Empowering Homebuilders – Maximizing Sales with Builder Buy Downs
Construction lending and builder buy downs are two things that have changed due to COVID. In Episode 20 of The Market Pulse, Aaron Fichera interviews Justin Freeman of CMG Financial to discuss how CMG works with home builders. From challenges in the Florida housing market to unique financing programs for new construction, let’s explore the strategies that are helping builders boost sales and navigate the current market conditions.
Working with Home Builders: CMG Financial’s Programs
Interest rate buy‑downs are a popular incentive for home buyers, and can make homes more affordable by reducing monthly payments. Recently, temporary buy‑downs have gained popularity; however, they are not a comprehensive solution for affordability. A temporary buy‑down might lower an interest rate from 7% to 5%, but this benefit is contingent upon the borrower qualifying for the higher rate initially. This can be a problem for prospective buyers who don’t meet the original interest rate requirements. On the upside, these temporary buy‑downs offer the advantage of allowing homeowners to refinance later on, potentially improving their financial situation over time. In Justin’s own words, “CMG Financial’s programs level the playing field between smaller builders and national builders.” Additionally CMG also provides horizontal and vertical financing. Horizontal financing allows businesses to secure funds from various sources at the same level to expand operations, while vertical financing involves obtaining funds from different levels of the supply chain to enhance control over production and distribution. Before receiving a loan however, CMG requires for all permits to be in hand or on the way.
Unique CMG Financing Programs for New Construction
As the housing market has evolved, new challenges have turned up. Understanding the market trends and leveraging unique financing programs is important in order to benefit both builders and homebuyers. As a result, builders are offering unique programs to make homes more affordable for buyers. As Justin explains, “interest rate buy‑downs are a big draw for home buyers in the current market.” CMG also works with builders on their marketing campaign in order for the houses to be sold, showing how these programs are all‑encompassing. CMG Financial provides a variety of programs for home builders, including interest rate buy‑downs and construction‑to‑permanent loans. CMG Financial is different from banks as they do not require a depository relationship and do not require the builder to pay until the property closes.
Challenges in the Florida Housing Market
The Florida housing market is experiencing an influx of people moving to the state, but there are challenges with insurance costs and affordability. Justin notes that many newcomers are drawn by the allure of sunshine and warmth, especially for retirement, yet they often find themselves caught off guard: “It’s called the halfback, where you move down from the Northeast, and you move to Florida, and you think it’s gonna be great, and then it’s so hot, and there’s so much traffic that you go halfway back to Georgia and North Carolina.” This sentiment reflects the reality many face as they encounter the challenges of living in Florida. Due to the risk of hurricanes and the prevalence of homes located near the water, insurance premiums have skyrocketed. For example, the cost of rebuilding insurance can increase dramatically, with annual premiums potentially jumping from $7,000 to $30,000. This sharp rise poses a serious problem for those on fixed incomes who may struggle to manage such a significant increase in insurance expenses.
The Changing Role of Realtors in the Industry
Technology and AI are reshaping the real estate industry, but human expertise and personalized service are still essential. Aaron and Justin talk about how realtors need to adapt to changing market dynamics and provide value beyond traditional services.
CMG Financial is here to help home builders by offering unique financing programs for new construction. To learn more, tune into The MarketPulse, Episode 20: Empowering Homebuilders: Maximizing Sales with Builder Buy Downs.