Home Buying in Benbrook>Question Details

Jennifer Sea…, Home Buyer in Fort Worth, TX

Is it strange that builders don't come down on price?

Asked by Jennifer Seabrooke, Fort Worth, TX Wed Jan 2, 2008

We fell in love with a house that is in the process of being built and will be ready Feb 2008 (lots are still being built up/empty). We came in with our realtor and asked if they would come down $10K. They actually went up in price!! I'm I insane to think of houses are like cars: you NEVER pay the sticker price?! Is it different for builders as opposed to resale? Do we need to actuall sit down and put a formal offer with earnest money or would we be wasting our time? Thank you so much for your imput!

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I think the problem is you ASKED if they would come down on price without writing an offer. If someone walked into my model or sales center and asked me that, the answer would be no. However if I recieved a written offer with a closing date and earnest money I'd be at the builders office seeing what I could do to put a deal together. I never start negotiating before something is in writing.
Michael Doyle Realtor
8 votes Thank Flag Link Wed Jan 2, 2008
If you are ordering one "to be built" just for you, the builder won't build it unless they are making the profit they believe they need. If you are buying one they have sitting vacant, they are much like any other seller that wants to get rid of inventory and will do what they can toward working out a deal.

There is one additional problem. If the builder sells model "B-12" to you for a discounted price of $20,000 off the price, that will be noted by all future appraisals and will effect the builder's future sales prices in that subdivision. So if the house you are buying is already built and the last one in the subdivision, then the builder might really make a special deal.
3 votes Thank Flag Link Fri Jan 4, 2008
Let me just add that builders who have already made price reductions can often time hold firm in price.

There is sometimes no rhyme or reason for why builders do what they do... there are builders that will hold out for a pipe dream just as there are sellers that will hold out for a pipe dream. Not everyone lives in reality.

It would be worth your time to place the offer and show you mean business. Do not let your emotions get in the way... place the offer and be willing to walk away. I have seen builders come back a few days later with a different tune.
3 votes Thank Flag Link Wed Jan 2, 2008
It should also be ket in mind that builders are selling more homes and yours will come up on future comp searches, so that they will not be able to make future pricing stick if they lower the sales price of your home. In addition, owners who bought just beofre you will be furious that they bought into this community at a certain price tag, and now it is being devalued before the community is even complete.

For this reason, they may offer lots of incentives as others have mentioned (pay closing costs, upgraded appliances, etc) - things that don't show up on the transaction sheet when a comp is done and will not impact the sale prices of the rest of their homes.
2 votes Thank Flag Link Sat Jan 5, 2008
Ooooh, good catch Michael.

I also think they may have raised the price because you were with a Realtor. Builders can be weird about working with outside agents because they know agents know more than buyers in general and they have to pay commission. Again, like a car dealership, if a women comes in they THINK they can take advantage of you. The Realtor is the equivalent of the hard nose husband who isn't emotionally attached because the car is for HER and he only cares about the money. So the builder loses twice: 1) a lower negotiated price 2) paying commission.

2 votes Thank Flag Link Wed Jan 2, 2008
Ruthless, Other/Just Looking in 60558
Thanks so much for all your help! We really haven't gotten any feedback from our realtor as for proper protocol or any comp sheets for the neighboorhoods we have been interested in. Do we get these comps closer to making a decision or right away? Thank you for all the imput. Your expertise is appreciated!
1 vote Thank Flag Link Sat Jan 5, 2008
Jennifer - What does your Realtor say about all of this?? Michael's comment below is very valid. I am surprised that a Realtor would attempt to verbally negotiate.
Your realtor should show you, thru comps, what the house is actually worth. And the realtor should be able to fill you in on the builder: is this a quality builder? How much off list, if any, has he sold in the past? That will tell you if the builder comes down in price or not. Has the builder already taken a very substantial price reduction? Your realtor really needs to do some homework for you on this. And your next approach should be with a written offer.
The agents below have given you some good advice that it may be more feasible to get some updgrades than a price reduction.
Tmans comments below will not work with most builders. And unless they are financially distressed, you will end up paying more for offending them. If you use that approach all over town, you may end up with a good deal when you finally find a builder under enough financial pressure, or one that had grossly overpriced the house to begin with. But it won't necessarily be the house you want. It won't work if the house is fairly priced because builders, like buyers, are not all idiots.
1 vote Thank Flag Link Sat Jan 5, 2008
For starters, you made mistake #1 - never fall in love, there's plenty of houses for sale ... when you go house hunting you should always have your first, second and third (and even 4th) choice in your pocket.

You also mentioned: "lots are still being built up/empty" -- did I read "empty".? ... especially this time of the year, sales are slow and even slower because of current issues ... just like a car dealer, empty means the builder is paying floorplan on a unsold commodity and he's paying points.

One of the oldest tricks in the book is when the builder raises his price - don't ever fall for it .. right now you should be pulling the records to see what the exact comps have sold for... .. see, most people don't shop until early or late spring when the kids are getting close to getting out, so most buyers don't know if the builder raised or lowered the price ... most raise the price to show a discount and buyers fall for it.

If you just "can't live without it" .... then get with your realtor (and bring your *complete* approved letter from your lender) and start the bidding at 20% back of "asking" price ... if they're asking $400,000 then come in at $320,000 and s-l-o-w-l-y come to a figure you both agree on, probably $350ish .... sometimes good negotiations takes weeks --- $10,000 off.? it would never happen, not in this lifetime and not in this market.

1 vote Thank Flag Link Sat Jan 5, 2008
My advice is to instruct your agent/Realtor to put the offer in writing and present it to the builder. I assume that your Realtor advised against a verbal offer-- if I'm correct, it was good advice.

Because it's in the process of being built, it is likely to be either an inventory home or a home in which the previous buyer backed out--either way, that puts the ball in in your court.

The price you were initially quoted is likely the base price of the home. Features such as upgraded light fixtures, certain types of flooring, enhanced landscaping and designer appliances are usually add-ons to the base price. In some cases, it makes sense to have the upgrades and enhancements taken care of while the home is being built rather than after you have settled in. Upgrades are negotiable as well since the builder's have access to discounts.

Be careful to stay within budget and don't forget that the property taxes are likely to go up next year. The builder's rep and your knowledgable Realtor will be able to provide more details.
1 vote Thank Flag Link Fri Jan 4, 2008
Bull's eye Michael... he's absolutely right. Were you not prepped by your Realtor?

Even if the builder doesn't come down in price, they can throw in some incentives such as pay your closing costs, make some upgrades (since the house is nearing completion) such as may be upgrading the appliance package, fixtures, GDO, ceiling fans, 2" blinds.... That way they still feel that they are getting asking price, but all those things will add up for you to put in afterwards.

What do you mean they went up in price? did they have a price increase since you first went in?

McBee Homes in Benbrook was the only builder that I have found was very very difficult to deal with about pricing.
Web Reference: http://www.sumnerrealty.com
1 vote Thank Flag Link Wed Jan 2, 2008
It is like cars. If you buy what is on the lot, especially one that they have been sitting on for a while, they will negotiate. If you are "ordering" the car you want, you will pay sticker price. It is worth your time to write up an offer, only offer $20k less now. Two can play the game.

Good luck,
1 vote Thank Flag Link Wed Jan 2, 2008
Ruthless, Other/Just Looking in 60558
PS I also meant to mention that you should get comps & don't be shy about when it's appropriate to ask for them. If you are a buyer, it's appropriate to ask for them at any time you belive the information would help you. Good luck!
0 votes Thank Flag Link Sat Jan 19, 2008
In general, it's a buyer's market. The builder's response to your offer is likely related to timing/negotiation. I would tell the builder no thanks, based on the other homes available we will not pay that amount, but call us if you change your mind. We will keep looking elsewhere. Don't counter with a higher offer than what you gave. isn't a good home for you if it's not a fair deal.
0 votes Thank Flag Link Sat Jan 19, 2008
Just for you Joe,

Everything is not recorded here, Texas is a non-disclosure state so the only thing that gets recorded is the deed of trust which shows just the amount mortgaged not the amount paid.
Web Reference: http://www.sumnerrealty.com
0 votes Thank Flag Link Mon Jan 7, 2008
I would have to agree with Joe's earlier comment about their PR and futrue pricing issues as it relates to selling that particular home you want. Everyone hears of all these auctions and builders throwing in everything to get the deal done, but you have to remember that doesn't apply to every builder. Some have many to sell, but others are waiting to sell out their current phase before breaking ground to control inventory. Your realtor should be able to get comp data (even if its not just in the community if they are all brand new homes, but surrounding areas as well) and if the price is okay, get the builder to give you incentive money. You should put your offer in writing and have your realtor negotiate. There are a lot of deals to be had, but you still have to be reasonable. Good luck!
0 votes Thank Flag Link Mon Jan 7, 2008
Every area is a little different, so your milage may vary, but here in PA, everything is recorded with the County and is a matter of public record. So, previous sales shouldn't be that hard to come by if you have access to this kind of system in your locality.

