Builder Watch: Beazer Homes Posts $110 Million Net Loss
Posted on 13. Aug, 2008 by Joshua Ferris in Builder News
Enclave at Hamptonburgh
Beazer Homes, known locally in Orange County New York for their communities of Glenview Hills at Florida, Enclave at Hamptonburgh and Riverside at Walden, recently posted a net loss of just under $110 million dollars for the third quarter of 2008.
In addition to a grim third quarter, Beazer Mortgage Corp. continues to deal with legal woes stemming from suspected HUD regulation violations from Beazer Mortgage Corp’s down-payment assistance program. Originally brought about by an investigation by the Charlotte Observer in March 2007 that revealed a number of homeowners who used the down-payment assistance had foreclosed on their homes in a 9 year period, the case has since spawned several investigations by state and federal governments including the SEC and U.S. Attorney General’s office in the Western District of North Carolina.
Beazer Mortgage Corp. ceased loan originations in February 2008 and is now working in conjunction with Countrywide Financial Corp. to provide mortgage options as the “preferred lender” of Beazer Homes Corp. No stranger to headlines themselves, Countrywide Financial Corp. was acquired by Bank of America in January 2008 for $4.1 billion and recently found itself the subject of an FTC probe over loan servicing.
Is there good news in sight? Although Beazer Homes has much soul searching to do, the builder did slash their backlog of homes from 5,952 homes in 2007 to 2,716 in June 2008. Their net loss is also down $9.2 million from third quarter 2007 to $110 million showing Beazer is getting leaner and still selling homes.
Our Recommendation: It’s always important to do your research on any home builder before committing to a new home community. Key points to review while looking for a new home include financial health of the builder, how far from completion the entire community is (Will they finish or will they back out of the project and attempt to sell the remaining lots?) and what loan options are available to you through different lenders.
We’d love to hear what you think! Comment below and let us know your thoughts on this new development in the ever changing real estate industry.
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Top 7 Advantages of New Construction Over Resale Homes
Posted on 27. Jun, 2008 by Joshua Ferris in Home Buying Guide, Orange County, Rockland County
Once you start house hunting there is no doubt one of your first stops will be at a new homes website or community to see what they have to offer in the area you would like to live in. In fact, new homes have stepped up to win the hearts and minds of home buyers for the better part of the past decade where we’ve seen an unprecedented explosion in new home construction and buying. What was once considered a luxury reserved for the rich and famous, new construction has opened the door to all price ranges and styles including luxury high-rise condominiums, townhouses, active adult communities and single-family homes.
There are a tremendous number of benefits to owning a new home including the ability to customize the home to your liking, meeting all the new neighbors as they move in and substantial savings in utility costs with new homes now being built to a higher, more energy efficient and green standard.
It’s your house. No, REALLY your house. – When you buy a resale home you are purchasing a home that someone else crafted to suit his or her lifestyle. Sometimes it’s just perfect and exactly what you are looking for but more often than not there are a few “Why did they do that?” issues with a home that you will have to renovate or remove when you move in to fit your lifestyle. When you build a new home you will be able to choose exactly what you want and where you want it so you can move in and not have to touch a thing.
Everyone else is new too! – Resale communities are great because you can see the neighborhood, how people care for their homes and everything is already established but those same benefits can prove to be cons when you are the only new neighbor on the block. Moving into a new home grants you the privilege of meeting the neighbors when they are also looking to meet new people and settle into the community. There won’t be any pre-established social circles to work your way into and you will be discovering new things about your neighborhood at the same time everyone else does.
Newer homes are more attractive when you resell. - Life happens. You might have to relocate or you make a lifestyle change a couple short years after you move in. The good news is that newer homes are more attractive to prospective homebuyers because it’s their opportunity to buy a newer home without the price premium associated with new construction. Better yet, you’ve already purchased all the appliances and upgrades for the home and many parts of the home are still under warranty making the home a great inclusive value. This will compare favorably to older resale homes that may require renovation or updating to make it livable for the modern homebuyer.
Location, Location, Location! YOU choose! – When you shop for resale homes the homes you find are obviously fixed to their current location. How many times have you seen a great resale that would be absolutely perfect if it were a little closer to the community clubhouse or offered a larger back yard for the kids to play? New homebuilders typically offer a range of model homes to choose from and you can usually place that model on a lot of your choice. Now you can have the home of your dreams in the cul-de-sac you’ve always dreamed of!
