Home Buying in Westfield>Question Details

Commnetad, Home Buyer in Westfield, IN

Are there any general rules of thumb on how much new home construction prices can be negotiated?

Asked by Commnetad, Westfield, IN Wed Aug 19, 2009

Base price of around $145K to $160K with options of $15K to $20K. If a builder is willing to pay a 3% fee to a realtor, shouldn't they be automatically willing to lower the price by 3% without one?

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You can try to negotiate the price, but a builder who is planning on continuing to build in the subdivision will not negotiate price. The reason is if you are buying a 500k property for 450k, the new appraisal and comp standard for that plan is now 450k and the builder will never see the 500k level again. We are handcuffed by the rules set forth by our government and cannot have a sale! (Thank Obama) If we want to sweeten the “deal” we basically have to “hide the money” aka upgrades from the appraiser and the lenders. Items which can be upgraded since it is much harder to determine value are flooring, electrical fixtures, upgraded paint, better insulation and better hvac equipment. We cannot lower the price, give away free sq. footage or add a garage when we do this we are having a going out of business sale in this subdivision since we cannot recreate the product for 450k and stay in business.
Picking a custom home builder is a lot like picking a realtor®; you should interview several builders before making a decision. Do not solely rely on a referral from an agent! Do the work yourself and interview several. Here’s a short check list of questions to ask:
1) Ask for current client referrals, 3 should be no problem & follow up with each regarding quality of the home and how well the builder did in regard to warranty work after the sale.
2) Ask if the builder is willing to do a cost plus contract this will save you money if the builder is ethical and doesn’t try to steal.
3) If you are obtaining financing ask about construction perm loans, these are one time closing loans and usually save the customer about 2,000 and may also have a tax benefit for you. It also allows you to see all the bills and control all the money.
4) Talk with the builders bank make sure the builder has the resources to complete the project
5) Do a basic background check on the builder look for items such as liens, bankruptcies, lawsuits different company names they are an officer in that are now insolvent and in the same industry.
6) Check with the local home builders association for a list of builders in the area
7) Energy cost are going up and the trend will continue pick an Energy Star home builder and have the home certified as an energy star home this will save you money over the long term, add quality to your home and help the resale down the road. For an energy star home expect to add 2-3% to the price of the home.
8) Ask to see a written copy of the home builders warranty program.
9) CONTRACTS- usually not a big deal and all 3 types work well the question is getting the best deal for you. The 3 types are: Realtor® provided (these protect the interest of the agents & brokers), builder provided (these protect the interest of the builder and usually provide more detail in regard to dispute resolution) home owner provided (these are drawn up by your attorney and favor you in the event a dispute arises) many times a builder will want to use their contracts, it’s usually fine just make sure your real estate attorney reviews the document before you sign.
10) Have fun!

That’s your top ten list! Good Luck!
1 vote Thank Flag Link Mon Mar 26, 2012
Builders can be really difficult to negotiate with. The joke is it is "their way or the highway." Give it a try though. It can't hurt. All they can do is tell you to "pound sand."
0 votes Thank Flag Link Mon Mar 26, 2012
Sorry, but it doesn't work that way. Most builders don't negotiate a lot of price, but instead, will negotiate on upgrades. Maybe they will include a basement, for example, or a deck or granite instead of solid surface countertops. A real estate agent can help buyers negotiate the final agreement with a builder, and often, agents can get better packages for buyers, and can help them made decisions about the home to increase the resalability of it. Builders pay real estate agents commissions, because they rely on realtors to help show buyers their neighborhoods, and most builders welcome agents to help buyers through the process. Not using rarely saves buyers money, but working with a realtor almost always can help with negotiations and the entire process.

Good luck.

Laura
0 votes Thank Flag Link Wed Aug 19, 2009
Forget all of that. Base your offer price on the recent sold comps, and make sure your agent includes an appraisal contingency, so that your offer is contingent upon the appraisal value being greater than or equal to the offer price, and that you have to approve the results of the appraisal.
0 votes Thank Flag Link Wed Aug 19, 2009
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