Just made an offer on an in-progress new build

minneapolisiteJune 11, 2012

Long story short: we just offered $580,000 (w/ $100,000 in earnest money) on an in-progress semi-custom house listed at $615,000. Hope to hear a counter offer by tomorrow evening. Looking for thoughts/advice/predictions.

Short story long: We looked at about 100 model homes, picked one we loved by Builder A, and had Builder B bid it out for the lot we had been eyeing for over a year (Builder B owns the lot we were interested in). Builder B came back at $663,000, which is more than we're comfortable spending.

While we were chewing on that number and trying to decide what options to pull and square footage to cut to make it more affordable, I was surfing Builder A's website and noticed that they were building 3 spec homes with "our" floorplan. The spec homes are in the same great school district, but 50% closer to my husband's work, are in an established neighborhood with mature trees, and w/ the options we want they are priced at $615,000 (or $604,545 after the 1.7% discount for not bringing in a buyer's agent).

The real estate agent told us that more earnest money = lower purchase price. We are a young couple and play our cards close to the vest, so I think he was shocked when we showed up the next day with an offer for $589,860 ($580,000 after the buyer's agent discount) with $100,000 earnest money.

If any of you have been through a similar situation I'd love to hear your thoughts/advice/predictions.

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sylviatexas1

I don't understand the "more earnest money=lower purchase price".

Seller's net (bottom line) is the best determinant of whether a contract is accepted, although putting up substantial earnest money may convince a seller to look more closely at a low offer rather than rejecting it.

Have you received a response yet?

    Bookmark   June 14, 2012 at 4:21PM
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turtleshope

By earnest money, do you mean down payment? (i.e. your total in cash portion of the sale price, with the rest coming from a mortgage) (because to me, earnest money is what you put down after the offer has been accepted but before inspections & such, and there is some risk of losing that if the deal goes bad because of lack of action on your part).
In a way, a larger down payment means the cost of the house is less to you ... because you pay less interest on the mortgage. But it has no effect on the seller.
Unless there is some difference when it is a builder you're buying from, that I am unaware of.

    Bookmark   June 14, 2012 at 4:32PM
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minneapolisite

No, I meant earnest money, not a down payment. Basically the build is going to take 4 months, so if we provide more earnest money, they don't have to pay for as much of the build out-of-pocket.

Anyway, we negotiated with the builder and have signed a purchase agreement! :) Now to sell our currently home. (In our market, it shouldn't be a problem so long as we're realistic about our price.)

    Bookmark   June 14, 2012 at 7:09PM
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sylviatexas1

It sounds like you gave this builder a deposit;
he couldn't use earnest money to pay for building the house.

Just out of curiosity, did you have your own Realtor, or is the real estate agent you refer to working for the builder?

    Bookmark   June 15, 2012 at 1:32PM
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berniek

I hope this builder doesn't go belly up. Happens frequently today. I hope your deposit is in escrow and not with the builder.
Good luck with your purchase.

    Bookmark   June 15, 2012 at 2:27PM
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