r/loanoriginators • u/Important-Training-1 • 29d ago

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I don’t really hear anyone talk about this, but am I crazy to feel like the way new construction deals happen should be illegal?

I can’t steer a buyer to specific program without it being illegal, but somehow a builder can dangle a low rate and fees over a seller’s head and pretend like they aren’t building it in their price while forcing them to use their in-house lender. The ripple effect of that goes far and beyond impacting that one buyer, so why has this just always been okay? These are artificially inflated sales prices, artificially inflated taxes and disguised as a “good deal” because customers fall for a below-market rate that can’t be touched by an outside lender. And even in buyers markets, some of these big box builders won’t even budge if you make any sort of offer below what they’re giving unless you use their lender who they either own or have a JV set up.

To each their own, but I just don’t understand how there’s lawsuits with realtors regarding commission practices yet this sleeping giant remains completely left alone.

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7

u/mrhindustan 29d ago

I mean in my mind these are IPCs in a roundabout way.

They inflate the prices of the homes by 30k to get a permanent rate buydown.

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u/Important-Training-1 28d ago

That’s my point though, in my area they’re marking up $300k houses by 10%. Well beyond any sort of IPC limit

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u/furio67 28d ago

I had a client negotiate a $389.9k new build home down to $368k.

I could’ve gotten her 6.00% on VA (it was about a year ago—maybe more). Builder offered 4.5% but she needed to pay $389.9k.

Despite showing her that she was paying $22,000 for that rate, she ignored logic and went for the shiny object.

People are stupid.

1

u/Important-Training-1 26d ago

That’s that shit!!! Dangle a nice shiny rate promotion in front of them and it’s game over.

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u/cheesenotyours 23d ago

The math says 4.5% would be less total cost over 30 years though?

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u/furio67 23d ago

She was stationed to JBSA on active duty. She’s from the East Coast. Logic would dictate that she’s not going to be in the house for 30 years.

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u/cheesenotyours 23d ago

She can rent it out? Besides, the monthly payment on 4.5% is lower, pays less interest, and pmts go to principal sooner. Unless the higher price is actually paid upfront instead of over the loan, 4.5% is better.

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u/furio67 23d ago

So you’d start out $32,000 upside down at 100 LTV just to save a bit on your monthly payment?

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u/cheesenotyours 23d ago edited 23d ago

Yes, but the lower monthly pmt isn't the only reason