Buena Vista Custom Homes, the 7th largest home builder in the Portland market by closings, has partnered with JPMorgan Chase to create a new financing program that allows potential home buyers to own one of its homes and pay less than one third of the monthly mortgage payment. Buena Vista will pay the remaining two thirds of the payment for two years.
In the past, Buena Vista conducted its financial business with a local mortgage company. But when that contract expired in January, Buena Vista wanted to secure a partnership with a new company that had strong financing background with a lot of trust and creditability. Buena Vista put the idea of the partnership out for bids. The home builder wanted to partner with another company that could offer unique services and develop creative financing programs to prime the pump and lure potential home buyers off of the fence.
So Pollack met with Gary Duffy and Michelle Gray from the Portland Regional office at JPMorgan Chase (Big Builder's publisher, Hanley Wood, is owned by affiliates of JPMorgan Partners) to develop an aggressive program that would make the dream of homeownership a reality, but also bring traffic into his homes. He didn't think that a traditional six-month, no-payment program was going to cut it during this sluggish market. Although Portland's market has been protected from the housing downturn, there was a six-month supply of inventory in the market, according to the MLS, which is almost double the amount inventory from 2003.
Because Pollack wanted to make a difference and a real impact on the Portland market, he collaborated with Duffy and Gray and they created a home financing program (developed exclusively for Buena Vista) in which a home buyer could buy a brand-new, 5,073 square-foot home, at $650,000, and pay less than $1,000 per month. Normally, the monthly mortgage payment would be $3,202.
What's the catch? The home buyer must put down 10 percent of sales price at closing and financially qualify to pay the full mortgage.
"We decided to partner with Chase because of their stature as the premier financial services firm," Pollack says. "They offer great service and many flexible mortgage options for our customers. They also were very responsive to our ideas on creative financing programs that we could offer our potential buyers, such as the one we offered. We have been extremely happy with the relationship."
Pollack explains that his philosophy is that "we are in the business of selling homes not holding homes. The program certainly had a price, but we felt that the concession was worth the exposure we got as well as the sales response."
And with the success of this program, other programs are now in the works with Chase. Buena Vista and Chase are considering other mortgage financing programs, such as a 30-year fixed, with a 4.75 percent interest rate loan or a 100 percent financed loan. Buyers also can choose to have $10,000 toward upgrades or free closing costs.
"I would strongly advise other builders to look within your business and seek potential partnerships that may be right around the corner. If we had not communicated our ideas and needs to Chase, our financial services partner, we would not have come up with this innovative program," Pollack says.