Home Buying Trend: Builders Buy Homes to Build New Construction on Existing Lots

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When you are selling your house does it really matter who buys it?  And what they do with it once they purchased your home?  Well, yes – it does matter.  Many buyers are actually builders that are seeking the perfect location or lot to be able to build a new home on the premises.  As more and more of these types of buyers enter the scene, sellers are increasingly asking how and why those buyers being builders has an impact on the sale.

The main reason sellers will benefit from advance knowledge of builders’ intentions to build on their property after tearing down the existing home is that it would alter the level of preparation done prior to the sale.  For most conventional sales, homeowners usually spend money to spruce up the back yard, enhance curb appeal with some landscaping, and repair things that need attention in the home plus make some cosmetic changes.  If a home is being bought with the intention to demolish it then there is no real reason to make the home more saleable thus saving the sellers a significant amount of money.

There are several reasons that a homeowner would benefit from selling to a builder:

No Property Inspections

Since the builder does not plan to use the structure in any way, most of the time there are no home inspections done on the property.  Unlike traditional sales where an inspection clues the buyers in on any potential pitfalls with the home, a builder is unconcerned with most types of problems that show up in a home inspection.  The benefit to the seller that knows a builder is vying for their property is less hassle at the negotiation table where buyers in a conventional transaction might have expected sizable credits for repairs.

No Dealing With Mortgage Companies

Most of the time builders engage in cash-based transactions.  This translates to no mortgage contingencies and fewer hang-ups or hold ups that would normally arise as part of the normal mortgage process.  For example, obtaining an appraisal or even the process of the buyer getting approved for a mortgage.  The absence of these, and other, parts of the sale ends up in a faster sale altogether.

Flexibility With Closing Dates

Usually builders are very flexible when it comes to closing dates and they are willing to work around homeowners’ schedules. This allows the seller to have some control of when they vacate the premises.  The entire time the home remains under contract, offering them the security of knowing the sale is done.  

How To Tell If Your Home Would Appeal to a Builder

Depending on what the buyer is looking for in terms of lot size, location and even neighborhood – builders will assess the figures and decide whether it is worth their while to build new construction on the property.  If there is significant value to the end user (that is the person that will end up living in the home) then sellers will likely be able to obtain a higher selling price for the home if they sell it to potential homeowners.

Builders will typically not be interested in homes that have updated kitchens and bathrooms, appealing amenities and nice features.  If your home has a strong aesthetic and functional appeal to begin with, then it would be more beneficial to invest in preparing for the sale as described above.  Unkempt, outdated homes will be attractive purchases to builders.

To find out how your property fares in all this, contact me today so we can assess your property and determine whether you would get top dollar by selling to end users or builders.

New Jersey Area Sellers Finally Enjoy the Upper Hand – Maplewood, South Orange, Summit, Millburn – Short Hills

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After years of a strong buyers’ market the tide seems to be changing.  In fact, in our area we are reporting a staggering change in year over year figures in terms of the number of homes sold as well as the number of homes that have gone under contract.  The perception is that the spring market is one where many people come out to put their homes on the market, given the warmer temps and festive attitude unlike the cold winter months. Despite this perception, the truth is that we have fewer homes on the market than we have had in a long time.  As you can see below the numbers have changed dramatically in each respective vicinity of our area from the same time last year over now.

Millburn – Short Hills
Currently there are 112 homes for sale, a number very close to the same time as last year.  Conversely, the number of homes that have gone under contract is up 17% this year from last year signifying a strong and positive selling trend in the market.

Maplewood and South Orange
Both neighborhoods struggled last year and each locale has significantly fewer homes on the market this year.  In spring of 2011 Maplewood had 150 homes on the market as opposed to 137 in the present market.  South Orange witnessed a sharp decline in inventory this year over last as well, with 150 listings last year versus 137 this year.

As far as homes that went under contract, Maplewood is up by 53% this year versus last and South Orange is reporting a 45% increase in homes under contract for this time of year compared to last.  With the same number of buyers but that much more selling activity the market has clearly shifted to a seller-controlled marketplace.

Chatham, Madison Springfield
There have not been too many changes in the Chatham, Madison and Springfield markets this year over last but as usually happens in a changing real estate market, these areas will likely follow suit eventually.

What Do These Numbers Mean To You?

The most significant impact these numbers have is on sellers and with fewer homes on the market to choose from sellers can enjoy less selling competition.  This translates to more interest from the buyers that are out there, multiple offers and even sale prices that are at or even above asking price.

If you have been sitting on your property waiting to sell it in a better market, now is that time.  Buyers are still eager to seize record-setting low interest rates before they go up again and they do not have that much to choose from at the moment.  At the same time the market has not been flooded by shadow inventory, expected to hit the real estate arena sometime this year.
If the latest market update motivates you to list your home for sale, move into something better or anything else, please contact us so we can assist you with your real estate endeavors!  We’d love to be of service!