Is there much mark-up in new construction? Would a builder be insulted if I offered him $15,000 less than what he is asking for a new town-home?

Asked by Cheryl Horsley, Manhattan, MT Tue Jun 26, 2012

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7
Sam Quasuitt…, Home Owner, Outside U.S.
Wed Nov 14, 2012
Markup in new builds is about 25-35% over the net construction. I'd offer 25000 less and see where it leads. You have to start somewhere. Builder's don't like going below their net costs - but it's a buyers market and if you have the cash - go for it!
0 votes
Erin Mandevi…, Agent, Bozeman, MT
Tue Oct 30, 2012
Cheryl,

You can always offer below asking, but as Karen and Ed noted there is usually a small margin for profit in new construction and you might not be successful in your first offer with a deep discount. Of course, if you don't ask...

If my buyer asked me to write an offer with a deep discount on new construction I would ask them to answer a couple of questions for themselves first. One, I would ask how badly the buyer wanted the home; are they willing to risk loosing it? Two, I would ask them what other properties they had seen and why they were choosing to offer on this builder property. Sometimes evaluating these questions will help a buyer determine if a deeply discounted offer will ultimately accomplish their goal.

Good luck, and let me know if I can be of any further assistance.
0 votes
Karen and Ed…, Agent, Bozeman, MT
Thu Sep 6, 2012
Hi Cheryl,
Townhomes in a lower range price range are quite marginal for builders to make any huge profit. Builders are making a living like anyone else at this particular time. Perhaps in an upper scale property there may be room to further negotiate. A buyer has to keep in mind that if a builder sells a newly constructed unit for $15,000 less, he will have to sell the others for a lesser amount as well. This new established price will affect all the future units to be built and appraisers will be using these "sold" prices as a base to establish value in the area.
Often, as a buyer agent, I will suggest to a buyer that perhaps a value-added benefit can work with an offer such as: a fully completed lawn package in the front and rear of the home; or perhaps a completed fence for pets and children. This way the builder can use his resources to accommodate a buyer and still maintain value in his project.
Hope this helps - let us know if you have further questions.

Ed & Karen Thomes
Prudential Montana Real Estate
Bozeman Montana
http://www.TheHomeTeam-Bozeman.com
0 votes
Richard Mayo, Agent, Bozeman, MT
Wed Jun 27, 2012
Hi Cheryl,

It's all relative to asking price. $15K is not much against an asking price of $250K but it might
resonage differently for an asking price of $100K. I would think of it more in percentages.
In this market no one seems to be offering asking price on anything unless it's something they can't
live without and there are multiple offers. New construction isn't too much different than pre-lived in homes. I would try to get an idea of what other like townhomes have been selling for and make your offer accordingly.

Best,
Rich Mayo
406 580 0856
0 votes
Tamara Willi…, Agent, Bozeman, MT
Wed Jun 27, 2012
It depends on the builder. Some builders are priced at what the market is currently demanding. You probably wont offended the builder, but they may think you are not educated on the current real estate market. You may be able to locate some listings that have been on the market for an extended period of time by contacting a Realtor. Generally Realtors have the ability to see which builders negotiate. If you have any questions about where you may have more buying power feel free to call. Don't weigh too much on what trulia or zillow says as those figures are literally pulled from thin air. Hope this helps!
0 votes
i would strongly disagree that Zillow values are pulled out of thin air. That was the standard realtor line from a few years back when most agents weren't even familiar with Zillow, in order to dismiss their analysis. Their vlue metrics are very much on point, and beware of agents or new const builders that want to dismiss them when you confront them with those figures.
Flag Mon Dec 1, 2014
Ryan Kirt, Agent, Bozeman, MT
Tue Jun 26, 2012
Cheryl, it really depends on the specific property and subject neighborhood. If you do not have an agent, feel free to contact me for further insight.

Ryan Kirt
Realty Executives of Gallatin Valley
406-223-2880
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Tue Jun 26, 2012
I recommend you have your agent run comps and advise you. Do you have an agent? You should have an agent.
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