NEW CONSTRUCTION WARNING ⚠️

This week we have a really important 
warning for every agent and buyer 
considering new construction — plus 
your weekly interest rate update during 
Fed Meeting Week.

Welcome to your Monday Market Update for 
the week of July 28th with Angie Gerber 
and Nikki Erickson from Kevnik Mortgage!

This week we are covering:
✅ Fed Meeting Week — what to expect 
   from the announcement and why rates 
   should stay stable or improve
✅ Interest rate update — after hitting 
   the high sixes last week we are back 
   to mid sixes today
✅ New construction warning — a builder 
   tactic agents need to know about 
   right now
✅ How some builders are falsely 
   inflating neighborhood home values 
   using buyer incentives
✅ Why this connects directly to the 
   tactics that caused the 2008 crash
✅ New construction vs existing homes — 
   the real cost comparison every client 
   needs to see
✅ Window treatments landscaping 
   appliances and all the hidden costs 
   of new construction
✅ How to research builder quality 
   before your client commits — 
   including TikTok
✅ Why new construction is its own lane 
   and what agents need to know before 
   going all in

If you have clients looking at new 
construction right now this episode 
is required watching before you write 
that purchase agreement.

Need a Great Real Estate Coach and Mentor....
 Join my Skool Community! https://www.skool.com/rebusinessbuilder/about
 🔗 Book your FREE Discovery Call with Angie: https://calendly.com/angiegerber/real-estate-business-builder

📞 Connect with Nikki Erickson at Kevnik Mortgage:
📱 Call or Text: 952-484-1584
📧 Email: nikki@kevnikgroup.com
📘 Facebook | TikTok | Instagram: 
   @mortgagesfrommntoaz

00:00 Introduction – Market Update Week of July 28th
00:30 Fed Meeting Week – What to Expect from 
      the Announcement
01:30 Interest Rates – Volatility Back to 
      Mid Sixes Today
02:30 New Construction Warning – What Every 
      Agent Needs to Know Right Now
04:00 The Builder Inflation Trap – How Builders 
      Are Falsely Inflating Home Values
06:00 How This Connects to the 2008 Crash – 
      A Warning for Agents
07:30 New Construction vs Existing Homes – 
      The Real Cost Comparison
09:00 Do Your Research – TikTok Inspectors 
      and Quality of Build
10:00 How to Find Nikki & Angie's Skool 
      Community

#realestate #newconstruction #mortgagerates

Transcript

SPEAKER_01 0:35

All right, here's your market update. It's the week of July 26th.

SPEAKER_00 0:41

Well, good morning, everyone. So we've had some interesting things happening with interest rates from you know really late last week into today. Um, to this week, first and foremost, is Fed Meeting Week. Kevin Marsh is going to be doing um an announcement tomorrow. Um, we aren't expecting any changes to the Fed interest rate. More importantly, we are not expecting the interest rate to increase. Um, he's really, really, really trying to keep the interest rates where they are or lower through the end of the year. So, with some inflation things coming along and all that stuff, we've just seen a lot of volatility um in the market in the anticipation of you know this meeting and the and everything that's going on with Oran. Um, with that being said, we really saw an increase in interest rates late last week into the like higher sixes, even I would say seven. I don't like to use that number right now, but yeah, that's it. Um, into today, based on you know all the information, everything that's happened economically, we are seeing those interest rates improve back into that mid-six range. So we're gonna experience a lot of volatility here. I have a feeling through the end of the summer, if we can keep these peace deals going, um, things should stabilize. But for right now, I think we can just generally expect, you know, mid-sixes through the end of the year. So that's kind of what I'm saying right now. But you know, things can happen. Anything can happen. Um, so as far as market goes, really interesting topic I wanted to talk about today is new build construction. Um, I got a call from an agent yesterday, and I've been kind of dealing with this prior to um this agent's call with other clients who are looking into new construction options. So, as you agents know, when a client wants to go new construction, a lot of time there's some builder incentives that are uh given to the client to use the preferred lender of the builder. And those are great because usually it's like, you know, a lot of closing costs are paid, or they'll pay for a buy down on the interest rate, or they'll give a, you know, um additional construction like a finished basement, things like that that will really incentivize the client to do new construction versus buying a traditional home. So there's a couple aspects to this. First and foremost, I got a call from an agent, and you guys need to be really careful of this. When a builder wants to increase the value of the homes that they are building and wants to sell the homes for more than the prior homes that they've sold, in other words, increase the equity. A lot of times what they will do is instead of increasing the actual equity of the property, they will offer additional incentives by raising the purchase price. So let me tell you what I mean about this. The question came to me that a client is looking at a $900,000 investment property purchase. They wanted to get the builder to give them incentive in order to build this house. In other words, pay for some closing costs. So the builder says, well, I really need to increase the value on these homes. And I in order to do that, I need to have one that sells for over a million. So if you write the purchase of prior purchase contract and I can sell it to you for a million, I'll pay $100,000 in incentives and closing costs. So that on the MLS record, we have a record of a million-dollar sale in this neighborhood. That shows the prior people who have bought that the in that the equity in these homes is increasing, and it really helps me out. So basically, what they're doing is they're falsely inflating the equity or falsely inflating the value by offering additional incentives to the buyer. Now, does the buyer get additional incentives? Absolutely. But is that the true value of the home when we talk about increasing that value over time? Well, no, it's not. Then we have to talk about how that's going to affect the appraisal. Well, if you're offering $100,000 in incentives, that's not true value of a home. And it's going to be really hard for a home to appraise out with in that manner. So those are things that you guys need to keep in mind when you're talking about these builder incentives and having a builder say to you, hey, I'll increase the incentive because I need a higher sale in this neighborhood. This kind of things and this kind of tactics is exactly what led to the crash of the real estate world in 2008. So it's something for you guys to be aware of. It happens multiple times. I get questions about it all the time. So just make sure that, you know, from an agent perspective, that you are really representing your clients well in this stuff that is happening. Now, does that happen initially even with regular incentives and you don't have a specific discussion with the builder? One could argue yes, because if you keep in mind on a new construction home, if they're offering $20,000 an incentive, let's say for closing costs, that $20,000 has got to come from somewhere. And it certainly isn't coming out of the builder's pocket. With that being said, if you take that home, that new construction home, and even though it's all brand new, and you compare it to a home that's three or four years old from a dollar-for-dollar basis, the things that you're not getting in the new build, landscaping, sometimes sods, sometimes, you know, appliances, window treatments, all that other stuff that's going to cost the client money out of pocket, if you take those into consideration when comparing the cost of a new construction to the cost of a home that's three to four years old, you can definitely see that that $20,000 is eaten up rather quickly by them increasing that price in order to pay for things that they're not doing on the home that you would find in a property that is three to four years old. So although these are great opportunities for people to buy new construction, they are fancy and new, it's just important for the client to understand what the real cost of that is and what the offsets are and how this is being built into the price of the home.

