Marketing Strategy of Builders in the Sacramento Region

I snapped the following shot while inspecting a Beazer property the other day in Rancho Cordova. This type of sign is very typical in many portions of the Greater Sacramento Region for new construction.

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In hopes of selling off their inventory, most builders these days use marketing language such as “Foreclosure Pricing” or “Closing Costs Back to You” or “Tax Credits”. Builders definitely have to compete with the foreclosure and short sale properties within the marketplace and so there is quite a different marketing strategy from what we saw just five years ago. Let’s take 2004, for example, the Builders could pretty much command whatever price they wanted (prices went up 10K a month like it was nothing), “upgrades” were quite pricey, and the builder was definitely in control. Nowadays the buyer is in charge, sometimes the “upgrades” are now included as more standard features, concessions and closing costs offered within the purchase price are more normative, and prices have come down substantially in most areas.

What other ads or signs have you seen in the local market?

Tip for the Buyer of New Construction: Make sure that you are paying fair market value for the house you are purchasing. You need to have a reliable appraiser who understands the current market. It’s nice to get closing costs and concessions included within a purchase price, but if the purchase price is padded so greatly with these things, one must wonder if the house is really worth what it is being sold for. For example, if a house is being sold for $325,000 and there are $25,000-$35,000 worth of concessions within the purchase price, maybe the house is truly worth $290,000-300,000. If the house was offered for sale without concessions or closing costs covered within the purchase price, what would it sell for? That’s a good question to ask and it might save you some money in the long run. Obviously though many times the inclusion of concessions and closing costs is what helps the deal get done and assists the buyer’s financing. Even though prices are much lower in California right now, it is still very difficult for the bulk of buyers to put down 20% of the cost of a home (hence the popularity lately of FHA financing programs with 97% loans).

If you have any questions, feel free to call me at 916-595-3735, see my company website at www.lundquistcompany.comor email me at ryan [at] lundquistcompany [dot] com.

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