Homebuilders back in business
Now that home values in Solano County have recovered, and the number of bank-owned foreclosed homes are down 95 percent from 2011, homebuilders are finally able to make profits building and selling homes in Solano County.
Most of these homes are large homes priced for homebuyers who are moving up from their smaller and older homes. Some high-income, first-time homebuyers with down payment funds can purchase new, too. The cost of permits alone adds up to something like $50,000 per home in Solano County before a shovel is even put in the ground. This makes profit margins pretty thin for all homebuilders, so they need to build higher-end homes of $450,000 and above to turn a profit and see reward worthy of the risk.
Most of the homebuilders have preferred lenders and most of the big national builders actually own their own mortgage company. The profits from their mortgage company are important to a builder’s business plan. Homebuilders also love the control they have in the process when their preferred lender is doing the loan for their homebuyer.
The new homebuilders occasionally offer their buyers financial incentives for using their preferred lender and sometimes, even though the buyer wants to use their trusted loan officer, the incentive makes it tough for the trusted loan officer to win the competition for the business. The loan officer may have worked hard to get their borrower preapproved and may have developed a personal relationship, like a friendship, or just a trust built where the borrower considers the loan representative a trusted financial adviser over the months of home searching.
Lenders often analyze the borrower’s entire financial situation and issue a firm loan approval letter. The buyer and Realtor then go house hunting, which occasionally takes months and sometimes even years to find the dream home. These delays happen for many reasons, but shortage of exciting and compelling inventory is usually the issue and then the buyer may stop looking because Little League has started and he or she may be the coach.
When a loan officer loses a client to a new homebuilder lender, they don’t get paid the commission of course, but what hurts the most to the truly professional veteran loan officer is the sadness associated with the loss. Loan officers who truly care about their clients live for that feeling of success and happiness when they see the buyers move into their first home or move up to their dream home.
Even though the pain of losing a few clients to new homebuilder lenders is hard to stomach and sometimes produces a feeling of sadness, we lenders need new homes for move-up buyers to purchase because we have a shortage of inventory. It is the circle of life in a healthy real estate market. We need buyers to move up from their existing houses and we need them to list and sell those existing homes for the other preapproved buyers who are looking for homes in that price range and neighborhood.
A professional real estate agent and a good loan officer can totally analyze this move-up strategy with little or even no cost. There are huge numbers of people who can move up to their dream home right now but don’t because moving is a big deal and nearly everyone is busy with work and family.
The investigation on exactly how to move up or move down can be done by phone or in person with a professional loan officer and the mortgage company’s branch manager and the borrower should only need to invest a couple of hours of their time to see all their options. Happy house hunting.
