Last month, I refinanced my home in Charlotte, NC for the second time in three years. The last time around the financing requirements were as easy as buying a movie theatre ticket. Not so anymore.My refinancing experience harkened me back to the days of old. First, the bank had to complete an appraisal and credit check before they would even talk firm rates and the loan-to-value (LTV) had to be less than 80%. Then, I had to give a complete financial package, with tax returns, bank accounts, etc. As I own several companies, I had to provide tax returns for them as well. I passed the test and was able to refinance at a lower rate. Gone are the days when a new "up-and-coming" millionaire would walk into a $2 million dollar home and buy it for little or no money down. Trust me, this is a good thing for America since we have seen the repercussions of this reckless loan model. But the pendulum always swings too far in either direction and while I praise proper lending standards, some banks have gone overboard. This is clearly evident in the luxury home market, where some banks are requiring as much as 40% down in equity. This is a shock to the luxury home market and it will take some time for the shock to wear off. On the other hand, the entry level and first time buyer seems to be fairing much better, as rates are at historic lows, deals are abundant and the government has pushed to help this home buying segment with such actions as the $8,000 first time home buyer credit. Let's take a look at how we can take advantage of this disparity in these two home buying segments.
He said in no case was the price of the home increased to cover the expense of the giveaway. He stressed that each homeowner had already set their price and that Peters' firm had done their own Comparable Market Analysis (CMA) to make sure the price was realistic. Once the price was established, the client was then asked what amount would they be willing to contribute to that help sell the home. Peters pointed out that these types of "incentives" (such as paying for closing costs or upgrades) are commonplace, but in today's luxury home market, sellers need to do more. He's right. Being curious, I asked, "What happens if the buyer doesn't want the car?" Peters told me that they would give the buyer cash back at closing equal to the purchase price of the vehicle. Hey, if it works, I'm all for it. I asked him if he has seen any results from his strategy and his answer was that his leads have "skyrocketed." I hope so. But as we all know, it is a long way from the lip to the pen.
Remember, housing starts are way below even historic lows at 458,000 annualized units. While inventory will take at least another year to fully absorb into the marketplace, when new starts come back to the normal level of 1.5 million annualized units, the well positioned, low-end home builders should be the first to make a big comeback.