SPEAKER_01 6:19

Absolutely. And another one that comes to mind that cut catches a lot of people off guard are window coverings. Yes. Yes.

SPEAKER_00 6:26

Yes, window treatments, yes.

SPEAKER_01 6:27

And how much, I mean, and it the price since I've been real safe since 2014 for window coverings or companies that will help you do window coverings. Wow. So yeah, I mean, and I think for agents, if you're not well versed or if you haven't done a lot of new construction and you have a client that wants to go look at new construction, find someone within your brokerage or a great agent that will help you, or at least you go to Quad or Chat GPT and ask what I should be thinking about for my client when looking at new construction. Because there are so many things that you learn along the way. And that I've learned, and Nikki, that you see come up all the time that we don't think about that. And I loved how you said even just opening your clients' eyes to this is new construction versus existing. So when you look at this incentive, look over here. And it's again like giving them a full buffet. They can see everything laid out in front of them and they can ultimately pick what they want. But it's our job to get them all the information laid out so that they can make the very best decision for themselves and their family.

SPEAKER_00 7:44

Well, and another point to make and um is on a new construction home, you know, you they're building these homes one right after another. On a home that's three to four years old, that home has been tried and tested, if that makes sense. The quality of the construction has been um, you know, alerted to, if that, if you will, and has, you know, people living in that property and you know, for three to four years, that's a short amount of time. And has the construction stood up to it and has, you know, if there are additional homes in that neighborhood that are not exactly new construction, but are one to two years old, because inevitably what happens in these neighborhoods is people, there are people that will sell within one to two years, you know, go into those homes and see how much that more they've put into those homes, such as, like you said, those window treatments, you know, the appliances, the landscaping, things of that nature that are going to cost you money outside of a new construction home and see if you can work out a deal with them, um, which can be more sometimes more beneficial.

SPEAKER_01 8:36

Or even if it's just a whole new neighborhood and it's one of the first homes, you know the builder, find another neighborhood that they've just completed in the last couple of years and go. I guarantee you, people are moving. People are moving all the time for different reasons.

SPEAKER_00 8:52

So find research on the quality of build too. That's a huge thing, too. You as an agent can do plenty of research for your client as well on the quality of builds for these bigger brands. Um, and more importantly, I hate to say this, but look on TikTok. People will call stuff out on TikTok. Consumers will tell you what they think of these build projects. Uh, sometimes even in home inspectors who um do home inspections specifically on new construction homes will tell you the quality of construction, will alert you to some of the things that you need to be alerted to if you are going to do a new build. And an existing home obviously always get an inspection, but yeah.

SPEAKER_01 9:27

Well, and I think people just get so excited at the thought of the all of that. And it has its place in it, it can be a perfect home for many people. Yes.

SPEAKER_00 9:38

Um, of course, it's our job to keep them excited, but also keep them realistic too.

unknown 9:42

Yes, yes.

SPEAKER_01 9:42

I know my husband um used to, he was subbed out for kitchens and he would put kitchens in new construction. And I definitely know the builders he would never buy from. He's like, you cannot even, he's been doing this for over 30 years. Yeah, I can't even believe some of the materials that are used and some of the subs that are in and how often a general contractor or the person that's you know running the whole operation even shows up. So do your research and especially as an agent, do that for your clients and start going into model homes. Ask questions if you truly want to sell new construction, it's kind of it's it is, it's just it's like a lane. You gotta go all in and you really gotta know, or you could do do your do your clients quite wrong.

SPEAKER_00 10:31

Yeah, yeah, absolutely.

SPEAKER_01 10:33

Absolutely. That's good. I had another question. I couldn't think of it. Um, but yeah, I think this is a a great conversation to have. And if you have any questions about new constructions or about incentives or what that looks like, or if you've ran into anything, reach out to Nikki right away. What how do they get a hold of you?

SPEAKER_00 10:54

Uh you can reach me on TikTok, Facebook, and Instagram at mortgages from MN to A Z. Uh, phone number is 952-484-1584 or email at Nikki at Kevinetgroup.com.

SPEAKER_01 11:04

Yes, and you can find me. I have a school community as well. It's R E for real estate, R. E. Business Builders. Jump in there if you have any questions or if you want a list of questions to ask or things to look out for. We didn't even get into the outside of the home. No, or landscaping. I mean, there are so many things to think about with a new construction. You really, you gotta know what you're doing. So if you need help with that as well, look me up too.

SPEAKER_00 11:32

All right. I'm good.

SPEAKER_01 11:33

We'll see you next week. Have a good one. Bye, everyone. Bye.