Holy Grail Pricing On New Homes

Early New Home Phases Are The Holy Grail

Phase One Pricing

Many Realtors know that when it comes to new home purchases, the early phases seem to be the Holy Grail. First phase homes will have the lowest prices in the neighborhood. That's where pricing starts, and it always goes up from there.

In a Bad Market...

Even in a bad market the price goes up, though not very much. Phase one pricing and the final phase pricing may not be that far apart. Here's what happens: the prices may go up just a little bit, but the incentives may increase significantly. How do home builders sell new homes for more when the market is moving down? They keep piling on incentives. So a home in phase one may sell for $300,000 and the same home in the final phase may sell for $350,000. That process may have taken a year. The house in phase 1 may have come with a washer and dryer, while the house in phase 20 may have come with a washer, dryer and refrigerator along with backyard landscaping and possible window treatment. Home builders need to keep raising prices or buyers would just drop out all the way. Why would anybody stay in escrow if the person after them paid less than they paid for a similar home.

In a Good Market...

In a rising market, the first phase is still going to offer the lowest priced new homes. What usually happens is that fewer incentives will be offered with each phase. In today's market you no incentives. However, we are not in a typical market. In a typical market, you might get a washer / dryer and refrigerator or closing costs as an incentive, but in today's market prices keep going up and there are no incentives. In today's market, between the time you place a down payment and the time your home is built and escrow closes, you may have a significant amount of equity in your home due to rising prices.

So what should a Realtor do? 

Every new home buyer wants to buy in the first phase. Realtors need to drive their clients to new home communities and register them on the buyer's first visit. New home builders often do not advertise new communities when they are building the models. When they start a new community they drop a sign that says "New Community Coming Soon." They often have a temporary trailer act as an on-site sales office to add prospects to an interest list, and they provide general information about the project. This is the opportune time for you to get your clients on the interest list. To get on the interest list clients need to provide proof of funds, or get pre-qualified  by the builders lender. There is typically a period of three or four months during which a builder creates this interest list. During that time they don't do much promoting or advertising.

When the builder decides to go to sale, they host a grand opening. The builder will call everybody on the interest list that has been pre-qualified, invite them to the grand opening, announce pricing, and write contracts on new homes based on the names that are first on the list and qualified to purchase a home.

In Summary...

Stay on the lookout for new home communities, register your clients early, and both you and your client will be pleased with the outcome!

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