With rising land, construction and business costs, many builders are forced to build “patio homes” while backyards and parking are becoming a thing of the past.

Luckily for builders, the new generation of buyers (mostly asian — like me) have kept buying and have sent an implied message that “we don’t care about lot size — it’s about living space.“

I’m sure you can do an appraisal study and you’ll find the value of an extra 2,000 or so of lot square footage will be next to little value in many cases. Of course, this is assuming all other things are equal: view, backing a street (or not), next to entrance, etc.

Which brings the following questions: What should the balance be? At what point will buyers respond?

On December 3rd, residents who live in the surrounding area of the proposed development of the current “Shaner Farm” on the southeast corner of Morse and Kraemer met with representatives of HQT, an Orange County-based homebuilder. This was the 3rd of a series of meetings that began in early 2013.

HQT has several developments in Placentia: Founders Park, Alta Vista South, and Bradford Court. Like most homebuilders, lot spaces have shrunk over the years as the new generation of buyers seem to be unfazed by the lack of outdoor spaces. The latest community constructed by HQT in Placentia was Bradford Court, which consisted of detached condominiums up to 3 levels high.

As shown in the photo above, the homes did not include yard spaces in order to maximize the amount of units. However, plenty of curb parking seems sufficient in addition to the 2 car garages of each unit.

Since 2009, other new home communities have been constructed in Placentia and nearby Brea and Yorba Linda. Although I don’t have the details for the Blackstone project where backyards are present in most communities, I suspect that City Planning and Shea / Standard Pacific maintaining a reputation came into play over just “maximizing profit.”

Out of the homes recently built, Crescent Heights in Placentia seems to be the most similar in terms of land space, home sizes, and number of homes built.

Crescent Heights is a gated community with homes that were built in 2011. There are small backyards and an HOA pool for residents. Curb parking is allowed — where a car can fit.

In the initial stages of planning, HQT proposed a community that would consist of a combination of high density attached living and several single family homes for a total of 112 units. After feedback from surrounding homeowners and city officials, that number changed to 78 detached single family homes in a gated community. To maximize the number of homes, outdoor spaces will be limited to small spaces and no street parking will be allowed. At the northwest corner of the lot, a “linear park” will be built. The smallest floor plan will be 2,084 square feet with 3 bedrooms and 2-1/2 baths. The largest homes will be on the east-most section of the neighborhood and are expected to be near 3,000 square feet with an optional downstairs bedroom.

HQT feels that based on their experience in a past community where no curb parking was permitted, 20 non-assigned spaces should be adequate. Homeowners present at the meeting disagreed. They felt that based on the site plan shown above, it would be natural for the overflow to park on nearby Fairway Lane and use the parking lot of Margo’s Flowers on the southeast corner.

While using averages from several studies may show that 15 spaces will be adequate for a “normal” day, it’s obvious that 2 or more homes having guests over during the holidays or Superbowl would force cars to park nearby.

This arrangement of limited guest parking reminds me of a nearby community called “Rio Vista Walk” by Olson Homes in Anaheim built in 2003. Whenever I’d visit my relative that lives in that neighborhood, I’d occasionally have to park at the nearby elementary school parking lot.

From HQT’s standpoint, there’s a fine balance that has to be struck between maximizing a profit and maintaining a reputation as a company.

What’s in store for the future of building homes?

As the housing market continues it’s upswing, you’re probably like most people who stumbled upon a few of the increasing homebuilder signs in your area. If you decided to follow them into the model homes, it might have hit you all of a sudden:

You decide you want to purchase a brand new home..… and decorate it like the models you saw.

You start by just casually looking at the prices and later figure out that if you sold your existing home, your payment will be manageable. You end up taking 3-4 more visits to the models and with every visit, you become more convinced that you’re going to live in a model-like home in the near future.

However, somewhere among the thick folder of builder brochures and price sheets, there’s a copy of the “priority list” instructions and you become overwhelmed looking at the countless items to submit. At first, you’re a bit arrogant and think that your downpayment from the sale of your home and impeccable credit score will set you apart from the other buyers. The arrogance turns into disbelief when it seems the builder’s lender doesn’t seem interested in returning a simple phone call. The dream suddenly starts to feel even more out of reach when you discover that there are over 20 buyers ahead of you. Several of them will be paying cash.

After glancing at the price list and available lots again, the logical side of your brain wakes up. You wonder, “Are there other options to buying in this development? Should I hire a local agent? Should I just put this dream on hold?”

The experience described above represents what the majority of buyers encounter when seeking a new home. While hiring an agent will not help your chances after that experience, the better route would’ve been to consult with a knowledgable agent after your first visit to the models and review your options. (Ideally, it would’ve been best to speak to the agent before even your first visit to the models, but most don’t decide they want to buy until after their first visit. )

Why seek the help of an agent for a new home?

1. A good agent will set the correct expectations. Contrary to your first visit to the model homes where your impulsive side is tempted, the agent will let you know what price you can expect to pay and what your chances are of getting the plan/lot you desire. Don’t be fooled with “base prices” which don’t include more than 80% of the “options” you saw in the models, required landscaping, additional melo roos or tax bonds, and lot premiums.
2. The agent will know how that community stacks up against other homes for sale.  For example, if you were reviewing the prices for Standard Pacific’s Montserrat community, how do you know if the prices are better at Shea’s Coral Ridge in Blackstone? Or Shapell’s new community in Amalfi Hills 5 miles away in Yorba Linda? Additionally, when prices are appreciating, the builders can occasionally underprice their homes. For example, if you’re purchasing a home that will be completed 6 months from now, the builder can possibly underestimate the market price at the time of completion. You probably have heard stories from friends or family where their home was worth over $50,000 more before they even moved in.
3. If selling your existing home, an agent will provide an estimate of how much cash you’ll be able to apply to the new home. They’ll also be able to provide “what if” scenarios: What if you sold 3 months from now? What if you kept the home as a rental?
4. An agent will help you choose and manage your transition options are for moving from your old home into your new one. There are terms that can be included in the sale of your home to reduce your risk. You’ll be surprised how much stress can come from uncertainty when moving.
5. The builder pays the agent — not you. Since most of the prices are already determined and a priority list has been established, the builder doesn’t pass this cost on to you. Only in rare situations (i.e. – buyer’s market) do the builders occasionally factor the broker referral into their costs on “freestanding inventory”, or a home that has been completed and yet to sell. Freestanding inventory is a thing of the past in today’s market, unless the home is overpriced. Even in those rare situations, the agent’s negotiating skill will often offset this cost.
6. The agent becomes your “one stop shop” – instead of learning the market on your own by spending hours on websites, calling numerous agents a day along with builder offices, why not just ask a person who’s already familiar with everything for sale? They do this for a living. Why not take advantage of it?
7. An unbiased opinion on financing options. The builder will push hard for their lender because they’re affiliated with them. How do you know if their costs and interest rate are competitive? I’ve encountered many situations where the builder was offering $10,000 in closing costs or “design center credit” and still ended up being more expensive than an outside lender. Real Estate agents don’t make a penny from your financing, so it will be in their best interests to ensure you’re in good hands.
8. The agent will keep you informed of resale homes. While most buyers would love to purchase a brand new home, most end up purchasing a resale home when they realize the cost of landscaping, upgrades, and the “new home premium”, which is usually about 10% more than resale homes. Many buyers end up buying a home “like new”: less than 10 years old and upgraded.

I can go on and on, but you get the point. Keep in mind that while most builders will work with your agent on a “referral basis”, your benefit is often received on the front end of your purchase process.