New Home Builder Incentives

Everyone likes to feel they’re getting something for free. If you’re in the market for a newly built home, you’ve likely encountered builders who have offered to sweeten the deal with a free upgrade or a price discount. While some of these builder incentives can be beneficial, others may be deceptive.

YOU MAY BENEFIT FROM:

Free upgrades
Some of the most favorable new home builder incentives are those simply designed to add value. Particularly in cooler housing markets, some builders may try to entice potential buyers by offering complimentary extras such as hardwood floors, landscaping or other home improvements intended to set themselves apart from the competition. As long as there are no strings attached, these incentives can be a great opportunity.

Online cash rebate
You can also benefit from the cash rebate offered for shopping online for a new home builder through iNest®, a subsidiary of LendingTree. iNest allows you to search and compare homes from leading new home builders and offers a 1 percent rebate on the base closing price of a newly constructed home from one of its featured builders.* For details, visit: www.internest.com.

YOU SHOULD BEWARE OF:

Artificial price discounts
When a new home builder offers a price discount, it’s wise to do a little comparison shopping. While some offers may provide genuine savings, others may simply offer the illusion of savings. For example, a builder may price a house $3,000 above its true value and then offer a $3,000 “reduction.” The National Association of Mortgage Brokers (NAMB) warns consumers to watch out for this type of price manipulation. In fact, if builders offer incentives and then make up the difference by hiding the cost elsewhere in a transaction, they may be violating regulations set by the federal Department of Housing and Urban Development.

Bonus for financing through the builder
You should also beware of deals that offer a signing bonus if you agree to finance through a builder’s lender instead of shopping around for the best mortgage offer and arranging your own independent financing. Before accepting such a deal, look at it critically. If you receive a $5,000 price reduction but settle for a mortgage with higher costs than you could have obtained from an independent lender, you may not save any money in the long run.

What’s worse, some builders mislead potential buyers by implying -- or even overtly stating -- that buyers have no option but to use their preferred lenders. This is illegal; according to federal law, builders may not prevent homebuyers from obtaining their mortgage or other services, such as a title search, from independent companies. A builder may ask you to obtain approval from a particular lender as a type of credit check, but a builder cannot refuse to sell you a home because you elect to arrange independent financing.

www.internest.com/xyz/disclosure/index.asp.