Builders offering buy-downs

November 10, 1991|By Jim Johnson | Jim Johnson,McClatchy News Service

SACRAMENTO -- To attract shoppers to new developments, some builders traditionally have given away hot dogs, soft drinks and balloons. And many have turned to more expensive enticements.

Not since the last major housing recession of a decade ago, in fact, have builders cooked up a more munificent smorgasbord of freebies.

Perhaps the most popular offering, according to promotions in recent weeks, has been the loan "buy-down." Builders reduce the cost of a buyer's mortgage by pre-paying -- in a lump sum -- a portion of the monthly interest, typically for one to three years. A 9 percent loan, for example, might be brought down 2 percent the first year to 7 percent, and 1 percent the second year to 8 percent at a cost of perhaps $5,000 to $10,000, depending on the size of the loan.

Typically, the more expensive the house, the larger the margin of profit, and the more generous a builder is likely to be.

In the $200,000-plus category, the slowest sector of the market, cuts of as much as $30,000, $40,000 and even $50,000 have been touted.

Consider some examples from the Sacramento, Calif., area. Citation Homes, for instance, has created what it calls "$40,000 and $50,000 nest eggs" on models in Folsom and Elk Grove. The money can be used to negotiate price reductions, upgrades in appliances and floor coverings and closing costs.

Pacific Scene seems to be giving away everything but the kitchen sink. The list includes washer-dryers, refrigerators, window coverings and rear-yard landscaping, plus buy-downs and payment of closing costs on housing starting at $197,000 at Stanford Ranch.

To move some units in South Sacramento, Attain Development Co. has offered a similarly impressive "free bonus package," featuring rear-yard landscaping, miniblinds, security system, garage-door opener and a trip to Hawaii.

For those who prefer just the simple touch of money, however, Calton Homes has agreed to match half of a buyer's down payment up to $15,000 with a one-year certificate of deposit.

Elliott Homes Inc. has rehatched the five-year, no-interest loan -- one of the most widely publicized incentive programs of the early '80s. Under the program, buyers must pay off their purchases in Elliott's project in the American River Canyon area, where houses are priced from the low $220,000s, in five annual installments.

For owners having difficulty selling their own homes, Elliott has a trade-in program. The company will purchase the house of a buyer who selects a dwelling at its subdivision at 94 percent of its appraised value. The price is discounted 6 percent, Elliott explains, because that's the typical commission a real estate agent would charge for selling the house.

Another advantage of the trade-in program, the builder points out, is that the owner doesn't have to worry about fixing up the housing or showing it.

Builders also are wooing buyers who lack sufficient funds to meet down payment requirements. But they are using more sophisticated incentives tailored to their needs -- like equity-sharing and lease-option sale agreements.


Other real estate notes:

* The National Association of Home Builders has been urging the Congress to enact legislation that would clarify the confusion over what constitutes a wetland. Presently, there is no clear legislative definition for what constitutes wetlands, a NAHB representative pointed out, and as a result, "the rules and regulations which apply to Florida's marshy wetlands may be exactly the same as for a landlocked pothole in the Nevada desert."

Legislation has been introduced to establish a three-tier classification for wetlands, based on their ecological significance.

* A former U.S. space program engineer has found a way to park 40 cars on a lot no bigger than a two-car garage.

Van Stokes, who said he once worked on the Saturn/Apollo moonshots, is marketing a machine that puts vehicles in orbit -- in a sense. Actually, the Car-O-Sell, as the name suggests, is a carousel that stacks cars in a narrow orbit approximately 10 stories high.

Similar machines have been used for years in high land-cost areas like Tokyo.

You drive into a compartment on the ground floor, lock your car, insert a credit card and walk away, Mr. Stokes said.

Then, an operator pushes a button and the carousel, much like a Ferris wheel, revolves to put the next available parking space at ground level.

The machines cost from $10,000 to $12,000 per space compared to the average of $17,000 per space for conventional, concrete ++ garages, Mr. Stokes said, and protect the cars better against thieves.

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