In the current market new homes may be a better deal than resale homes. – That’s right, the market shift has turned the tables. Now buyers have the market in the palm of their hands and can get some really outstanding deals on homes but you have to know where to look. Resale home owners may be willing to deal but in the past thirty days I have been able to successfully negotiate $69,117 off the asking price of a new home for a client and then shortly after located a home for another client and negotiated $91,000 off the asking price and we are still in negotiations to get even more from the builder. By the way, these home prices included upgrades! I have never met homeowners who were willing to accept a substantial reduction on the price of their home to the tune of more than $60,000. As a matter of fact, many homeowners have overpriced their homes on the market because they owe more than the home is worth and they cannot afford to go lower in price.
Buying Tip: To score a new home deal you can’t walk in and offer builders $400,000 under what they are asking for the home. Fantastic deals can be found however if you find the right buyer’s agent who specializes in new homes because their experience, relationships with builders and negotiating ability will help you save thousands of dollars.
That brown carpet and tiny kitchen? Soooooo 1970s! - Kitchen big enough for one? Small closets, shower only bathrooms and carpet everywhere? Not for today’s homebuyer! The modern lifestyle is drastically different from what it was even ten years ago and resale homes often lack the oomph and space to satisfy. Today’s homebuyer wants a bright, open kitchen with breakfast bar and high-end appliances. We now do most of our living in the kitchen! Soaking tubs in the master suite and walk-in closets are now considered standard staples of the modern home. New homes often feature these amenities as a part of their standard offering and are even starting to prepare homes for the future including the addition of whole house networking and walk-out basements that can be finished as future living space.
New homes save money with efficiency and green building techniques. – Many new homes are taking advantage of the Energy Star standard which sets forth a number of requirements that products like windows and doors must adhere to in order to achieve an Energy Star rating. In addition to Energy Star many builders are now offering green building and living options like the installation of solar panels on the roof of a home to harness the sun’s energy and convert it to electricity. If you install enough solar panels you may just have the electric company paying you for the electricity you are producing! These features are often very costly to retrofit a resale home with if it wasn’t initially built to these standards.
The next time you start searching for homes be sure to consider all of your options including new construction. When buying new construction you should take into account the fact that most new homes take approximately four to six months to build. You will also devote more of your personal time to building the home as you will need to choose home upgrades and work with your agent through the inspection and financing processes.
Happy hunting!
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Top 7 New Home Buying Mistakes
Posted on 27. Jun, 2008 by Joshua Ferris in Home Buying Guide, Orange County, Rockland County
Buying a new home is great! You get to choose where your home will be built, add a sunroom here, third garage bay there and before you know it you are moving into your dream home. With all the options to choose from it is very easy to overlook crucial elements to your new home buying experience that could cost you greatly in both time and money.
Choosing upgrades with the lowest ROI or too many upgrades, period. – This is truly the most common mistake made by new home buyers who don’t consider the resale value of their home in the future. When buying a new home be sure to stick with the essential upgrades like two sinks in the master bathroom, high quality cabinetry and above all else, top quality padding under the carpeted areas.
Not examining your lot choice thoroughly enough. - A recent United Feature Syndicate by Lew Sichelman highlights some very important aspects to choosing a lot for your new home to be built on. Among them are: terrain, noting that people psychologically feel more secure looking down at the street rather than up, location and lot shape which can affect your surroundings including the possibility of facing the rear of a neighbor’s home.
Finding communities first, vitals second. - When you are buying a home you have to shop differently than you would if you were buying a car or shopping for clothes. To save yourself much heartache and frustration, be sure to hammer out your lifestyle requirements before even searching for a community to build a home in. For example, if you commute to New York City and have school age children you would want to find a school district that you approve of in an area with multiple mass transit options (train, bus, highway) and then locate new home communities within close proximity to both.
Overlooking the “inspection” clause in builder contracts. - A dirty little secret in the new home industry is the fact that some builders, national builders included, send out contracts with a clause stating that they don’t allow home inspections by an independent, third party home inspector until after you close on and own the home. They offer to do a walkthrough of the home with you before you close but chances are, unless you are a licensed home inspector with many years of experience, you won’t notice any red flags beyond the superficial.
