The Housing Scene

‘Dirt’ vs. Inventory Houses

There’s no question that purchasing a newly constructed house is an exciting time. But if time is of the essence, consider buying a house out the builder’s inventory of finished but unsold homes.

Both to-be-built houses and inventory homes have their positives and negatives. If you need the time to sell your current place, hold a couple of yard sales to get rid of the stuff you no longer need or want, pack up the stuff you’re taking with you and take care of the myriad of other details involved in moving, what they call a “dirt” house in Texas is probably for you.

Not only do you get a scratch-built home that comes together from the ground up, you get to make some changes to the floor plan, add whatever options and upgrades you might want and pick all the finishes -- from the colors on the walls to the material used for your countertops to the style of your cabinetry. You even get to choose the exterior elevation you like.

“You have a lot of flexibility,” says Brian Hoffman, the third-generation owner of Red Seal Homes, headquartered in Northbrook, Illinois. “Lighting, plumbing, walls. If you have the time to get a home exactly as you want so it doesn’t look like everybody else’s, build-to-suit is the way to go.”

It’s nice to have choices, for they personalize what is essentially a standard production house. “You can put your stamp on it,” says Kathy Zigler, sales counselor at Caldwell Homes in Houston. “But it can be overwhelming” to have to make all the choices that are necessary.

“There are a million tiny decisions to make,” according to Haubstat, Indiana-based Reinbrecht Homes. “It’s not uncommon for a couple to make a lot of top-tier selections, only to realize they’re overshot their allowances by $100,000 or more.”

Another drawback: Building a house takes time, about seven months on average, according to the latest data from the National Association of Home Builders. And it could take longer -- nine to 10 months in the Mid-Atlantic region -- depending on where you are buying.

But that was way back in 2012, a lifetime ago in the construction business. Now, with the widespread shortage of construction labor -- the number of unfilled construction jobs is nearing 300,000, the most since the end of the Great Recession -- it probably takes somewhat longer.

So, if time is the determining factor -- say your old place sold faster than you thought it would, you’re anxious to move before the new school year starts or you’re changing jobs and have to relocate your family ASAP -- purchasing an inventory home may not be that big of a compromise.

For one thing, Zigler in Texas points out, “you get to see exactly what you are going to get.” No trying to visualize the house by reading floor plans or blueprints. No trying to mentally remove all the upgrades builders tend to put into their model homes. With an inventory home, it’s all there, right before your eyes.

Another important factor: If you have your financing all arranged and are pre-approved for a mortgage, you can probably close the deal within 14 days, says Hoffman, who has anywhere from four to 10 completed or nearly completed houses in inventory at any one time, depending on the pace of sales in a particular location. Indeed, Red Seal is “doing more speculative building lately” than at any time in its 80-plus years, he reports.

Also, you won’t have to settle for a lousy home site. Inventory houses are built throughout a community, not just in the worst places. One such Caldwell house in Cypress, Texas, is actually on an oversized lot; another has a view of the lake.

The house probably won’t be a stripped-down, basic model, either. Typically, Caldwell’s inventory houses have some upgrades -- an upgraded master bathroom, for example, or a gourmet kitchen. Says Hoffman of Red Seal: “Buyers of move-in ready homes have the benefit of finishes and special features hand-selected by our design team.”

If the house is finished, you are not going to be able to customize. But if it is still under construction, some degree of customization may be available, depending how far along the builder is.

Prices of inventory houses often are negotiable, too. After all, the longer the house languishes on the market, the more it costs the builder.

Zigler at Caldwell says the usual markdown is 10 percent, and the builder may be willing to go lower, depending on the property, but especially if the house is one of the few remaining to be sold. “We’re open to all offers,” she says. “Builders build homes to be lived in, not sit on the market, so you can get the best deals on these homes.”

If the builder won’t cut his price, maybe he’ll throw in some financing help. According to New York-based consultant Ivy Zelman, builders are increasingly offering such items as closing cost assistance, mortgage rate buy-downs or increased commissions for agents who bring buyers to their doors.

Because time is money, builders generally are more motivated to offer these kind of concessions on inventory models than production houses. All you gotta do is ask.

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