Builder gets creative after loss of seller-funded assistance
by J. Craig Anderson - Oct. 12, 2008 12:00 AM
The Arizona Republic
One local home builder is trying to paint itself out of a corner by handing out smocks, rollers and brushes to prospective buyers.
When builders found out in late July that the government was going to ban seller-funded down-payment assistance on Federal Housing Administration loans, they began a mad scramble to come up with another way to offer no-down-payment or low-down-payment mortgages.
After poring over FHA guidelines in search of a loophole, this is what Chandler-based Trend Homes came up with: paint equity.
FHA rules allow a home's seller to contribute up to 2 percent of the buyer's required 3.5 percent down payment as compensation for work performed by the buyer on the home.
Thus was born the Trend Homes Work Equity Program.
It's a simple concept: Spend three to five shifts painting the interior and/or exterior of your future home, and the home builder will reduce your down payment to as little as 1.5 percent of the sale price.
It's actually an interesting idea that might appease a few critics of seller-funded assistance, under which home builders were merely gifting down payments to buyers through a non-profit organization. The practice accounted for as much as 90 percent of new-home sales in recent months.
Unlike that program, which was banned effective Oct. 1, paint equity doesn't cover the entire down payment, and it requires home buyers to sweat a little for the money.
It can't be used to sell inventory homes, also known as spec homes, because they've already been built and painted.
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