Not using a buyer agent. - When looking for a new home, be sure to find a buyer agent who specializes in new homes. There are numerous important steps when buying a new home that a new home buyer agent will be prepared to work with such as price negotiation, lot choice, researching future development around the community and the pros and cons of building materials your builder will use in the construction of your new home. At present, the buyer agent’s services are paid for out of the builder’s marketing budget.
Using the builder endorsed financing company out of convenience. - Many large builders have their own in-house financing company and they often offer incentives on their products by tying in the use of the incentives to financing through their in-house lender. In some instances you will find that the builder’s in-house lender financing and incentives will cost you more money in the long run than if you had financed your purchase through an outside lender. Rule of thumb: Always check your financing options with the builder’s in-house lender, a mortgage broker and a loan officer for a direct lender before committing.
Believing everything you read in advertisements. – If it looks too good to be true, it probably is. Always verify everything you read in real estate advertisements including newspaper ads and the community’s standard features list. Aside from the obvious typographical errors that occur I have also seen blatant false advertising. For example, I have seen new home community literature advertising the community’s short “less than an hour” drive to New York City despite the fact that it would take at least 90 minutes on a good day from that community.
Buying a new home is a wonderful, dazzling experience that will cater to your every need. By using reasonable care and professional guidance you will enjoy many great years in your new home and reap substantial rewards from your diligent buying efforts when selling your home in the future.
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Top 7 New Home Buying Incentives
Posted on 26. Jun, 2008 by Joshua Ferris in Home Buying Guide, Orange County, Rockland County
After the real estate market hit a steady decline in mid 2006, home builders turned to incentives as a way to attract home buyers to their communities and to help differentiate themselves from the competition. When you start looking for a new home be sure to compare builder incentives as much as the communities themselves.
To help you choose, I have created a list of the top 7 new home buying incentives you should look out for:
Military or Civil Service Incentive - As a thank you to the individuals who serve in the military or are veterans of the military in addition to firefighters, police officers, EMTs and hospital staff, national home builder K. Hovnanian is offering $5,000 off the asking price of their homes, for a limited time, to people in these fields. Other large builders also offer similar incentives to teachers and civil service positions.
Lower Asking Price on “Spec Homes” - Depending on your moving situation, this is the golden egg of builder incentives. Most new home builders will construct a set number of homes in their community as “spec” homes or homes built on speculation that people will purchase the homes and move in quickly.
Once these homes are finished the builder won’t want to sit on a large inventory of homes so they will offer spec homes with predetermined upgrades included at a lower asking price than if you were to build the home from scratch and add those upgrades.
Incentives Tied to Builder’s Mortgage Company – Builders and on-site sales representatives enjoy working with their established banking relationships because they feel it will make the mortgage process easier and less stressful for everyone than if you were to use an outside lender. In this scenario I’ve seen builders offer to pay closing costs and up to one year of Homeowner’s Association fees for buyers who purchase using their mortgage company.
Lot Premium Reductions - Like a rare platinum ring, highly desirable lots tend to come with a premium attached. Builders often place premiums ranging from a few thousand to nearly $100,000 on the most desirable lots in the community. Lot premiums are not set in stone and under the right circumstances can be negotiated much like everything else.
Reduced Option Prices – With the average new home buyer spending about 10% of their purchase price on upgrades you should look to get the most bang for your buck with the limited budget you have set for options. When evaluating the standard features list for a community, check into the cost for all of the options you would want in the home and see if the builder is providing special pricing on select options.
Standard Features… and then some! – To make homes more appealing than the standard features list will allow, builders are now including previously optional home upgrades like granite countertops, expanded suites, swimming pools and sun rooms as an incentive to buy in their community.
“Free Gifts” with Home Purchase - Sometimes it takes more than granite countertops and hardwood floors to make a home stand out. Some builders are going the extra mile and including in-home luxuries like plasma screen tvs and offering car leases to draw in prospective buyers. For soon to be commuters, a two year lease on a new car might be the perfect way to help ease into life in the suburbs.
When you are ready to start looking for a new home your best bet is to get in touch with us as we specialize in new home communities. We will help you cross shop communities and serve as a third party to help advise on the best deals and the potential pitfalls of incentives. Because incentives vary greatly, you will need to weigh the pros and cons of each community before making a final decision on the home that’s right for you.