- The Washington Times - Friday, August 10, 2001

Car dealers commonly use marketing come-ons such as "end-of-year closeouts" or "inventory reduction sales." Did you know builders use them, too? Is it possible to find a deal on an "overstocked" home?

New-home construction is a seasonal business, which in the past has led to annual sales events. Even in the fairly temperate climate of the Washington area, builders ramp up and cut back construction as the seasons change. However, today's active market limits the need for builders to unload homes at the end of the year. Besides, "the end of the year" doesn't matter so much anymore, as builders have improved their ability to work throughout the year, limiting weather's effect on construction.

"Although the traditional thought has been that January through May are the only busy months for builders, the September-through-November period is also very busy," says Sue Martinez, vice president of sales and marketing for Edgemoore Homes. "The only slow periods for builders these days are the summer and the month of December."

Even these "slow periods" have been busy in recent years, as a flood of buyer demand has motivated builders to keep crews working in all but blizzard conditions.

"Builders today stay on-site as long as they have orders to fill," Ms. Martinez says. "We've learned how to pour foundations in the winter, and the contractors move around to different phases of construction depending on the weather."

Builders may have learned how to work around the weather when they need to, but they still have to wait for land on which to build. Cold and wet weather have a more severe impact on developers because they can slow or even halt the preparation of land for a new community.

"From a land-developer perspective, the business is very seasonal," says Kim Ambrose, marketing manager for Terrabrook, a developer that does a lot of work in Loudoun and Fairfax counties. "Depending on how severe the winter is, weather can affect everything, and when we can't complete our share of work on the lots, it trickles down to the builder."

When a developer is putting together an entirely new community, a lot of infrastructure must be built. Utilities have to be laid underground. Storm sewers and roads have to be built. The most weather-sensitive of these operations is road construction. When it gets cold, the asphalt plants in the Washington area shut down, because crews can't lay asphalt when it is below 32 degrees outside.

"Every year, we know we must complete our lots for the spring by November," Mrs. Ambrose says. "If we don't, they won't get done until April."

It's important for that land to be available in January, because that's when the local real estate market heats up. It used to be February before new-home sales really got moving, but January recently has been almost as busy as February.

In fact, sales of new homes have been strong throughout the year recently, even if the construction of those homes can hit slow spots. Sales typically slow only twice each year: during the July and August vacation season and from Thanksgiving through New Year's Day.

"The more expensive projects tend to slow in the summer," Ms. Martinez says. "There's no question, wealthier people like to vacation in the summer."

Sales also slow a bit in the summer because school begins in September. New-home construction takes months to complete, so homes bought after May are not likely to be completed in time for school. That can deter some buyers.

Still, those two slowdowns each year aren't as profound as they were in years past. "The consumer is really out of luck when it comes to deals today," says Debbie Rosenstein, president of Rosenstein Research Associates.

Because builders typically are constructing homes they sold months ago, they aren't pining for sales to keep crews busy, as they were in the mid-1990s. Back then, most builders had a big sale in November to unload excess properties, many of which were sold but went back on the market when a buyer's financing fell through. There also were "spec" homes that had to be sold, houses that had been built on the speculation that they would be sold before long.

"Right now, the builders typically have enough backlog so they don't have to make a special effort to sell homes," Ms. Rosenstein says. "For the most part, there really aren't any seasonal discounts to be found in today's market."

Other kinds of discounts can be found, but it isn't easy. Some builders still construct spec homes, which come in handy in this market, with many transients looking for quick home purchases. You shouldn't expect a great deal on a spec home, however. Chances are, plenty of other buyers want to buy that spec property, eliminating the incentive for the builder to make a deal.

You may find some builders who are willing to deal when they near the end of construction in a particular community, unloading those last few lots so the sales team can move elsewhere. With buyer demand so high, and prices rising all the time, however, don't expect any dramatic bargains.

"Our communities are full-price from beginning to end," Ms. Martinez says. "This preserves the value in the neighborhood for previous buyers. We don't feel that someone should get a better deal just because they negotiated better or bought in the fall."

There are two times when a builder might be likely to make a deal, but finding out about them is next to impossible. The first is the end-of-year closeout for a company's fiscal year. Some builders end their fiscal year at times other than December, and there may be some pressure from the corporate office to boost sales before the year closes. This is especially true for the larger, national companies. Again, in today's hot market, there isn't much of a need for builders to lower prices. Even if you discover when a builder's fiscal year ends, you shouldn't anticipate an unusual discount.

The other event that might give you an edge is a sales contest put on by any of the larger home builders, similar to a sales contest at an auto dealership. In such contests, new-home salespeople have the opportunity to win trips or prizes if they sell a large number of homes in a given period.

"They might offer a cruise or a big trip to Cancun or Puerto Rico," Ms. Rosenstein says. "Everyone who meets their sales quota gets to go."

Sales staff might be more willing to make a deal during one of these six-to-eight-week contests. They never will tell you that such a contest is going on, leaving most buyers in the dark.

Even if you think you are getting an unusual deal from a builder, how can you be sure? "At a car dealer, you can ask for the invoice price, but you can't do that with a new home," Ms. Rosenstein says.

Because home prices and values vary widely from area to area, it's virtually impossible to know if the cost of that "free sunroom" was built into the original sales price. The best a buyer can do is shop around, choose an area and home style and buy a home he can comfortably afford. If you hold out for some unusual deal, you are likely to miss some good opportunities and expend valuable time and effort.

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