What is a "builder’s incentive"?

sedonaWhen a builder is looking for business, rather than lower the base price, he will offer an "incentive"  to the buyers to purchase his product. It will range from giving you refrigerator at closing to several thousand dollars to be used for your closing costs or the purchase of his options. It is always tied to your using the builder’s financing or paying cash. Many of the builder’s parent corporations own financing and title companies. This is to their benefit because they can control the time lines of the lenders and have a direct line of communication with them. We always encourage our buyers to compare the "Good Faith Estimate" that the builder’s lender gives you with one from an independent lender. The rates may be similar, the expenses may not. However, sometimes even if your brother is a lender he cannot beat the builder’s incentives. You must compare to be certain.

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What is a Lot Premium?

leaf in waterThe builder offers their plans built with a base price on a standard sized lot. They frequently have the lot price included in the base price. If the builder has several lots available on which to build a plan, some may be more desirable than others by virtue of exposure, size or location. Those more desirable lots will have a "premium" to purchase them. That can be from a few hundred dollars to over several hundred thousand dollars for a lot on a prime golf course or lake. The same applies to selection of a floor in a condominium; the higher the floor or the better the view or exposure, the higher the premium.  The penthouse unit may be identical to one on the first floor, but will be much more expensive.

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What is an Upgrade and an Option?

Sedona Arizona Bell RockAs soon as you request a different grade of material than is offered by the builder and included in the base price of the home you are requesting an "upgrade".

The builder expects you to do this and makes certain "options" available to the buyer by pre-pricing the expected upgrades. 

For example: the builder has already priced groups of tile in amounts necessary for each of the areas in the specific plan you are purchasing, they know what it will cost to convert that open den to another bedroom etc.

These upgrades and options include everything from door knobs, lighting, windows, flooring and cabinets to raising a ceiling, rounding corners, adding a bathroom or converting a garage. The average buyer will spend from 15% up to 30% or more of the base price in upgrades. More if they add a casita or pool. Although the builders do not as a rule build pools, they work closely with selected pool contractors and the cost of a pool can usually be added into your mortgage.

 

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What is an “elevation”?

In the construction of a community, the builder does not want all of the homes to look alike, but does not want to undergo the challenge of making several dozen floor plans available, so the builder will offer different exterior finishes to the same model. The base price exterior or “elevation” will be included within the base price of the home. If you want a stone front, rounded windows, or other options that make the house look different from the exterior to the home next door, there is that opportunity for an additional fee. The builders are quite specific in their offering of lots with regard to floor plan, color and elevations. They will not allow the same elevation on the same floor plan to be directly across from or next to an identical one. You are given a palette of colors from which to select your exterior, that palette may have the houses next door and across the street excluded! This eliminates the appearance in a community of the old “tract home”, where the builder built the same floor plan with the same elevation in the same color all the way down the block.

Why don’t more homes in AZ have basements?

ground digIn cold climates the sewer and water lines have to be buried deeply. As the builder brings heavy equipment in to dig holes to lay those lines it is a small matter expense wise to continue digging a hole large enough for a basement! In our Valley of the Sun we do not have deep freezes. Our water and sewer lines are about 18 inches below the ground. Our footers are not much deeper. Our homes are mostly built on cement slabs. There is no need to bring in heavy equipment to dig deep holes. If they do dig that hole and create a basement home, they will have to include a "pump room" with a pump to get the water and waste from basement bathrooms and sinks up to the level of the sewer lines. We do have electric outages here as in other cities. If you purchase a basement home you accept the possibilities that come with power failures.

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What is a “Spec” Home?

Front of houseWhen a builder has crews available, or he is trying to sell lots in a certain section, or for any number of reasons, he will begin to build a home on the “speculation” that someone will want to buy it. There may or may not be Specs available at any given time. All of the choices that go onto the city permit to build are already made: elevation, left or right garage, patio extensions, garage conversions etc. Depending on the building stage the buyer may have choice in selection of paint, cabinets or flooring and countertops, or the home may be completed and ready for occupancy. It is an opportunity to own a brand new home without the long wait to have it built.

What is a “builder’s incentive”?

pre slab lotWhen a builder is looking for business, rather than lower the base price, he will offer an “incentive” to the buyers to purchase his product. It will range from giving you refrigerator at closing to several thousand dollars to be used for your closing costs or the purchase of his options. It is always tied to your using the builder’s financing. Many of the builder’s parent corporations own financing and title companies. This is to their benefit because they can control the time lines of the lenders and have a direct line of communication with them. We always encourage our buyers to compare the “Good Faith Estimate” that the builder’s lender gives you with one from an independent lender. The rates may be similar, the expenses may not. However, sometimes even if your brother is a lender he cannot beat the builder’s incentives. You must compare to be certain.

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