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Home Builders Say: "Trade In" Old Home For New!

Yes, it’s yet another upshot of the downturn in housing. As big builders try to get rid of a heavy load of inventories, they’re faced with the fact that their potential customers can’t sell their existing homes and therefore can’t plunk down the big down payment on a brand spanking new one.

Never fear, the builders are here. Along with all kinds of incentives, like help with the mortgage, free upgrades in the kitchen and bath, a lease on a BMW or the like, some home builders are now offering to not just help you sell your old home, but to actually buy it from you themselves. Call it a trade-in. With new home sales down nearly 11% from a year ago, cancellation rates climbing along with interest rates, it’s simply the next best thing they can do to unload a piece of new construction.

Logically, the builders are doing it in some of the toughest selling communities, especially in states like Florida, Arizona and California, where new home sales are really in the toilet and builders are saddled with the highest levels of inventory. A fellow I spoke with who would know says K Hovnanian is one of the builders making the offer. We asked KHov for an interview, but they said they were a tad busy.

It actually makes a lot of sense. For sellers, they don’t have to pay an agent commission, sweat through open houses and keep the kids’ bathroom clean for months on end, in case a potential buyer should want to come through. They also won’t have to pay two mortgages or a bridge loan, because the builder can make the closings clean and simple. Homebuilders will also offer 90-95% of the appraised value, so it all comes out in the wash.

AP

As for the builders, they get to sell a brand new home, tick it off the inventory list, and given their vast resources, they can take the old home, remodel it pretty efficiently and sell it at a higher price than they purchased it. Plus they already have an in-house marketing and broker staff, so they may be able to sell it relatively quickly.

So far, I’m told not too many builders are doing this. However, it’s catching on quickly. Might be worth asking around, if you’re in the market for a new home

Questions? Comments? RealtyCheck@cnbc.com

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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