A reader asked me this great question today, and I simply don’t know the answer. Can anyone give him some advice?
As a buyer of new construction, we recently found out that the builder wasn’t going to make our late July completion date. Instead the builder estimated a mid-September completion. Ugh, we have a child who will start school in a new school district, so this will cause a hassle.
Anyways, we were planning on listing this week (with an open house on the weekend hosted by our agent) but because of the delay in construction I’m at a loss of what to do. Here are my thoughts on the numerous statistics and opinion I’ve found so far:
- Spring, especially during the last weeks of school is generally one of the best times to list a home
- Listing a home later in summer can increase Days on the Market slightly, but sales price is often unaffected
- Due to the region having great job growth and numerous relocations, the school calendar, has a lesser effect on home sales than other regions.
BTW, we are selling a condo in the Klahanie – Issaquah area. So, long-winded way of asking… Do I:
- List in mid-late June and get a high volume of traffic but have a request that we pay rent through mid-September (roughly 45 days+ if the condo sale closed near end of July)?
- List in mid-late July hoping to close in late August, thereby having to pay rent to stay only an extra two weeks?
- Do something else?
Before we fully answer this let’s put a few facts on the table before I go to sleep. 5 for sale, 9 in escrow, 26 sold since the first of the year, average days on market 28, median days on market 17, minimum days on market 3, maximum days on market 135.
Assuming it’s under $300,000 in maybe Sundance.
I’ll sleep on it and give a general answer to the questions in the morning. For a more accurate response, email me offblog with real details like address and price you intend to ask.
In the light of morning I notice that you indicate that you have an agent. Agents are not permitted to give advice to consumers who are represented by agents, it is considered contract interference.
However you raise several interesting points, my answers to which are contrary to popular thinking (what else is new). So I will write a generic post on those topics.
Step into the time machine & set the clock back to contract signing. Make sure you have a lawyer there and he puts in a cluase that if the late July completion date is not met you get per diem credits against the purchase price (which you can use to pay your rent ).
sorry for the monday morning quarterbacking but someone needs to eradicate the notion that you dont need a lawyer in a real estate transaction.
Tell them Russ
Actually 3 cents, I was going to call on the LENDERS to chime in here, because a long rent back may not be possible at all, even if the lawyers say it is “possible”.
Unless you are selling to a cash buyer investor, condos are most often first time buyers who are going to owner occupy. I ran into a situation on one of my listings where I tried to get a longer than 30 day rent back and the buyer’s lender would not allow it. Their guidelines said that a rent back to the owner of more than 30 days disqualified their “owner occupied” status on their loan. The buyer didn’t qualify for the loan with a longer than 30 day rent back.
I’m not sure if “no rental payment” would make a difference, meaning if the seller tacked the rent on to the sale price. Any lenders out there have this answer? It’s something to be checked, in any case, with the actual buyer’s lender before the seller signs the offer.
I’m referring to a per diem “cash credit” against the purchase price charged to the builder for his (unreasonable) delay. It is a savings to the buyer which can be used to pay rent or put in his or her pocket if they dont need to rent.
Work the per diem to suit your needs–rental or otherwise.
A per diem charge of say $50 per day beyond July 31 would generate enough cash to pay for a rental of $1500 per month or a 1500 per month savings.
Per diems act as incentives to keep the builder on task—if there is no risk then delays are borne solely by the buyer & that aint kosher in my deli.
Re: Lenders:
Good point Ardell.
Another reason you need a lawyer to put in a clause that if the delay causes you to lose your committment you can cancel the contract. Or what about the added costs to extend commitments–a good lawyer would cover you on this as well and pass that cost to the delinquent builder.
Note: i am assuming that the negotiated late completion date is so far out as to be unreasonable & a burden to the prospective buyer.
3 cents,
I can’t wait to hear from the lawyers about how many times they have been able to get the builder to pay the buyer. If the builder was willing to put in a written contract that hed pay me for all that suff, I probably wouldn’t want that builder, as he’d be pretty hard up for some reason 🙂
3 cents,
I can’t wait to hear from the lawyers about how many times they have been able to get the builder to pay the buyer. If the builder was willing to put in a written contract that hed pay me for all that suff, I probably wouldn’t want that builder, as he’d be pretty hard up for some reason 🙂
He’d be the only builder that i would trust to finish on time if he put it in writing. He stands to lose if he does not deliver.
3 cents,
In my experience regarding builders, I would rather the builder take an extra week or two to get everything right, than to cut corners to finish on time. Of all of the things I want the builder to do, being on time is down on the list of priorities.
I have seen the sub-contractors installing the wrong thing. I had them pull it all out and replace it and that caused the home to be finished later than expected, but I didn’t care about time as much as quality of “the job” at hand.
