Real Estate Help - Buying a house

[NSXLuvr]

Hey Guys,

I figured I would ask the RE experts here. I am buying a house that almost 2/3 finished already. The market in our area is stable. However, there are plenty of houses on sale. The deal is the builder buys my house if I buy his. I haven't bought a house in 10 years and my Father In Law helped with the details on that one.

Questions:
1. What % of profit is usually built in on a new house. Basically - I am asking how much negotiation room do I have.

2. Are there any good links so that I can learn all the little fees that they use to screw you?

3. Is it much "cheaper" to modify the house now than if I wanted to do it later?

4. Are there any other way to reduce the taxes on it since I am "trading" in.:tongue:

Any help would be appreciated.

Ritesh.

 

[tosugrad]

Questions:
1. What % of profit is usually built in on a new house. Basically - I am asking how much negotiation room do I have.

2. Are there any good links so that I can learn all the little fees that they use to screw you?

3. Is is much "cheaper" to modify the house now that if I wanted to do it later?

4. Are there any other way to reduce the taxes on it since I am "trading" in.:tongue:

From my personal experience:

1) Depends. But in many markets builders are selling at a loss to get rid of houses.

2) Most of the screwing will come in the form of using the builders bank to finance. Watch those rates and fees. Also they use title/closers that give kickbacks so make sure you get a "good faith estimate" of fees.

3) Depends. On a screen in porch? Probably not. On a finished basement? Maybe. Figure out what you want and have the builder quote it for you. Then get another quote from a reputable contractor. Compare them. Just remember that anything the builder does CAN be rolled into your mortgage. That may be good or bad. Im not here to judge.

4) Not really.

 

[docjohn]

For an apples to apples you should have a good feeling for how you want your house finished and compare the other comparable home sales with that level of finish to calculate a price per square ft. Once you have a ball park on square foot price then your expectations of the final details(the stuff you can touch,mechanical/hvac,ect) must be made super clear in boring written detail with the builder.My advice is to get everything you would ever want to do in the future done before moving in.Anything you do later will cost more per square ft.Most good subs save small renovation jobs/remodels for after thier big jobs with new home construction.Plus you have more leverage now with this builder if he has to move the property.He also needs to show you all documentation that he infact owns the land and has proper deeds/title.A good re attorney is a plus on your end.

 

[HTN]

Hey Guys,

I figured I would ask the RE experts here. I am buying a house that almost 2/3 finished already. The market in our area is stable. However, there are plenty of houses on sale. The deal is the builder buys my house if I buy his. I haven't bought a house in 10 years and my Father In Law helped with the details on that one.

Questions:
1. What % of profit is usually built in on a new house. Basically - I am asking how much negotiation room do I have.

2. Are there any good links so that I can learn all the little fees that they use to screw you?

3. Is is much "cheaper" to modify the house now that if I wanted to do it later?

4. Are there any other way to reduce the taxes on it since I am "trading" in.:tongue:

Any help would be appreciated.

Ritesh.

These are great questions. However, there are hundreds more to be asked.
You should hire an experienced Realtor that you can trust. He/She will help you more than you think. Just my 2 pennies.
Good luck... great time to buy.

 

[NSXLuvr]

I do have a realtor. However he is keen on selling more than helping.

Btw, I have another question. Does the realtor get 3-6% commission off BOTH houses since he "introduced" us?

 

[Cairo94507]

Find a new realtor if that is the case. And, everything is negotiable- even their firm, in concrete 6% commission which they believe is an entitlement.

 

[HTN]

find a new realtor if that is the case. And, everything is negotiable- even their firm, in concrete 6% commission which they believe is an entitlement.

^^^+1

 

[NSXGMS]

Hey Guys,

I figured I would ask the RE experts here. I am buying a house that almost 2/3 finished already. The market in our area is stable. However, there are plenty of houses on sale. The deal is the builder buys my house if I buy his. I haven't bought a house in 10 years and my Father In Law helped with the details on that one.

Questions:
1. What % of profit is usually built in on a new house. Basically - I am asking how much negotiation room do I have.

2. Are there any good links so that I can learn all the little fees that they use to screw you?

3. Is it much "cheaper" to modify the house now than if I wanted to do it later?

4. Are there any other way to reduce the taxes on it since I am "trading" in.:tongue:

Any help would be appreciated.

Ritesh.

