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Home builders fight buying foreclosures
Home builders are confronting head-on one of their biggest nemeses: foreclosed houses that lure buyers away with deeply discounted prices and depress the appraisal values of newly built homes.
At the International Builders' Show expo recently in Orlando, consultants and builders said that with gluts of foreclosures in major markets around the country, the time has come to aggressively educate buyers about the often hidden costs of buying foreclosures.
In Phoenix, Fulton Homes has put together an interactive "foreclosure cost calculator" that allows shoppers to estimate the expenses they're likely to face if they opt for a foreclosure (www.fultonhomes.com/foreclosure-calculator). The calculator uses what the company's vice president, Dennis Webb, said are commercially available expense averages for acquiring, repairing and outfitting foreclosed houses of varying sizes, conditions and price levels in the area.
Say you're considering a foreclosure. The cost calculator prompts you to input the size, price and physical condition of the foreclosure. This house is listed for $110,000 with 2,125 square feet of living space and in fair condition. For this foreclosure, according to Fulton's data, the typical post-acquisition costs — the repairs, new equipment, appliances and other improvements — would add another $32,288. The calculator also identifies possible legal fees, such as eviction costs if the property is still occupied, plus lawyers' bills for title and lien complications.
Next to the calculator — here comes the big sell — Fulton offers you a look at some of its own newly built homes that are in the same general price range. They come with none of these add-on costs and instead have extended warranties on construction, appliances and equipment plus independent third-party inspections. Webb said that the calculator has been "amazingly effective" in opening the eyes of home shoppers to the "dark side" of foreclosures, and has helped the company rack up rising sales in a market where 46 percent of local listings are foreclosures.
Jay McKenzie, vice president of BDX, an online information site for the industry, said his firm recently had conducted a survey of builders in different parts of the country, and found that comparisons are a strong new marketing trend. Among the key arguments builders are using in their campaigns:
• New homes are more energy-efficient. They also come with the wiring and spaces needed for most high-tech information and entertainment preferences.
• Newly constructed homes allow the buyer to "choose what you want."
• Most builders are willing to help with settlement costs; not banks unloading foreclosures.
• Financing is almost always easier, since a large percentage of builders either have their own mortgage subsidiaries or are affiliated with a lender.
Kenneth R. Harney can be reached at kenharney@earthlink.net.
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