Tustin: Buy New with Builder Incentives or Buy Old for Cheap?

We’ve all heard about those crazy incentives builders are throwing in to get their new homes sold without having to slash prices. I’ve heard about upgrades such as granite countertops, stainless steel appliances, Italian tile or wood floors instead of carpet, landsacping… even a swimming pool! It all sounds nice, but is it worth it to pay more?

Lennar and William Lyon Homes are still trying to sell (I would say dump, but the prices are just too high) their last remaining properties. A recent L.A. Times article (“Builder incentives: Just marketing, or the real deal?“) by Patrick Duffy helps unravel the incentive myth by interviewing a guy that bought in Tustin Legacy’s Columbus Grove. This “guy” was Glen Biener who happens to have a background in real estate and financial planning.

Beiner went in with some expertise of real estate and finance and came out with a negotiated deal from Lyon (after having bought another property from Lennar previously). However, in the end, Beiner says “his experience led him to conclude that a simple discount off the price of the home would have been far easier than dealing with incentives.” He found that the incentives weren’t really all that they were cracked up to be — upgrades inflated at Lyon’s design center vs. outside venues/contractors, etc.

While some builders are ditching the incentives and going for lower prices, according to Duffy in his article, incentives are still popular with buyers. Duffy writes, “On a national scale, however, they remain popular with buyers. In fact, nine out of 10 new-home buyers in 33 markets surveyed for a study to be released this fall are receiving incentives; a quarter of those are worth $25,000 or more.” The problem with incentives is that they can up your property value, resulting in additional property taxes, as in Beiner’s case.

So, what’s the best deal… new house with incentives or an old one that is a heck of lot less expensive? Well, it’s really you, the buyer, that can decide. If you are one that’s attracted to shiny and new, just be sure to do what Beiner did– do your homework and negotiate until you really do have a good deal… and don’t be fooled by those incentive smoke and mirrors.