Builder profit is case by case meaning as much as possible. But as osugrad pointed out many are taking losses just to move them. Bottom line is you'll never know what their bottom line is.

There shouldn't be any junk fees. Those scams went out of style long ago. All the fees should be easily justified and explained to you in plain English. Fees are not where you're going to get screwed...unless it's tied to financing. Origination fees and mortgage broker fees can burn you but also can be negotiated. Almost anything going to the lender can be negotiated.

As far as modding the home now I'd say do it now since you don't want to have to remove anything the builder puts in if you don't like it--you have the builder install what you want from the start. Just call another contractor and ask for an estimate or price out materials yourself if you feel the builder isn't being fair with substitutions/options.

As for the taxes, you get up to $250K/$500K profit (single/married) tax-free
when you sell if it was a primary residence owned for 2+ years. You also don't pay taxes on profits as long as the money is moved into a property of "like kind" within a specified period of time. This is essentially what a 1031 exchange is. So if you profit $1 million from the sale of your primary res. and put all of that into your new primary res. upon purchase or shortly thereafter you'll pay no taxes on the $1 million. Same with investment to investment.

And yes, the realtors commssions are negotiable. You have a perfect right to know how much he's making and it could very well be 6%, but if he's also the listing agent he's probably getting less. He is not entitled to commission on your old home unless you've agreed to or signed paperwork to that effect--either in the purchase agreement, escrow instructions or listing agreement. Unless you've agreed to give your proceeds from the sale of your old home to anyone only you can touch it. That's where the commission would come from on the old home--you.

 

[flaminio]

I do have a realtor. However he is keen on selling more than helping.

+1 on getting a new realtor. Your realtor is supposed to be your advocate in these kind of situations. Sounds like yours just wants to push the papers and close the deal.

 

[NSXGMS]

I don't see exactly how at this point the realtor isn't doing his job. I'm not sure if this is a bad deal for you or not or if the realtor is pushing you to get this deal done. It might be a great deal for you.

However, any realtor who couldn't answer the questions in your OP should be dropped on that basis alone. You shouldn't have to come here for answers and he should certainly be watching out for you in terms of junk fees/exorbitant costs.

 

[GreyHoundSteve]

I didn't read the other responses so this may have already been mentioned but i also live in North Texas and if this is one of those builders that i am thinking of that does these types of deals then i would say, STAY AWAY!

My inlaws did one of these deals because they could not sell their junk house out in the boondocks and wanted to move back into town and so they thought they had to go this route to make that happen. They got just below market value on their house but got majorly screwed on house they bought from the builder.

IMO they paid about 20% more than they should have because they thought this would be the easier and less expensive route.


This is an old trick i've seen allot lately here in North Texas. These types of builders use to target mobile home owners because unlike real houses mobile homes depreciate rather than appreciating and so allot of those people get trapped by buying a $50,000 trailer house that they can't sell for $25k a few years later. So what these builders do is build these cheap houses with little to no options or community support and then because no normal person would live in one of these developments they offer to get people out of their current house and into a new one (usually unfinished).

The problem is that now most of these people went from being upside down in a home they could afford to being majorly upside down in their new home and having no money to finish the yard, or the fence or the garage or anything else these builders leave out. Another issue that will arise is that they are now living in a development that is filled with these same types of people who can barely afford the mortgage so inevitably these communities turn ugly real fast and then no one wants to live there and your stuck in the same situation again only with more debt and a higher mortgage.

I would caution you against this type of deal.

Nothing beats the old fashioned way of just selling your existing house before buying a new one. When you do things this way (the right way) you have all of the leverage and can get much better deals and have allot more attractive options available to you.:wink:

Another option would be to list your house for sale with the same agent you'll be using to purchase from and have them reduce their seller commission (usually to 1%) and then make a contingent (based on your house selling) offer on a house you would like to buy. This is a buyers market and i bet you could get someone desperate to sell to give you 3 months or better to unload your existing house and if it doesn't happen then all you lose is your escrow (amount negotiable) and thats it.

I did a deal similar to the one i described on the house i am in now and it worked out great. We weren't even looking to move but we saw a great deal on a house and the seller was desperate so we made the contingent offer for 90 days and at the end of the 90 we got an extra 90 because the other house still didn't have any other buyers so we were able to get exactly what we wanted for our old house and paid exactly what we wanted for our new house. Our agent was also able to get us a $500 escrow so we only had that to risk.:biggrin: