How should I go about negotiating the price of a brand new home?

Asked by S Detora, Fort Wayne, IN Fri Apr 9, 2010

The base price on the home is $133K and I want to get about $11k in upgrades, for a total asking price of $144K. I put a deposit on the lot. I have not chosen any of the specifics for the house yet, nor have I signed anything. Construction will not begin until I've chosen upgrades and signed a contract. What kind of discount in today's Fort Wayne market is fair and reasonable? Should I contact a Realtor to do this for me? Considering that the developer would have to pay my Realtor a commission of about 3%, they should negotiate directly with me at least that much. Honestly, if I got $4,000 off the total (less than the 3% commission), I would be very happy. If it makes any difference, I am paying 100% cash for this house, I have no contingencies (such as needing to sell another home), and I am pretty tough when it comes to negotiating. I know exactly what I want in the house and I know exactly what I'd like to pay for it. Thanks for taking the time to respond.

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James Gordon ABR SFR SRS ’s answer
James Gordon…, Agent, Hamilton, OH
Sat Apr 10, 2010
Realtors® get compensated for introducing the builder and the buyer. What you have done to cut your Realtor® out is to talk to the builders. Most builders will not compensate a Realtor® if the buyer has already registered with them. Most builders will not compensate a Realtor® if the buyer already has money into the transaction and now brings in someone to negotiate after they find out the property will cost 133k and they want to do 11k in upgrades.

I am glad you have knowledge of the automotive field and I am sure that you could negotiate a home transaction well but market knowledge is key in negotiations.
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S Detora, Home Buyer, Fort Wayne, IN
Sat Apr 10, 2010
Original Poster-More Specific Information Added

It's too late to involve my Realtor? Why is that exactly?

I am out of state, and have not set foot on the property, agreed to any price, or signed anything. I mailed a "good faith" deposit of $500, which is nothing. My Realtor is in Europe on vacation for three weeks. While he is gone, I have been searching for new home communities all over the country in my price range. I have spoken with several agents representing builders in several states. What exactly have I done to make it too late to have my representation step in to negotiate the deal on a house? Construction on the lot has not yet begun. They build each home as the land and specific model are purchased.

As far as being a tough negotiator, I have helped save my family and friends thousands of dollars off the sticker price in a dozen new vehicle purchases. I also sold cars myself and know how to "play the game." I am not emotionally attached to this particular area, community, house, etc., so I am comfortable to walk away if they do not negotiate with me and approach another builder. I am not interested in 30% off the asking price. I do not see getting a home listed at $144K for just over $100K as being feasible. I would like to know if a Realtor with knowledge of the Fort Wayne real estate market and new home communities believes that they could negotiate me a deal on the house for between $135K and $140K. Rather than use terms such as "fair" or "reasonable," I should rephrase the question and ask "What kind of discounts are typically seen in today's Fort Wayne market?" Am I totally off base in thinking that the builder would even consider selling a new home built to my specifications for a discount of $4K to $9K? I will be negotiating this from another state. Perhaps that will make it more difficult. I really don't know. That's why I'm here and hoping to get some advice. Thanks
0 votes
James Gordon…, Agent, Hamilton, OH
Sat Apr 10, 2010
S detora It is too late to bring a Realtor® into the process and have the builder pay commission as you have already been to the builder and put money down on the transaction. It would have been good to talk to a Realtor® who is familiar with the area before you went to talk to the builder but it is to late now to get that help for free. I sure hope you signed something when you gave the builder your money so you would have proof of the lot hold and the verification of the funds you gave.
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Don Tepper, Agent, Burke, VA
Fri Apr 9, 2010
Oh, boy.

You're "pretty tough" when it comes to negotiating. Good.

You say you "put a deposit on the lot" but "nor have I signed anything." Huh? I hope there's some paperwork. And that paperwork should have indicated what the deposit was for, what the purchase price was, what the terms were, etc. Also, the paperwork should should indicate under what conditions you'd get your deposit back.

You ask "What kind of discount in today's Fort Wayne market is fair and reasonable?" Fair to whom? Reasonable for whom? Certainly not the builder. You're the tough negotiator. You want the best deal possible. If you can get a 30% discount, go for it. That's what a tough negotiator would do. And you never know until you ask.

You figure that because the developer would have to pay a commission to a Realtor, they should knock that much off because they're dealing directly with you. Umm. Think again. If the Realtor had been responsible for bringing you together, leading up to the sale, the developer would pay. But you walked straight in, put a deposit on the lot, all without a Realtor. That's your right. But now the developer has absolutely no incentive to negotiate with you. Why should he. He's got your deposit, and he knows you're interested in the home and upgrades. What's the developer's motivation to knock "at least" as much as the Realtor's commission off the price? Because that would be the "fair and reasonable" thing to do? Uh huh. Think again.

I'm sure you know exactly what you'd like to pay for it. Now you've already negotiated against yourself. First, you thought the developer should knock "at least" 3% off the price. That'd be at least $4,300. Just a sentence later you say that if you only got $4,000, you'd "be very happy." That's some tough negotiating. And all without a Realtor. And now you're asking "How should I go about negotiating the price?"

Look: You know what you want. And you're convinced you know how to do it. More power to you.
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Sean Dawes, , Philadelphia, PA
Fri Apr 9, 2010
What is that house worth though? They may be asking $144k with upgrades but do the comps reflect it?

Also is the builder moving units rapidly and do you feel like you will miss out? Im assuming you want it locked in before the 30th to get the tax credit?

If they arent moving units, play hard ball. You have cash and should use that as your leverage. 4k isnt much off asking unless they are already undervalued and have buyers lined up to come behind you.

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