So you’ve decided to buy a new home and are checking out all the new communities in your favorite areas. Maybe you’ve already picked the community where you want to live, but haven’t signed a contract yet. Regardless of your stage in the home buying process, you’ll want to get the best price possible on your new construction house.
Some Factors that Influences New Home Pricing Include:
- Cost of the land
- Size of the home
- Cost of the building materials
- Labor costs
- Real estate market conditions
- Builder impact fees
With a resale home, you have to deal with a seller’s emotional attachment to the house. Fortunately, that attachment isn’t part of the equation with new home builders.
However, builders are generally don’t want to sell their houses lower than the asking price because it sets a bad precedent with other buyers. Doug Reynolds, an Agent in Sacramento, California, states, “Typically getting them to lower their price is very difficult. Usually best to focus on getting a large closing cost credit and/or upgrades for free. Builders are protective of their pricing.”
So how can you negotiate with a builder to get a good deal? Read on for our best tips:
1. Be Creative
There are a number of creative ways you can get a better deal on your new home that don’t involve a lower price. Perhaps the builder is willing to pay the closing costs. Or you maybe you can negotiate for additional upgrades at no or reduced cost. Keep in mind that even a 50% discount on upgrades for you is still a significant markup for the builder. Be armed with information about how much it would cost to have independent contractors do the same work after the sale.
2. Buy the Model
The model homes in a community come fully equipped with all the best upgrades, and are usually sold at a discount. There are a few reasons for this. First, a model home isn’t a completely new home, with plenty of people walking through. Second, everything is already installed, so you won’t get to select finishes and upgrades. This isn’t an issue if you like everything about the model home, or if you’re willing to make a few changes after the sale. Third, appliance and foundation warranties won’t have as much time left on them as a brand new house, since they’ve been in use.
3. Show Around for Financing
As you start thinking about financing your new home, your builder will likely try to steer you toward their preferred lender, so find out if there’s any incentive for you to go with that lender. Even so, shop around and educate yourself. Their lender may not be offering the best mortgage terms for you. Check with your bank or credit union, which may offer you good rates and terms based on your history with them. Your agent is likely to have lenders they often work with who can give you good rates.
4. Be Realistic and Willing To Walk Away
If you have a budget, stick to your guns. You have to be willing to walk away from the negotiation until you find a home with the right f location, features, and pricing. If you’re in a rush to buy, or in a hot real estate market, chances are you won’t be able to get a great deal. If the houses in the community you’re eyeing are selling like hotcakes, then not only is it unlikely you’ll pay below asking, you can even expect to pay up to three percent more as you may be one of multiple bidders on a new home in this kind of market. If you have a fixed price in mind, specifically look for new houses that have been on the market for 45 days or longer, they tend to have lower prices or better upgrade packages because the builder wants to sell.
If you suspect new houses in a particular community will sell quickly, you may get your best price by buying early. If a community is popular, the same house that sold for a decent price in the first phase of community development may be $100k more by the third development phase. Conversely, if sales slowdown, prices may go down.
For the last 16 years, Rachel Kinbar has been a writer of articles, blog posts, white papers, essays, infographics, web copy, sales copy, scripts, poetry, lyrics, and more. She has keen research skills that she applies to a wide variety of topics, and she especially loves topics related to design, history, and sustainable living.