- My Forums
- Tiger Rant
- LSU Recruiting
- SEC Rant
- Saints Talk
- Pelicans Talk
- More Sports Board
- Fantasy Sports
- Golf Board
- Soccer Board
- O-T Lounge
- Tech Board
- Home/Garden Board
- Outdoor Board
- Health/Fitness Board
- Movie/TV Board
- Book Board
- Music Board
- Political Talk
- Money Talk
- Fark Board
- Gaming Board
- Travel Board
- Food/Drink Board
- Ticket Exchange
- TD Help Board
Customize My Forums- View All Forums
- Show Left Links
- Topic Sort Options
- Trending Topics
- Recent Topics
- Active Topics
Started By
Message
Builder Deposit Question
Posted on 3/8/21 at 7:26 am
Posted on 3/8/21 at 7:26 am
I’m wanting new construction in Houston. Found a type of home I like for around 750k. I’m trying to time this where I can sell mine and move into the new one with no intermediate period.
Builder wants $3k in earnest money, 4% of base price and all upgrades paid upfront - which are all credited back at closing. I don’t want to give them close to $50k down. Agent claimed the 4% figure was bc of their bank.
Is this bs? I talked to my broker and he said he’s done numerous new build loans in this range for 1-2% earnest with upgrades paid upfront.
If they tell me they won’t budge then I’ll move on. Just didn’t know what was standard for these type of deals.
Builder wants $3k in earnest money, 4% of base price and all upgrades paid upfront - which are all credited back at closing. I don’t want to give them close to $50k down. Agent claimed the 4% figure was bc of their bank.
Is this bs? I talked to my broker and he said he’s done numerous new build loans in this range for 1-2% earnest with upgrades paid upfront.
If they tell me they won’t budge then I’ll move on. Just didn’t know what was standard for these type of deals.
5
Posted on 3/8/21 at 7:38 am to Hou_Lawyer
4% seems aribtrary - but $30k on a $750k home is really not crazy. Now, maybe (potentially) builders is using your deposit as HIS equity for the bank loan? How long has he been in business? Good reputation? It comes down to a good contract and some trust.
Builders can build their normal plans / spec homes and be confident they will sell it if you walk away. But, you start adding upgrades that may not be typical for the market, and builder ends up with a home with neon green painted rooms and black toilets and then you walk away - that's an issue for the builder to try to sell it to someone else. Hence, the upgrades upfront is very standard.
Instead of letting him finance it, you could finance it yourself - interest only during construction and then convert to permanent. Obviously, your income level would have to support the new construction loan and your existing home loan.
Builders can build their normal plans / spec homes and be confident they will sell it if you walk away. But, you start adding upgrades that may not be typical for the market, and builder ends up with a home with neon green painted rooms and black toilets and then you walk away - that's an issue for the builder to try to sell it to someone else. Hence, the upgrades upfront is very standard.
Instead of letting him finance it, you could finance it yourself - interest only during construction and then convert to permanent. Obviously, your income level would have to support the new construction loan and your existing home loan.
Posted on 3/8/21 at 7:41 am to bamaswallows
All depends on the size of the builder and how many homes they are building a year etc etc. Also, is this house in a subdivision or just a one off lot somewhere.
If it's a smaller builder then there's some negotiating room. If it's a large regional or national builder, they aren't going to budge especially in this market.
If it's a smaller builder then there's some negotiating room. If it's a large regional or national builder, they aren't going to budge especially in this market.
Posted on 3/8/21 at 9:04 am to Im4datigers
the terms are close to what my builder wanted
Posted on 3/8/21 at 9:14 am to Hou_Lawyer
Builder's in Houston pretty much have the ability to do that right now with how few houses that are available. I've got several in that $600k-$700k typically most ave the 1% down and upgrades paid up front at the moment. 4% of base price on top though seems a little high.
Posted on 3/8/21 at 9:15 am to bamaswallows
No respectable builder is going to let an individual finance the project.
Posted on 3/8/21 at 9:49 am to bamaswallows
In business since 2004.
They’re not a national brand. They have about 15-20 homes going up at the moment. All inside the loop or Oak Forest.
Good rep as far as I know. I just thought 4% is too high.
They’re not a national brand. They have about 15-20 homes going up at the moment. All inside the loop or Oak Forest.
