Your Biggest Competition May Not Be the House Down the Street

66% of builders are offering incentives. Here’s why South Denver Metro buyers AND sellers should pay attention.

By Bruce McQuiston
Coldwell Banker Realty
Your Personal Real Estate Coach

Most sellers know they have competition.

They look at the house down the street.

The new listing around the corner.

The one that just reduced its price.

But Bruce believes there’s another competitor many resale sellers aren’t watching closely enough.

The builder five miles away.

And that builder may be offering something your neighbor isn’t.

Money.

According to the National Association of Home Builders, 66% of surveyed builders reported using sales incentives in September.

Another 38% reported cutting prices.

Among builders cutting prices, the average reduction was 6%.

That’s worth paying attention to.

But Bruce thinks the bigger story isn’t simply that builders are offering deals.

It’s what those deals are doing to the way buyers compare homes.

Buyers Aren’t Just Comparing Prices Anymore

Imagine a buyer considering two homes.

A resale home is priced at $700,000.

A new construction home is $735,000.

At first glance, the resale looks like the better deal.

It’s $35,000 less.

Simple.

Except the builder may be offering some combination of:

Closing-cost assistance.

Financing incentives.

An interest-rate buydown.

Included upgrades.

Or a price reduction.

Suddenly the question isn’t:

“Which house costs less?”

It’s:

“Which house gives me the better overall financial and lifestyle outcome?”

That’s a completely different conversation.

The Sticker Price Can Lie

Not literally.

But it can tell an incomplete story.

A buyer shouldn’t compare:

$700,000 vs. $735,000.

They should compare:

Purchase price.

Interest rate and APR.

Cash required at closing.

Monthly principal and interest.

Taxes.

Insurance.

HOA or metro-district costs where applicable.

Included upgrades.

Landscaping.

Window coverings.

Appliances.

Future maintenance.

Lot.

Location.

Commute.

Move-in date.

And the value of the neighborhood itself.

Now we’re comparing houses.

Not advertisements.

Builders Understand Something Sellers Need to Understand

Builders don’t fall in love with their asking price.

They have inventory.

They have carrying costs.

They have sales goals.

And they have homes they need to move.

So when buyers slow down, builders look for ways to make the transaction more attractive.

That doesn’t always mean dropping the price.

Sometimes they attack the buyer’s biggest problem instead:

The monthly payment.

That’s smart.

And it’s something resale sellers should understand.

Sellers: This Doesn’t Mean You Need to Match the Builder

Absolutely not.

A resale home may have advantages new construction can’t reproduce.

An established neighborhood.

Mature trees.

A larger lot.

Finished landscaping.

Window coverings.

An established community.

A better location.

A finished basement.

Completed improvements.

A shorter commute.

No construction happening around you.

And perhaps the biggest advantage:

You can actually see exactly what you’re buying.

With the right resale home, the buyer isn’t waiting for a neighborhood to become something.

They’re buying what already exists.

That’s valuable.

But only if we show buyers why it’s valuable.

This Changes How Bruce Looks at Competition

When Bruce prepares a home for market, the competitive analysis shouldn’t stop with:

Active. Pending. Sold.

Those are essential for determining market value.

But there’s another question:

What else could this buyer purchase?

That’s the marketing competition.

And those two things aren’t always the same.

A new-construction promotion doesn’t automatically establish the value of your resale home.

But it may absolutely influence whether the buyer chooses your home.

That’s an important distinction.

Here’s an Example

Suppose Bruce is preparing a $750,000 Littleton listing.

There are three comparable resale homes nearby.

That’s traditional competition.

But there’s also a new-home community ten minutes away with homes starting around $800,000.

Easy to dismiss, right?

Not necessarily.

What if that builder is offering an incentive on a specific completed home?

Now the buyer may be thinking:

“For roughly the same monthly payment, should we buy brand new?”

That’s the question Bruce wants answered before the listing hits the market.

Because once we understand that comparison, we can position the resale properly.

Maybe our advantage is:

A larger lot.

