Kinds Of Upgrades

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Overview

Builders are still trying to lure in customers using incentives. Lennar and Pulte Homes offer financing options and price deals. Other builders are offering new cars, mortgage payments and even frequent flyer miles. The NAHB says 75% of builders nationally are offering incentives.

Lennar's October Madness Sale Ends Today. Florida: Mark Metheny, Lennar (LEN) division president: "During our October Madness sale, buyers can take advantage of special financing options. Buyers can choose the special financing package of 2.99% the first year, 3.99% the second year and then a 4.99% fixed rate for the life of the mortgage, or they can choose zero closing costs.” (Tampa Bay Online, Oct. 19) 

Free Kitchen Upgrades, Oh -- and Airline Miles. “Big, national builders are making unheard-of cuts in prices and offering other incentives, giving local builders no choice but to follow suit. NAHB: 75% of builders are offering incentives… St. Lawrence Homes, a regional builder in North Carolina and Ohio, recently offered a new car with the purchase of a home… Schumacher Homes, a national custom homebuilder, will make your first year of mortgage payments. A more common incentive: free upgrades. Richmond American Homes recently offered up to $35,000 toward upgrades... Jamie and Nate Kelly of Cupertino, Calif. [were offered] airline miles.” (Kiplinger, Oct. 19)

Del Webb Offers Savings In Mesquite And Las Vegas. “Savings and incentives are being offered on homes that can be ready for move-in by year's end at developer Del Webb’s (PHM) communities in Las Vegas and Mesquite, including Solera at Stallion Mountain in Las Vegas, the nearly sold-out communities of Sun City Anthem and The Villas at Solera at Anthem in Henderson and Sun City Mesquite in Mesquite, Nev.” (Las Vegas Review Journal, Oct. 18)

Lennar In La/Valencia Is Closing Out Inventory Homes During This Weekend’s October Madness Event. Valencia, California: “Select Lennar communities in Valencia this [weekend (October 18th and 19th), will be offering “incredible pricing and mind-blowing financing” through Universal American Mortgage Company of California (UAMC) as they begin to close out their remaining inventory homes before year end.” (Press Release, Oct. 16)

                                                                            

Get Seeking Alpha's housing market coverage by email -- it's free and takes only seconds to sign up.

Comments

[proman:]

The "free car" doesn't make a lot of sense from either a buyer's or lender's perspective. For lending purposes, the value of the car will need to be deducted from the purchase price of the house. The result is a lower loan amount and a corresponding higher down payment. If the "free car" is not disclosed to the lender, the regional builders could be looking at a civil and/or ciminal fraud action. Once buyer's realize that the "free car" offer is really a poorly designed bait and switch scheme, complaints to the local Department of Real Estate will commence.

2008 Oct 22 01:01 PM

[billddrummer:]

Hi Judy,

Great resource, as always. It's a pleasure reading your contributions.

As far as the 'free' car, it sounds to me like the car would be considered a marketing cost by the builder, and wouldn't have any impact on the sales price of the home. It's just an incentive to buy, which would be separate from the sales transaction. As far as the lender is concerned, that wouldn't make any difference to the value of the property.

But the purchaser would have to declare the value of the car as income, similar to a sweepstakes winner, if in fact the builder offered it as a sales incentive. Then, the buyer would have capital gains tax to pay on the value of the vehicle, which could be substantial, depending on the type of vehicle offered.

The alternative (if the buyer didn't need the car) would be for the buyer to immediately sell the car at less than market value but keep a portion of the proceeds to pay the resulting tax.

For example, if the builder throws in a $15,000 car, the capital gains tax would be 20%, or $3,000. If the buyer sells the car for $12,000, then that cuts the gain to $12,000, and the tax payable drops to $2,400. The homebuyer would then net $9,600 after the tax has been paid.

Meanwhile, the builder deducts $15,000 in 'marketing' to account for the cost of the vehicle.

If anyone out there has any insight, it's welcomed. But that's the way it seems to me.

Great job as always!!!

Bill

2008 Oct 22 07:35 PM

[billddrummer:]

Hi Judy,

Thanks for this resource!

I reported JBarikhan, because the post appeared to be a solicitation for hits on his own website, that advertises builder-sponsored auctions across the Southwest.

I don't think this represents a proper use of this forum.

All the best,

Bill

2008 Oct 29 01:51 PM