Houses that don’t sell themselves

Anxious builders offer bells, whistles and cars to lure buyers to spec homes

Wednesday, June 14, 2006

The buyers of the custom-built home at 7102 Pomander Lane in the Village of Martin’s Additions will receive an added bonus for their roughly $2 million purchase — a fully loaded Acura SUV, with a three-year lease paid in full.

For Chevy Chase builder Noel Fisher, owner of Fisher Fine Homes, who bought the lot and built the house, the promotion is a sign of the times.

‘‘Obviously with the market a little bit slower than it’s been in the recent past,” Fisher said, ‘‘I was trying to come up with an incentive to get a potential homeowner to come in and look at the house.”

With a large inventory of speculatively built houses available in the downcounty, builders and real estate agents said, the once red-hot real estate market has seen the mercury move a tad closer to lukewarm. As a result, builders with speculative houses on the market are coming up with creative ideas to woo the suddenly more discriminating buyers.

‘‘There are 65 houses right now in Bethesda-Chevy Chase above the price of $2 million,” Bethesda realtor Jane Fairweather said. ‘‘And 51 percent are spec houses — empty, brand new, accruing interest every month spec houses. There’s huge choice, with very few buyers right now.”

Hence the Acura MDX, complete with leather interior, navigation system, unlimited free car washes and loaner cars. Aside from enticing people to at least look at the house, Fisher said he hopes people will see three years without a car payment as a way to offset interest rates.

‘‘As custom spec builders we got a little bit spoiled with the way things were a year ago,” Fisher said. ‘‘We definitely have to do what we have to do to get people in there and get an edge over our competition.”

Some residents in the unincorporated neighborhoods of Bethesda and smaller municipalities like the Town of Chevy Chase have pointed to speculative building as one of the driving forces behind the trend of tearing down older homes and replacing them with newer, often much larger ones.

With a possible decline in speculative building, Fairweather foresees a corresponding reduction in the number of houses being torn down and replaced. The result could be new opportunities for young first-time home buyers, as well as retirees on fixed incomes, in communities that have lost most of their affordable housing in recent years.

‘‘Their prices will go down,” Fairweather said of the older homes, ‘‘because an end-user isn’t going to pay top dollar, which I think is a good thing. All this stuff goes in cycles anyway. I think it’s good for the neighborhoods.”

As for offering a new car to a prospective buyer, it’s a nice gimmick, but not likely to be a major selling point, Fairweather said.

‘‘Rarely can you entice somebody with an Acura who’s going to pay $2 million-plus on a house,” she said. ‘‘If you want to give them a Rolls, you want to give them a Mercedes, OK. What it does do for the builder is it gets him noticed.”

A car may bring a potential buyer to the house, but a better added selling point would be interior decorating or furnishing, she said.

‘‘Residential sales are an emotional decision, so you’ve got to put the emotion in the house,” Fairweather said. ‘‘And that’s what decorating does.”

While the home is still on the market since the Acura promotion began at a June 4 open house, Fisher said the offer has attracted attention.

‘‘We’ve had a pretty decent reaction,” he said. ‘‘Our traffic has definitely increased at the house.”

Having to provide additional incentives simply to lure buyers in the door to look at a house will contribute to a major slowdown in speculative building, Fairweather said.

‘‘A builder unlike a resale [homeowner], has very little margin to play with,” Fairweather said. ‘‘The typical builder is going to make 10 percent. If you now have to pay to decorate it, raise commissions and give credits back to the buyer, you’re now eating quickly into that profit.”

Fisher said he plans to be much more discriminating with his business decisions over the next year or so.

‘‘I’m certainly being cautious with the projects that I’m entering into for the coming seasons,” he said. ‘‘I’m making sure that we’re considering all the factors involved. We’re not chasing any lot that we can get. Every factor of the transaction has to be perfect for us to want to jump into it.”

Patrick K. Keating, owner of the Garrett Park-based PKK Builders, agrees. While traditional Arts & Crafts style homes custom-built for property owners represents half of Keating’s business, the other half is speculative building.

‘‘So my speculative sites have to be well-selected,” Keating said. ‘‘There’s got to be something unique and special about each property.”

Both Fisher and Keating also said the downcounty is by no means shifting to a strictly buyer’s market.

‘‘The bottom is not falling out of real estate,” Fisher said. ‘‘Sure, things got a little bit out of control with pricing and multiple offers. But I think we’re just back to a more level playing ground where buyers and sellers can play nice.”

Higher construction costs driven by increases in the cost of oil and other commodities, will play a role in keeping housing costs from a significant drop, Keating said.

‘‘We could have some leveling off, which is what all the pundits are predicting, that you’re just not going to be shooting fish in a barrel anymore,” Keating said. ‘‘So we’re gearing up for that, which is what we always have been doing.”