Avoiding The New Home Incentive Scam
A new home incentive scam has potential buyers on the lookout for people with bad intentions. However, are home incentive programs really a scam? More importantly, how can you avoid them and still buy a home before property prices and interest rates go up further?
U.S. home builders were rocking earlier this year. They were busy reporting stunning surges in revenues, orders and upticks in stock prices. They managed to do this while building material, labor and land costs remained a challenge. Of course, there has also been some reversal in that trend over the last couple of months.
Many point to rising mortgage interest rates as the main culprit. Bloomberg reports that U.S. home builders are combating this and are trying to support their numbers by offering incentives for using ‘in-house lenders.’ In exchange, they sometimes offer upgrades, appliances, or to help offset some closing costs. But what they won’t do is lower the price of homes. Many have dubbed this strategy the “new home incentive scam,” as it can be misleading.
While the sales pitch can be extremely seductive, and the promise of thousands of dollars in incentives hard to pass up on, the net deal is often far from being as attractive as it’s made out to be.
In many cases, there is a catch. Home prices are often over market value. This can only be pulled off by an in-house or preferred lender that has an arrangement with the builder. Whatever you do, don’t buy the model, which can often be the worst deal on the lot.
So what’s wrong with overpaying for a home if you really like it? Overpaying, or paying above top of the market for a new home can mean you are stuck in it. It will take a lot longer to build any equity, and in the meantime you won’t be able to resell without coming out of pocket big time. While giant builders are similar to banks in the weight they carry with regulators, they aren’t untouchable. The last thing you want is to be involved in any type of real estate fraud.
New homes are nice, but when they become a dead weight around your neck it is time to move on. Look around; there could be ‘like new’ homes in the area that are less expensive, offer more value and peace of mind, and you’ll actually enjoy owning and living in them!