Better location.

Finished basement.

Mature neighborhood.

Lower ongoing costs.

No construction.

Immediate occupancy.

More square footage.

Better outdoor space.

Or $50,000 worth of improvements the new home doesn’t include.

Don’t just tell buyers the resale is better.

Prove where it’s better.

Buyers Need to Be Careful Too

Builder incentives can be excellent.

But the headline offer isn’t necessarily the offer available to every buyer.

Before treating an advertised promotion as money in your pocket, Bruce recommends getting several things in writing.

Which specific home qualifies?

Not the model.

Not “homes from $699,000.”

The actual house you can purchase.

What does that house cost with your selections?

Options can change the number quickly.

What financing is required?

Does the incentive require the builder’s affiliated lender?

What rate?

What APR?

What fees?

How many points?

Is the rate temporary?

A 2-1 buydown, for example, changes the buyer’s payment temporarily.

Buyers need to understand the payment after the subsidy expires, not just the attractive first-year number.

When must you close?

Many incentives have deadlines.

A terrific promotion isn’t terrific if the buyer can’t meet the requirements.

What are the ongoing costs?

HOA.

Metro district.

Taxes.

Insurance.

Maintenance.

Those numbers can materially affect affordability.

One More Thing: The Builder’s Salesperson Represents the Builder

This is something Bruce has emphasized for years.

The person sitting in the builder’s sales office may be helpful and professional.

But their job is to sell the builder’s homes.

The builder is their client.

That’s why buyers should consider having their own real estate representation when purchasing new construction.

Someone needs to analyze the transaction from the buyer’s side of the table.

Not just the price.

The contract.

The incentives.

The financing.

The inspection process.

The deadlines.

The options.

The competing resale properties.

And the total cost of ownership.

This Is Where Experience Matters

Bruce has helped buyers with new construction as well as resale homes.

And that’s important because the goal shouldn’t be:

Sell the buyer a resale.

Or:

Sell the buyer new construction.

The goal should be:

Figure out which opportunity actually makes the most sense for that buyer.

Sometimes the builder wins.

Sometimes the resale wins.

But you don’t know until you compare the entire package.

And Sellers Need the Same Analysis

Before Bruce recommends pricing and positioning a South Denver Metro listing, there’s a question sellers should be prepared to answer:

“Why should the buyer choose your home?”

Not:

“Because we love it.”

Not:

“Because Zillow says it’s worth this much.”

And not:

“Because the neighbor sold for that last year.”

Today’s buyer has options.

If the builder is offering an incentive, your home needs a compelling reason to win the comparison.

Maybe that’s price.

But frequently it isn’t.

It may be:

Location.

Lot.

Improvements.

Lifestyle.

Lower ongoing costs.

Established neighborhood.

Finished spaces.

Immediate availability.

That’s positioning.

And in today’s market, positioning can be just as important as pricing.

Bruce’s Perspective

The biggest mistake sellers can make right now is assuming their competition is limited to similar resale homes.

It’s not.

And the biggest mistake buyers can make is assuming the builder with the biggest advertised incentive automatically has the best deal.

They don’t know that either.

The better question for both sides is:

What’s the real value after we compare the entire package?

That’s where Bruce believes experienced representation matters.

Because today’s real estate consumer doesn’t need another person to show them listings.

They need someone who can help them understand what the numbers actually mean.

Thinking About Selling?

Before you decide what your home is worth, find out what your buyer is comparing it against.

Bruce can prepare a Buyer Competition Report showing the resale AND relevant new-construction alternatives competing for the same buyer.

Message Bruce:

“SHOW ME MY COMPETITION.”

Thinking about buying instead?

Bruce can compare a new home and resale side-by-side, including price, financing incentives, estimated ownership costs, included features and other relevant tradeoffs.

Message:

“COMPARE THE DEAL.”

Bruce McQuiston
Coldwell Banker Realty
Your Personal Real Estate Coach

Don’t just compare the price. Compare the opportunity.