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The Daily Scoop

When builders compete with foreclosure-sale prices

Richard Defendorf, contributor

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Despite relatively low mortgage rates and some tempting tax credits for buyers, the uphill sales battle most homebuilders now face can be especially difficult in areas where nearby foreclosed homes are priced well below those in new-home developments. 

As one KB Home executive told the Wall Street Journal for a story published Wednesday, in many markets "we are no longer competing with other builders. We are competing with foreclosures."

The problem plagues mainly large builders who, in some cases, are trying to compete against now-foreclosed homes they built only a couple of years ago in the same development.

The builders told the Journal they are responding with a number of strategies. Among them: 

n Build smaller homes that compete directly on price with foreclosure-sale properties nearby or in the same development.

n Rather than trying to compete on price, offer low mortgage rates, energy-efficient designs, and warranties not available in a foreclosed-property sale.

n Tout available tax credits and the fact that a new home will include amenities not available in an older house, even one built as recently as two years ago.

n Don’t build at all in neighborhoods with foreclosure listings, and tout the foreclosure-free nature of the neighborhood for your new homes.

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Comments (2)

ronlbrenner writes: mddesignhomes - I agree. In todays times it is more important than ever for a builder to distinguish themselves. Either through design or through construction quality / techniques(green)or better yet both. It is definitely tough out there for everyone in our field.

www.simplyeleganthomedesigns.com
http://simplyeleganthomedesigns.blogspot.com
Posted: 9:18 am on March 31st

mddesignhomes writes: I’m afraid that until all these incredibly low priced homes have been bought up, it’s going to be difficult to be competitive based on price alone. Providing desirable features those homes don’t have such as energy efficient construction is your only chance. The tax credits will help but aren’t enough to make up for the difference in price.
Posted: 10:58 am on March 26th

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