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.
Influences on New Home Pricing
- 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 generally don’t want to sell their houses lower than the asking price because it sets a bad precedent with future buyers. They’re considering aspects such as overhead and profit margins, base construction costs, and more, meaning they have a certain sale price in mind in order to recuperate the work they’ve put into the home.
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.
You should also inquire about the price range on lot premiums. Within a given community, lots are often priced for a wide range of clientele. By asking the builder for more information, you may find a lot premium lower than you were expecting, which will free up your budget for other expenses.
2. Buy the Model Home
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, as plenty of people have walked 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.
Be sure to ask the builder if there are spec homes — homes built on speculation of sale — that have been sitting in their inventory for a while. Like model homes, you won’t be able to choose the upgrades and finishes, but if a builder is looking to sell, there may be room to negotiate the price. It never hurts to ask.
3. Shop Around for Financing
As you start thinking about financing your new home, your builder will likely try to steer you toward their preferred lender. Find out if there’s any incentive for you to go with that lender, but don’t stop there: Shop around and educate yourself. Their lender may not be offering the best mortgage terms for you. Check with your bank or credit union, who may offer competitive rates and terms based on your history with them.
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 location, features, and pricing. That being said, be sure to set reasonable expectations.
In a hot market or a compressed timeline, chances are you won’t be able to get a great deal. Even outside a seller’s market, if the community is selling fast, there’s little that can be expected by way of negotiating. In fact multiple bidders on a home can drive overall price up three percent than originally listed.
Houses that have been on the market for 45 days or longer these tend to have lower prices or better upgrade packages because the builder wants to sell. This can be a good way to filter searches if you’ve got a specific price in mind.
Money Isn’t Everything
The important thing to remember here is that negotiations on new homes relate to more than just the final price. Upgrades, mortgage terms, and cost variations on an itemized list can all result in a happier home shopping experience for you.
Mia Zozobrado joined Builders Digital Experience (BDX) in 2019 as a content writer. A graduate of Southwestern University with a degree in English, Mia is passionate about the written word and making connections. Outside of work, Mia also serves on the Board of Directors for the Writers’ League of Texas.