It should also be said that many county employees are not the fastest or most helpful workers ever, so you may need to perservere to get at what you want. Good luck! Let us know how it goes!
0 votes Thank Flag Link Mon Jan 7, 2008
Any agent is probably going to have a tough time getting comps because 90% of the builders sales are not listed in the MLS and if they are the numbers are not accurate because they don't show the seller's concessions.
Web Reference: http://www.sumnerrealty.com
0 votes Thank Flag Link Mon Jan 7, 2008
Get the comps now. Information is power. If the comps tell you its over priced, you can stop trying to make a decision. You also want them now to see how things change in the next couple months.
Good luck and please award Michael best answer if you agree.
0 votes Thank Flag Link Mon Jan 7, 2008
Ruthless, Other/Just Looking in 60558
Michael - you got it and you're racking up the TU. You have them in a good position (and in a few months you'll have them in a better position if the home doesn't sell - carrying costs will start to kill them.) Make yourself a serious, qualified, viable buyer and you'll have leverage. That is ... if the homes aren't selling. They don't need to budge if they have buyers.

Note - I've seen builders hold tight on price until the home is built, then once it sits for a while they start to bend if nobody is buying. I've seen 2 of the *exact* same home listed by a builder - one 20K less than the other - because one was built and sitting and another isn't built yet. Same home!

Last - prepare yourself for a hardcore high pressure game of "who's gonna blink first' with the builder. Every builder I've ever dealt with are buggers. I guarantee you they say they have other buyers and other bids coming in as soon as you start the dance. If you really want the bargain ... unless you can't stand the thought of losing the house ... play tough. and hold your ground. Call their bluffs. See what happens. You can always go back and offer full price. If you blink first.

Having said all that - if the home is priced well and it's your dream home and you can afford it ... you should do the best you can with your realtor, push as hard as you're comfortable, and get the deal done.
0 votes Thank Flag Link Sat Jan 5, 2008
Think of a builder as a bank with it's own rules because that's basically what they are! Everyone of my associates below has touched on many points to ponder. Do keep in mind that builders do this to everyone, which is good to know when it comes time to resale. Think about it. If there are empty lots like you say there are, don't you think it will be a bit tough to compete with the builder for incentives when it's time to sell! The builder can "pay closing costs" or offer "free upgrades" when these things are already figured into the price. Also note that appreciate in new homes is not as significant as established neighborhoods with older homes. When I go to buy a home, I immediatly think about how I'm going to sell it later! I haven't even moved in to it at that point! Let me ask you... What are your plans for this new home you are in search of? Raise a family? Stop paying rent? 2nd home? First home?
0 votes Thank Flag Link Fri Jan 4, 2008
Builders used to make a lot of money in the mortgage market. Now that it is slowed, they have to make up for the loss by raising prices. It also doesn't help that building materials keep going up either...
0 votes Thank Flag Link Wed Jan 2, 2008
It depends on the builder and the price of the home. Are you talking about a $500,000 home or a $100,000 home? Some of the basic home builders have tried to cut out the fat and if they are selling a lot in that area, then you're right. They probably won't want to negotiate much if at all. That may also be the case if you build from scratch. If you buy an inventory home then it will depend. ALWAYS take a Realtor with you. You certainly won't get a worse deal, but you may get a much better deal than going at it alone. Just as at the car store, if you go in alone, you're more likely to get taken. When you go with an experienced negotiator that can encourage you to walk away or think from different angles you'll get a much better deal in most cases. You can check out my website for all the things that can go wrong when you don't use a Realtor and in my experience those who go at it alone often get a "sorry" from the builder, while those with Realtors get monetary compensation. There are ways to negotiate with the builders and tighten the screws.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Wed Jan 2, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
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