Friday, August 5, 2011

BUILDERS TURNING DOWN NEW HOME SALES

I thought I would never see this happening but more often than not, new home builders are refusing to sign a contract for a new home until the buyer actually sells and closes on their present home.  Here is part of an article from the Wall Street Journal that caught my eye today....


Home Builders to Buyers: Sell First, Then We’ll Talk

Today brought more evidence of how home builders are playing hardball with uncertain buyers these days.
Denver-based MDC Holdings Inc. today reported a second-quarter loss as closings fell and the builder wrote off the value of several subdivisions. The company responded by cutting positions and revamping its speculative-construction strategy.

The company also offered up a revealing comment today during a conference call. It is being careful about working with buyers who haven’t yet sold their existing homes, given the risk that the home won’t sell and the buyer will have to back out of the deal. (Some builders say they’re not even inking deals with consumers until they sell their existing homes.)

“When we get an order and the buyer has not yet been loan approved or that buyer has a home to sell, generally speaking, we will not start that home for that consumer,” said Robert Martin, MDC’s vice president of finance and business development.

While this might seem like turning down much-needed business, we can’t blame them.

2 comments:

Builder Bob said...

Coach, give me the names of those buyers and I'll lock them into a contract with a non-refundable deposit. Its not my fault they want to build a new house before they sell their old one.
I work hard to get people to the contract stage and if they back out because they couldn't fulfill their part of it, I should still earn something.

Anonymous said...

Coach:
Understand what Builder Bob said and what you said however, that non-refundable deposit doesn't help much (5% of sales price because thats all the cash they have) when the buyer walks or cannot sell their house and then you sit there with 1 or 2 homes and have to wait on them to sell before the bank will give you any more money to build with because they now consider the homes standing as spec homes. Pay the interest on those puppies for about 8 or 9 months or longer and see what you then think about non-refundable deposits! You are talking to a guy with 2 standing and the non-refundable deposits are almost gone in interest payments and I have to lay off workers because I can't get any more money from the bank until at least one of these dogs sell!