New construction: 5 upgrades to negotiate when the builder won't move on price
Here's 5 upgrades to negotiate when the builder won't move on price.
In new construction, the builder can be very resistant to negotiating the price of a new home. Builders often resist or refuse to lower the price of a new home for a variety of reasons.
Lowering the price affects the value of the next home he builds.
The neighbors, his prior clients, will be very unhappy. If the builder has a model or office in the community, he'll hear from the neighbors if he lowers the price of the homes as he continues to build. Since each home he builds is typically a comp for the next set of homes, the neighbors don't want to see values or equity go down.
The builder's costs continue to rise with the economy. Supply and demand could affect the supplies the builder needs for new construction. The builder's loans could also be affected.
If the builder is building during a housing shortage, or seller's market, he'll want to take advantage of scarce inventory. This definitely does not include lowering his price.
Builders don't usually have an emotional connection to the sale. The price is based on what he needs to run a profitable business.
If the builder won't lower the price, what can you do?
Look for value in upgrades and negotiate. Consider options that add future value to your home.
If you're handy or like to do remodeling projects, focus on things the builder can do during construction. You want to focus on things that would be more costly down the road for you to do yourself.
Here are a few examples:
1. Consider cabinet upgrades. Taller, more ornate or deeper cabinets can be a valuable upgrade. We all love nice cabinets, and the value is easy to see when the time comes to resale.
2. Extra space upstairs. It's cheaper for the builder to go up. Since the most expensive part of the home is complete - the roof and foundation, the builder's cost to add framing upstairs are relatively cheap. Let the builder start the unfinished room above the garage or the extra bath upstairs.
Having the builder rough-in the floor, walls, electrical, plumbing, and heat can save you money down the road. You can finish the room in the future and add living space.
3. Future plumbing. Perhaps you'd like an extra bath or kitchen in the home in the future. Asking the builder to plumb those areas now can save money in the future. You can finish those projects down the road or sell them as potential options to a buyer in the future.
4. Ceiling fans. Ceiling fans help optimize the heating and cooling system in your home. The long-term effect of lower heating and cooling could be a selling point in the future as buyers become more energy conscious.
5. Landscaping. Clients are often unsettled by how close a neighbors home feels until the landscaping matures. Asking the builder for additional landscaping has been well received in contracts I've negotiated.
Since landscaping becomes more expensive the longer you wait, negotiating a little extra can add a lot of future value.
6. Opt for a cheaper lot. If you can swap your plan to a cheaper lot, you'll stretch your dollars for upgrades or perhaps a nicer elevation.
If you have something else in mind, it never hurts to ask.
I recently spoke to a builder, and this quote stuck with me...
We can use it a general rule of thumb in negotiations with the builder:
We won't negotiate price right now, period. The market isn't there. We will negotiate upgrades. Fence, granite, tile, screen rooms, concrete patios, landscaping, etc... anything that doesn't add to the square footage of the home (heated).
Anything that adds to the square footage without raising the price hurts future comps. Keith Bloemendaal