HOW CAN YOU SAVE MONEY AND GET THAT NEW HOME?
WITH ALL THE UPGRADES YOU WANT???
You just toured the model home of that new development you had been eyeing. Guess what - you have just found the home of your dreams! It is beautiful and has EVERYTHING you ever wanted.
Be careful though. What you see in the model home is not necessarily what you will be getting in your new home. The builder model home might not be a good representation of what comes standard with the home. Think of it as the Paris fashion show dress by that upscale designer - and your home as a good dress from Saks Fifth Avenue or Nordstrom. There is a big difference between a Paris designer dress and a retail dress - even in a good store, and there is a big difference between a builder's model home and the base home without all the upgrades.
THE MODEL HOME IS THE HOT FUDGE SUNDAE VERSION (WITH WHIPPED CREAM) OF THE VANILLA HOME
The model home is a high-end version of the standard home. It is the showcase home for the builder to show off the many spectacular upgrades you can purchase. Face it - the house just looks prettier and nicer and more appealling with all those expensive upgrades! Generally these upgrades have a very good profit margin. The builder is betting that the buyer will like these upgrades and ultimately add them to the purchase of the home.
When touring the model home, find out exactly what options are standard, what options are available, and, of course, what any additional options will cost. Don't fall in love with that coffered ceiling without knowing what it will cost. That bay window is great but the price tag may be even grander!
Each builder will have their own set of standard items that come with a house. A standard item for one builder might be an upgrade for another. You need to make sure what is included in the base price and what is extra.
HOW DO YOU GET ALL THOSE UPGRADES WITHOUT BREAKING THE BANK?
Builders don’t like to reduce their prices. It comes back to bite them in future home sales. Subsequent buyers will look at the previous recorded sale prices and base their offer on those recorded sales. So you can understand why the builder is not going to negotiate on the base price!
How do you get a deal then if the builder is not going to negotiate on the base price? If builders are going to negotiate anywhere, it is going to be on closing costs or upgrades because those don't show up in the recorded sale price. Future buyers are not going to know that you got $10,000 in closing cost help or $15,000. They are not going to know that you got a finished basement or an upgraded appliance package from the builder. So... negotiate on amenities or closing costs rather than the base price. Another one to nibble at is the lot premium charge. After the property settles and the price records, no one is going to pay attention to whether your home is the premium lot on the cul de sac so get the builder to waive that $5000 lot premium fee!
Knowing that the builder is going to hold firm on the base price is good news for you too because you don't want the builder to undercut the price you paid for your home by selling the same home for less in a year or two.
WHICH AMENITIES SHOULD YOU CHOOSE?
As always you should be mindful of resale when you choose your amenities and upgrades.If everyone else in the neighborhood has a deck and it only costs $5000 more or the morning room for $10,000, then you should probably choose that. Remember when you go to sell in five or ten years, you will be competing with those properties and you want to compete on an equal footing. On the other hand, if no one else chose the sunken tub with surround sound, you might not get much in return at resale.
Another tip is to be mindful of what those amenities cost and whether you can install them at a later date. If your wish list exceeds your budget, look carefully at which things can be installed later and which would require more work to change out. Built in book cases don't have to be built in by the builder. You can have a contractor install them after closing even a year from now. On the other hand, I had a client who went with basic vinyl flooring in the bathrooms with the intention of changing that out for tile at a later date. Honestly that seemed to be more trouble to me than it was worth - and I know I would not be laying tile myself ever but hopefully they will. Finally, obviously you shouldn't postpone to post closing any amenity that you want that puts extra square footage in your new home. Adding a bump out or an extra room post closing is too much trouble! But hiring a contractor to finish a basement post closing may be cost effective.
HERE'S ANOTHER TIP -- HOW FAR ALONG IS THE CONSTRUCTION?
It is important to remember that builders are not like you selling a personal residence. Builders are not emotionally attached to that property you just fell in love with. They make their decisions based on what is best for their bottom line or their corporate bottom line. They would rather make a deal now rather than waiting for another six weeks.
What does that mean to you? Every day that a new construction home lingers on the market, the builder is losing money. Keep an eye out for builder inventory homes that have been sitting on the market for 45 days or more. These are the properties on which you might get a good deal.
Much of the negotiation with the builder and pricing is going to depend on the home itself. If the builder has not started the home yet or worse yet even broker bround, you are going to have less negotiating power. If it is an inventory home (mostly complete with few choices such as carpeting left to finish) you are going to have more bargaining power. A completed inventory home is the best becuase the builder is paying on a construction loan until the home is sold. The longer the home has sat the more the builder has spent on it. Most builders will discount a home that has sat without offers as they are losing money on it.
TIMING IS EVERYTHING! EVEN IN NEW CONSTRUCTION
In many new bigger developments that are rolled out in phases, there is a cycle to the pricing of the new homes. They start out at an inviting price designed to bring buyers and get construction rolling. Then the next homes to be released go up slightly in value and then the next phase goes up again. Each phase is priced higher, until the very end when the builder may - if you are lucky - be engaged in a bit of a close out sale. Again the buyer has a stronger negotiating position - so you want to time your purchase in a larger new development!
I love to negotiate with builders on new construction! If you are considering a new home in the DC metro area - DC, Maryland or Virginia, be sure to give the Lise Howe Group a call. We sell several new homes each year and save our buyers lots of money. Let us save you money too and get a great deal! We can be reached at 240-401-5577 or email us at lise@lisehowe.com.
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