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Baggett isn’t building his housw alone. Rather, he is part of a smallk but growing numberof new-home buyers takin g advantage of a builder incentive that hasn’gt been seen for a decade sweat equity – to make their dealas work. Tight credit markets and the disappearanceof zero-dowj mortgages have driven at least four Centrall Ohio builders to take a page from theifr old selling manuals to attract customers. “It was a way of life for many said RobertYoakam Jr., president of “In another two years down the line when the marke t improves, I think it will be a lot more In addition to Rockford, area builders , and are offerin sweat equity programs to reducwe prices.
They are amony a few builders nationally to offersuch initiatives. Representatives of the , the and the said they had seen few instanced of the option makinga comeback. Columbus-baseds Rockford began offering its work equity option in January as a way to help customerx who likely would have gone lookin gfor zero-down loans when they existed, Yoakam said. “This lets them earn the money (for a down payment) and get a vested interest inthe home,” he said. The programj also helps builders move their inventort ofunsold houses.
At Westporrt Homes in Westerville, roughly 60 percent of the builder’sa first-quarter customers have taken advantage of its sweatyequity program, said Jack Mautino, divisiom president. Meanwhile, first-quarter sales were up 4 percentt from the first three monthsof 2008, a likelyt combination of low interest rates, the government’sa $8,000 tax credit for first-time buyer and the work program, he said. Sweag equity works simply: Homeowners who take on -backecd mortgages can work on their and the money the builders save goes towardr adown payment.
Money saved from work equity can also be used to reducr the interest rate on a mortgage a tactic being used by Baggetg onhis $140,000 house in Pickaway County. “Nosw we don’t have to pay any out-of-pocket costzs at closing,” he said. The federal government requires that work equity must be complete d before a sale can be It also demands that the work completed by a buyer be documentes so that a lender can assign a fair market value tothe work, FHA Spokesman Lemar Wooley explained in an e-mai l to Columbus Business Firstf . Worth it for builders? Baggett is buying his three-bedroom, two-and-a-half-batyh home in Ashville.
Westport offered him a menu of work from spreading gravel incrawl spaces, to light paintinbg to installing sod in the yard. “Wse try to keep (customers) off the Mautino said. And away from tools. Lega liability is one reason, and workmanship is another. Builders say thos are just two of the downside to bringing work equity back intothe mix. If builderse want to use the program, they must negotiate a new deal with subcontractords because they are takingaway work. there are logistical and schedulingf concerns. If, for instance, a buyert has elected to install sod, they must arrivde at the construction site on time so that thegrasas doesn’t die on the truck.
“If it’x done right, it can be a good Yoakam said, who acknowledged it is an undertakinfg that can make building more difficultto manage. But there are also advantagesd builders may not want topass up, said Gopall Ahluwalia, vice president of research at the National Associatiohn of Home Builders. Today, first-time buyers make up 40 percentof new-homer purchasers, compared to the historic trend of 25 and that represents a pot of gold for builders. “There is a good reasonm for that,” Ahluwalia said. “They don’t have to sell thei r home to buya home.
” Because of FHA loans, which have lowerd down payment requirements and permit the sweat equityh option, are growing in popularity. From 2004 to when credit was flowing freely and the housing market was at its just 4 percent of new houses were bought with FHA National Association of Home Builderafigures indicate. Last year, FHA mortgages made up 16 percentof new-home financing.
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