Selling Houses Before Building Them Helps Developer Bring Prices Down
In the midst of languid house sales, a Los Angeles developer is using an unusual tactic in Oxnard by selling homes that buyers have never seen.
The Kaufman & Broad Home Corp., one of the state’s largest home builders, began to sell houses on a 70-acre site in Oxnard recently without first erecting homes that buyers can inspect.
According to real estate experts, not building a home until a buyer is identified saves the buyer 10% to 20% of the home’s cost.
While the prospective buyer cannot see the finished product, the firm provides artist’s drawings and floor plans.
“It’s very unusual, but I think that this can save buyers a lot of money on marketing and merchandise,” said Eric Brown, a partner at The Meyers Group, a development analyst firm in Los Angeles.
And the tactic has resulted in quick sales, said Dee Boysen, a spokeswoman for the Building Industry Assn. of Southern California.
A Kaufman & Broad spokesman said the company sold 13 houses in a recent weekend in a development called California Cove at Ventura Boulevard and Vineyard Avenue. The first phase of the project consists of 17 units. The firm plans to sell 212 single-family houses.
The first houses should be completed in March or April, and construction most likely will continue through 1991, said Bernard Sandalow of Kaufman & Broad.
With many builders around the county struggling to find buyers for new houses, Sandalow said the Kaufman & Broad strategy also assures that the firm does not build a house until a buyer is identified.
The buyers of the Kaufman & Broad homes were apparently unintimidated by allegations raised in a recently settled lawsuit, which charged the giant development company with covering up faulty construction methods and paying off a building inspector with gifts.
In March, Kaufman and Broad paid $5.5 million to settle the suit filed by 34 homeowners in Riverside and Corona, according to sources close to the case.
Sandalow said the allegations have not damaged the company’s reputation and have not slowed sales. According to an annual Los Angeles Times survey in March, Kaufman & Broad is the state’s fourth-largest builder.
Although the housing market in Southern California generally has been faltering, Boysen said the initial success of the Oxnard project indicates that the market for lower-priced houses is hot. “It’s probably a good indicator of the times we are in,” she said.
The average cost of a new house in Ventura County is about $300,000, according to TRW Real Estate Information Services. Sandalow said the Kaufman & Broad homes, ranging from 1,702 to 2,320 square feet of living area, are priced between $240,000 and $270,000.
“I’m surprised that they can do this in this market,” said Marshal C. Milligan, president of Bank of A. Levy. “But I guess it’s a good indicator that there is still some demand around here.”
The development site next to River Ridge Golf Course is a dusty, bare expanse divided by a few paved streets. Underground utility pipes and wires stick out of the ground like overgrown weeds. Kaufman & Broad runs its sales operations from a trailer in the middle of the lot.
Boysen said Kaufman & Broad’s position as an established home builder gives buyers some confidence that the house will be built according to specifications. “I think it’s a terrific idea,” she said.
