New Home Builders Taking Old Home Trade-ins
Jun 7th, 2007 by Jody McLeod
Although I haven’t seen this practice in Portland yet, some new home builders across the country have turned to a new tactic to move their product in this changing real estate market - the trade in. Yes, in some areas where over-building has taken place and the market has slowed, just as you can do with your old car, you can trade in your old home.
Home Trade-in Basics (these vary from builder to builder):
- The new home must be at least 20% more expensive than the current home.
- Home-owners receive a trade-in value on their old home from 85-95% of their current home’s appraised values.
- The buyer pays the difference between the homes.
- The builder then rehabs the old home and sells it.
I can see that there might be pros and cons to this type of transaction:
- Pros
- The home-owner doesn’t have to try and carry two mortages.
- There is no need for the home-owner to market the current home and wait for a buyer to come along in a slow market.
- The current home-owner doesn’t have to worry about fixing up the home to sell.
- Cons
- The home-owner doesn’t have anybody representing them (and only them) in the transaction.
- How can the home-owner be sure they are getting the most they can from the trade? They might be able to sell their home for much more than the trade-in value (just as in selling an old car).
- They do not have anyone representing them in the purchase of the new home. A builder’s agent has a fiduciary duty to the the builder to get the best possible price, not to the buyer and his or her interests.
More reading on this topic:
CNN Money.com
Newspress.com
Photos by zhartley and tdell82, used under creative commons licensing.
Technorati Tags: Home trade in, Portland, old home, home-owners, appraised values
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