What are Builder Incentives?
When a home builder first develops the homes of a new community, they are motivated to sell the homes as quickly as possible. Think about it - they’re pouring a lot of time and money into building these homes upfront. They don’t actually make money until the homes sell, so they do what they can to get them sold ASAP. One method they use to sell homes faster is builder incentives. The builder will offer these to home buyers to sweeten the deal and encourage them to pull the trigger.Examples of Builder Incentives
Builders can be creative, but most of the incentives you’ll see fall into these buckets.- Upgrades for “free” - the builder may allow you to upgrade the home for free if you buy within a specific time window. Typical examples are nicer countertops, appliances, pools, hot tubs, or finished basements.
- No Property Tax - the builder may offer to pay the first 6-12 months of property taxes on the home after it’s sold.
- No Mortgage Payments - the builder may offer to pay the first few mortgage payments on behalf of the buyer. This usually amounts to somewhere between one to four payments, meaning the homebuyer is saving thousands!
- Insurance Payment - when you buy a house, homeowners insurance is critical. The builder may offer to pay your homeowners insurance for the first year.
- Closing Costs - when you buy a home, the closing costs will price you a pretty penny. Sometimes a builder will offer to pay them for you.
- Lower Prices - the last resort is for a builder to lower the price of the home. This is usually reserved for later in the building cycle because they don’t want to reduce the overall market. This is used to help the builder sell the last few homes so they can dust off their hands and move on.