Discounts on standing inventory of new construction

Irvinehomeseeker

Active member
So I was seeing Redfin for the recent sales of SFRs in Eastwood and noticed that the last few quick movins of Avila sold for big discounts based on the Property history - like the one below.
It was listed at 1.5 million and then after 6 months sold at 1.35 million. The property possible had quite a few upgrades as well. How is this possible? The buyer made good equity I feel.https://www.redfin.com/CA/Irvine/105-Allenford-92620/home/166746633

This is another such Avila home - listed at 1.45 million and sold at 1.3 million with all the upgrades.https://www.redfin.com/CA/Irvine/123-Lovelace-92620/home/148523892

Now KB homes is building around the lots left by Richmond Avila at possibly a price of 1.5 million.


 
Yup, the longer the homes sit done unsold the better deal that you can negotiate with the builder.  I'd done a few $100k+ discounts for my new home buyers last year.
 
Best time to buy new construction homes is somewhat contingent on the buyer not being too picky on lot location and exterior features. Most publicly owned companies will gleefully accept  low offers on standing inventory and/or "last second cancellations" when their fiscal year end is looming. I've seen as high as 25 percent discounts from list price over the years on a few zero hour purchases. Average accepted  discounted offers are between 10-15 percent though. Still, "Ask not, get not".

Some publicly traded builders have fiscal year ends in June so it's not always a December purchase play. Discounts exist as well each end of quarter, although not as dramatic as FYE, on standing inventory and last second cancellations.

To the very nimble come great rewards!

My .02c
 
While I tend to favor resale, this is one of the benefits of new home buying is the ability to negotiate on standing inventory.

You can negotiate large discounts but this is all relative because they have bumped up the price of these homes by the "upgrades" the previous buyer had chosen. Years ago, we put in an offer that was $200k below the sheet price and the builder accepted (as this was the range that their current models were being built out for) but we ended up canceling because it was really stretching our affordability and we weren't sure about the floorplan and location after multiple visits (I really didn't like how the laundry room was a walk through from the garage... which was tandem not 3CWG). Hindsight says we probably would have been okay but I can say that for dozens of homes we looked at. :)

And even if not standing inventory, if it's a "slow" season (or as SGIP said, "make the books look good time"), builders can be plied for design center credits or "free" upgrades.
 
1) Have a Buyer's Agent. A MUST.
.
2) Have your financing or cash 100 percent ready to go - full approval and $$$ liquid.
.
3) Ask for the moon, but be ready / expect to meet 1/2 way.

It's that simple.
 
Soylent Green Is People said:
1) Have a Buyer's Agent. A MUST.
.
2) Have your financing or cash 100 percent ready to go - full approval and $$$ liquid.
.
3) Ask for the moon, but be ready / expect to meet 1/2 way.

It's that simple.

+1  Also emphasize how there are a lot of other resale options and that you really don't like the selected options by the builder (cabinet color, countertop, etc) even if you like it are OK with their upgrades.  One of the big draws for most new home buyers is to select their own upgrades so that is doable for their completed standing inventory homes.
 
And also depends on demand and timing. For my example, this was when housing was in a lull (late 2000s) so we had the advantage.

Right now, since housing is flattish (or is it a slowdown?) it may be a good time.

The one caveat about having a buyer's agent, there will already be some money out of the deal because of their commission so you may or may not have less to negotiate on. But if you use a good agent, you could get both a discount and some money back as a "rebate".

If you don't have a good poker face.. go with a buyer's agent. :)
 
Typically, with standing inventory, builders will put in nicer upgrade to have good eyes candies for lure prospective buyers. However, they do have a hard stop on pricing downward as this is an even pendulum market.

They do want business and moving products, I tried to lowball and they did not take me seriously, when I came back 2 weeks later, it listed and dotted sold.

And they were not nice to me after that. Don?t blame them.
 
Soylent Green Is People said:
Best time to buy new construction homes is somewhat contingent on the buyer not being too picky on lot location and exterior features. Most publicly owned companies will gleefully accept  low offers on standing inventory and/or "last second cancellations" when their fiscal year end is looming. I've seen as high as 25 percent discounts from list price over the years on a few zero hour purchases. Average accepted  discounted offers are between 10-15 percent though. Still, "Ask not, get not".

Some publicly traded builders have fiscal year ends in June so it's not always a December purchase play. Discounts exist as well each end of quarter, although not as dramatic as FYE, on standing inventory and last second cancellations.

To the very nimble come great rewards!

My .02c

This makes total sense on the public homebuilders. Good advice. Thanks.

What about Irvine Pacific? One IP agent said the company is privately owned (and very much controlled) by "one man" (whom I'm guessing is Mr. Bren) so presumably another strategy is necessary. Or is it a black box?
 
From my experience, Irvine Pacific can be very difficult to negotiate with.  They tend to be very inflexible compared to other builders.
 
USCTrojanCPA said:
From my experience, Irvine Pacific can be very difficult to negotiate with.  They tend to be very inflexible compared to other builders.

Same.

I'm trying to remember but I think it was William Lyon and StanPac that I was lowballing and they were receptive.
 
Agent Joe said:
Another tip: ask your realtor to look up past closed prices. Not everything is on MLS but you can get the addresses and parcel #s from rental listings (since a lot of new homes in Irvine are bought as investment properties). Then use the address or APN to look up the final price onhttp://tax.ocgov.com/tcweb/search_page.asp.
This or ask a title rep to run the closing prices for you. You may not get the full picture as many builders are offering huge 6 figure design center credits (Shea Homes @ Padova is one of them).
 
From what Ive seen past two weeks with clients, Right now the smaller builders are doing some actual discounts off list price with design credits if not completely finished. Lennar and Toll brothers still sticking pretty close to list but giving bigger than usual (for them) design credits.
 
Many of these builders are relying on funding loans through non-bank lenders. These non-bank companies are now unable to fund Non-QM loans and seeing their funding platforms restricted. If making a low offer, don't take closing costs from the builder by using a lender that might not be able to close. Bring in your financing approval through a Bank, or at least give the builder the comfort in knowing you have more than one available way to finance the property. The mere fact you are more than able to close with a range of financing in hand prior to contract can help you negotiate a great price for your new home.

My .02c
 
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