Of course you may “want it all” but if you manage to put penalties on the builder regarding time, you may be sorry if you get TIME moved up on the priority list.
In my experience the best homes ever built are the ones where the future owner visited the construction site OFTEN, as often as possible, and yes, delayed the completion by being “picky”. The workers on that house know the future owner is watching them and don’t hide their lunch refuse in the drywall in that house 🙂
Even if you do not know a thing about construction, make a habit of watching them whenever you can and don’t say anything to reveal your lack of knowledge. Let them think you know more than you do by being quiet. Become the “squeaky wheel that gets the grease” just by being present often, if nothing else.
Don’t let completion time be number 1, 2 OR 3 on the priority list when it comes to new construction, or cut corners may be how they get finished “on time”.
3 cents,
In my experience regarding builders, I would rather the builder take an extra week or two to get everything right, than to cut corners to finish on time. Of all of the things I want the builder to do, being on time is down on the list of priorities.
I have seen the sub-contractors installing the wrong thing. I had them pull it all out and replace it and that caused the home to be finished later than expected, but I didn’t care about time as much as quality of “the job” at hand.
Of course you may “want it all” but if you manage to put penalties on the builder regarding time, you may be sorry if you get TIME moved up on the priority list.
In my experience the best homes ever built are the ones where the future owner visited the construction site OFTEN, as often as possible, and yes, delayed the completion by being “picky”. The workers on that house know the future owner is watching them and don’t hide their lunch refuse in the drywall in that house 🙂
Even if you do not know a thing about construction, make a habit of watching them whenever you can and don’t say anything to reveal your lack of knowledge. Let them think you know more than you do by being quiet. Become the “squeaky wheel that gets the grease” just by being present often, if nothing else.
Don’t let completion time be number 1, 2 OR 3 on the priority list when it comes to new construction, or cut corners may be how they get finished “on time”.
Do buyers rountinely let sellers rent-back properties? Does this make the new buyers landlords and then responsible for occupancy issues? ugh. Potientially going through the eviction process to occupy your new home sounds crazy to me.
Eric,
I don’t know how common it is, but I do know that it happens from time-to-time. My understanding is that it is normally a short-term thing (like 30 days or less), and it is probably a lot more common in seller’s markets when buyers are more willing to give in to seller requests in order to get a home.
Eric,
I don’t know how common it is, but I do know that it happens from time-to-time. My understanding is that it is normally a short-term thing (like 30 days or less), and it is probably a lot more common in seller’s markets when buyers are more willing to give in to seller requests in order to get a home.
Eric, It’s a judgment call for sure. If the owners, for example, have lived there for 15 years and it is immaculate, not likely they are going to trash the place in a 3 week post occupancy. If it is a pre-foreclosure with holes punched in the walls…they may pull out the kitchen cabinets on the way out the door…so that is a NO. Also the post occupancy usually has a very HEFTY per diem if they do not leave on time, like $500 a day which should be attached to their seller proceeds in the form of a reserve. If they have no equity…and nothing to attach, then again the answer would be NO.
But by and large a post occupancy can give the buyer leverage in the offer process and save them thousands while costing them next to nothing on a relative scale.
It’s a tool that is useful in multiple bid situations or seller’s markets or just for plain old decency issues that arise. Like should the seller let the buyer store anything in the garage? Sometimes. Shoud the buyer let the seller stay 2-3 days so they can close on their new house with the money from this sale? Often.
The better the agents know the parties, the more accurate the judgment call. Many agents JUST SAY NO on principle and that can cost their clients money in the long run. Every situation deserves an answer that absolutely relevant to THIS situation, IMHO.
Eric, It’s a judgment call for sure. If the owners, for example, have lived there for 15 years and it is immaculate, not likely they are going to trash the place in a 3 week post occupancy. If it is a pre-foreclosure with holes punched in the walls…they may pull out the kitchen cabinets on the way out the door…so that is a NO. Also the post occupancy usually has a very HEFTY per diem if they do not leave on time, like $500 a day which should be attached to their seller proceeds in the form of a reserve. If they have no equity…and nothing to attach, then again the answer would be NO.
But by and large a post occupancy can give the buyer leverage in the offer process and save them thousands while costing them next to nothing on a relative scale.
It’s a tool that is useful in multiple bid situations or seller’s markets or just for plain old decency issues that arise. Like should the seller let the buyer store anything in the garage? Sometimes. Shoud the buyer let the seller stay 2-3 days so they can close on their new house with the money from this sale? Often.
The better the agents know the parties, the more accurate the judgment call. Many agents JUST SAY NO on principle and that can cost their clients money in the long run. Every situation deserves an answer that absolutely relevant to THIS situation, IMHO.
With low repayments like that every month, as well as good interest rates on your savings, it sounds like you have it made!