Oregon Mortgage News: Home Buying at the Car Lot?

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Home Buying at the Car Lot?

I just ran across an article that says that some builders are now taking a buyers old home in trade for their new home. Interesting concept. Basically the builder evaluates the home for it's current market price, what it would be worth if fixed up and makes a fair market offer for the buyers home. The plus for the buyers is that they don't have to market their old home and can close quickly. The Builder get's rid of excess inventory and can usually fix up and market the old home for less then someone else.

The new home needs to be at least 20% higher in value then the new home and it appears that the buyers can't be working with a Realtor yet to market their old home. I could be wrong on this though.

Evidently this has been done very effectively in England and is starting to be used more here in the states. The link to the article can be found at Trade in that Old House at CNN Money.

Has anyone ran into this? If so, what was your experience? From a lenders perspective, I don't foresee any problems.

Larry Morris is a Certified Mortgage Planning Specialist and Certified Mortgage Coach with Golf Savings Bank in Beaverton, Oregon. He specializes in USDA Guaranteed Rural Home Loans, FHA Purchase and Refinance, FHA 203k Rehab loans, FannieMae HomePath loans and conforming purchase and refinances in the states of Oregon, Washington, Idaho and California.

He can be reached at 503-421-0096, or larry@PDX-Mortgage.com.

www.PDX-Mortgage.com

 

HUD

7 comments • Larry Morris, Oregon Mortgages • June 06 2007 09:57AM

Comments

Larry- I've seen the buyout solution many times, but it didn't involve the builder (other than paying a larger than normal commission to the agent that performed the guaranteed sale).  Interesting stuff!  thanks for the post
Posted by Laurie Mindnich at Options Realty over 2 years ago

Strange!

I don't know that I would want to "trade" houses...

...although there was that show Wife Swap....

hmmmm.......

Posted by Kris Krajecki - American Mortgage Werks - Huntley, IL over 2 years ago

Laurie - I had a deal fall apart here where the builder's realtor said that she would buy the buyers home if it wouldn't sell. It didn't sell and she came in with an insult of an offer. My client lost their earnest money since they had to back out oif the home and had a pre-approval from teh builder's lender...

Kris - not going to touch that...

Posted by Larry Morris, Oregon Mortgages (Golf Savings Bank) over 2 years ago
Larry- the buyout agreements were in writing before the purchase of the new home (concurrent, actually) and the only agents used were those that provided a significant credit line.  Never had a problem.  The buyout amount was presented UP FRONT.
Posted by Laurie Mindnich at Options Realty over 2 years ago

That's good. My situation was just very sleazy...

I find teh idea of builders trading properties interesting. It's a good business model as long as it's fair.

Posted by Larry Morris, Oregon Mortgages (Golf Savings Bank) over 2 years ago
Many builders in my area are willing to consider this.  They can work very smoothly if you can work out terms.  Manytimes the non-builder will have to pay close to list price for the new home to get the builder to pay close to asking price for the new construction.  How this will impact the commissions that the parties pay has an impact in the deal as well.  There are really many things that are considered in a deal like this.
Posted by Patrick Brady (RE/MAX Masters) over 2 years ago
True. I see it as an imortant tool in the Builders/Realtors/Lenders belt. We need to always be willing to think outside of the box. If the builder is sitting on a construction loan that he's paying interest on it could make sense to get rid of the property even if it means taking out a rehab loan on the new property. It depends on the interest rate AND the strength of the builders construction line of credit. They must proptect that or their ability to do the next big project could be jeopordized.
Posted by Larry Morris, Oregon Mortgages (Golf Savings Bank) over 2 years ago

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