Many people shop for their dream home in pleasant subdivisions with multiple models, clean streets and manicured lawns.
But to a more adventurous minority of potential home buyers the sight of bulldozers and weeds can present the promise of a future lifestyle fully as alluring–but at a much lower cost.
It`s during the ”presale stage” of a development, before models have been built or streets laid out, when many builders say the pioneering home buyer with faith or courage or just foresight can save.
”The people who buy early have the greatest chance for future appreciation, and the best choice of home sites,” says Richard Faltz, president of Primus Corp.
”The drawback is that they are operating on trust that the project will come through the way it`s being presented. The developer, especially if he is unknown, may not be able to follow through on the project.
”At that point what the builder is really selling is the buyer`s dream, the faith that what they`ve visualized is what they will find when the keys are turned over.”
People who buy at the end of a project, on the other hand, ”have less to worry about because they are buying a known quantity,” says Faltz. ”They know what the area`s going to look like.”
Typically, the buyer during presales ”can only look at blueprints and brochures,” says Faltz. ”He may be able to look at site plans that show the relation of his lot to nearby schools, churches and parks. Maybe the builder has constructed similar homes somewhere else, and the buyer can drive there and look them over.”
Faltz divides the life of a development roughly into three segments.
”There`s preconstrution, typically from the intitial groundbreaking to completion of the models. Then there`s the grand opening stage, including a third to two-thirds of the sales. Then comes the final sales or closeout period.
”We try to wind up the final sales in a three-month period. We have an increased marketing budget, and typically the advertising budget is increased. We`re trying to minimize the construction mess for the people who are now living in the development. The last 5 percent of the units are sometimes offered at special promotional prices. The models are sold and you`re closing up shop, moving on to the next project.”
Primus is starting preconstruction sales at one project now, and closing out another.
”We`re completing Lakewood South at Green Trails in Lisle, a single-family development. We`re down to the last six lots of the original 40. When we started, prices ran from $105,0000 to $140,000. Now they start at $120,000 and run to $175,000.”
”At another development, Windcrest, in Oswego, the company scheduled a
”preconstruction kickoff” for this week. Single-family homes are being offered at prices from $118,000 to $190,000.
”We`ve got 49 lots in the first phase, and 75 people expressed interest in those lots,” says Faltz. ”We scheduled a lottery. We`re offering 10 per cent discounts on the lots.”
The company typically expects prices to increase 15 to 18 per cent from preconstruction in a development to final closeout, says Faltz.
”In a year, or year and a half, a 15 per cent increase in the value of the house would be a pretty good return on your investment,” he says.
David Hoffman, president of Red Seal Development Corp., agrees that
”the most advantageous time to buy from an economic point of view is early, but warns that early buyers have to put up with the inconvenience of construction work going on around them.
”We believe in opening a community the minute we have subdivision approval, long before any construction starts,” says Hoffman.
No matter how carefully the construction is done, he says, ”early buyers still have to live in the midst of it. We have a program where we clean our streets at night when it`s muddy. But there`s a certain amount of dust and dirt that can`t be helped. For the person who is not concerned about price or location of his lot, the best time to buy is at the very end because that`s when there`s the least amount of dirt.”
Others, however, can take advantage of a builder`s ”strong desire for early success,” says Hoffman.
”We try to offer incentive programs for people to buy before the models are open,” he says.”
In Winchestr Estates, the company`s newest subdivision, the first of 91 will be priced from $206,000 to $233,000. Models won`t open until fall. The the first 10 buyers received a ”comfort and ease package” consisting of an electronic garage door opener, burglar alarm system, intercom, built-in central vacuum system, and upgraded oven and microwave. The package retails at $6,000, says Hoffman.
Sheldon Lazar, president of United Development, thinks that there are certain merits to buying at various times during the life of a subdivision, but that few people pay attention to this.
”When people need a house, they will buy when they see it, whether it`s the first or the last in the subdivision,” says Lazar. ”But our message to the public is that the presale stage is the best time to buy.”
At the company`s Brittany Place subdivision in Bollingbrook, which is in the preconstruction phase, 10 of the 77 planned homes, priced from $73,990, have already been sold.
Lazar sees less benefit in waiting until the end of the subdivision.
”If the builder says his houses were selling for $100,000 and this is the last so you can have it for $80,000, you probably should be concerned,”
he says.
”In a successful development, the prices continually go up. Occasionally, at the end a builder will discount the fact that he used a home as a model, and there might be upgrades in there that you`ll be able to get.” William Mabrook, vice president of Lexington Homes, sees advantages both in being a ”beginner” and an ”ender.”
”You`ll never get it at a lower price than you will as a beginner,”
says Maybrook.
”The vast majority of developers–and we`re no different–will start out selling their houses at a lower profit margin. We want to get a fast start and initial success. The lower profit margin translates into lower consumer prices. The builder figures he will make up the difference a little bit later in the life of the development.”
Partly the beginning sales are for the builders peace of mind, says Maybrook.
”With every new subdivision a builder opens, we have butterflies in our stomach. We want to know that we`re getting off to a good start.
”People will gravitate toward purchasing in a successful area,” he says. ”There`s nothing more deadly than buying in a subdivision that was supposed to have a couple of hundred homes and all the visitors see are weeds and a few houses.”
Bankers who lend money for constructing the developments also like to see brisk early sales, says Maybrook.
”The builder has given the lender estimates of the rate of sales and the amount of money the houses will bring in. The builder is supposed to perform according to those estimates. The initial presales will give him a brisk early sales pace, and will also give him cash flow so he`ll be able to pay his bills.”
Lexington`s Arlington Club development in Wheeling is now in a presale situation, he says.
”We bought a former golf course and are creating housing on it. We started taking reservations last November on one of our designs, the Birchwood Arbor Home. The guaranteed reservation price was $79,490. Today that home sells for $88,490. This is the kind of thing that happens in a halfway decent market. You would not have heard stories like this in 1982 when the market was down. You would have heard us say something like, `Come out and buy a home and I`ll give you an automobile at the same time.` ”