Good rep as far as I know. I just thought 4% is too high.
Posted on 3/8/21 at 11:03 am to Hou_Lawyer
My parents just started construction last week on a home in Houston at about 350k. All 3 builders we were negotiating with asked for 10% earnest money upfront. We later talked one down to 5%. Of course your home is more than twice the cost so I can understand your predicament.
Posted on 3/8/21 at 11:07 am to geauxbears08
i don't want to make another thread but if you already own the lot can you potentially use that as collateral when negotiating with builders?
This post was edited on 3/8/21 at 11:08 am
Posted on 3/8/21 at 11:49 am to Hou_Lawyer
I've built 2 custom homes in the Baton Rouge market. First was sales price of $360k. Custom home builder require $5k deposit. 2nd was sales price of $540k...same builder, but they requested a $25k deposit.
I felt very comfortable with them from prior experience and they've been building homes in the area for 40 years. I didn't hesitate when they asked for the money, but I'm also confident they would have accepted a lower amount, too.
In my opinion, why does it matter? If you're going to buy the house, and at that price point, why would you balk at their request? Seems very reasonable to me. You either pay it now, or you pay it later. They don't want to get stuck with a custom house and random upgrades any more than you want a builder who folds and takes your money.
I felt very comfortable with them from prior experience and they've been building homes in the area for 40 years. I didn't hesitate when they asked for the money, but I'm also confident they would have accepted a lower amount, too.
In my opinion, why does it matter? If you're going to buy the house, and at that price point, why would you balk at their request? Seems very reasonable to me. You either pay it now, or you pay it later. They don't want to get stuck with a custom house and random upgrades any more than you want a builder who folds and takes your money.
Posted on 3/8/21 at 12:13 pm to MaxDraft
I’d like to use the equity from the home sale. I don’t want to pull that kind of cash out of investments if I don’t need to.
The contract states the deposit and earnest is non refundable anyway. If I’m putting 25-30k down then I’m not going to run. It seems they’re wanting the homebuyers to fund further projects w/ that % down. But maybe that’s standard. Hence the question.
The contract states the deposit and earnest is non refundable anyway. If I’m putting 25-30k down then I’m not going to run. It seems they’re wanting the homebuyers to fund further projects w/ that % down. But maybe that’s standard. Hence the question.
Posted on 3/8/21 at 5:54 pm to Hou_Lawyer
I think it's pretty much par for the course over in Baton Rouge at least. A friend just built a $650k custom. He put like $30k down with the builder and made additional payments (what they called "draws") during the build. Now, he was a shoddy builder though...to be honest.
Posted on 3/9/21 at 7:19 am to Hou_Lawyer
If you decide to move forward I would go to his office and nail down every detail and allowance. You don’t want him downgrading your fixtures, flooring, etc after you pay and sign. Then he has you over a barrel if you want to upgrade.
Posted on 3/9/21 at 9:11 am to bamaswallows
quote:My ex-wife was a paralender in construction loans. I can tell you some horror stories concerning people who didn't do due diligence when picking a builder. I wouldn't give a dime to a builder before doing A LOT of homework on him first.
4% seems aribtrary - but $30k on a $750k home is really not crazy. Now, maybe (potentially) builders is using your deposit as HIS equity for the bank loan? How long has he been in business? Good reputation? It comes down to a good contract and some trust.
Posted on 3/9/21 at 12:09 pm to greygoose
quote:
I can tell you some horror stories concerning people who didn't do due diligence when picking a builder.
Go on...
Posted on 3/9/21 at 9:28 pm to indytiger
Update - builder caved. I wrote the counter for a sum a little more than 1/2 of their offer and said to take it or leave it. Also asked for more in upgrades.
They agreed.
They agreed.
Posted on 3/9/21 at 9:40 pm to Hou_Lawyer
If you want a quote from a local lender to compete with the interest rate you’re getting on the build shoot me an email at my username at gmail and I’ll let you know where we are at currently.
Good job on the negotiation many people don’t negotiate enough with builders when hashing out the contract
Good job on the negotiation many people don’t negotiate enough with builders when hashing out the contract
Page 1 of 1
Popular
Back to top
Follow TigerDroppings for LSU Football News