New home builders have different negotiating priorities from regular home sellers. When a regular person sells a home, she has to answer to herself. If she can find a price that meets her needs, she can sell. Home builders, on the other hand, have to answer to everyone who bought homes in their project. If they drop their price, it could potentially drop home values across the development, leading to unhappy customers. While you can still negotiate with them, you may have to use a more nuanced strategy than just hacking away at the price.
Research the market to ensure that it's truly a buyer's market. If inventories of resale homes are tight, or if builders are short on inventory, your negotiating position might not be as strong as you think. Just because you've heard that the community has a weak market doesn't mean that your neighborhood's market is in bad condition.
Visit other home developments to get a clear sense of how those builders are pricing their homes and to understand what discounts and incentives they offer, if any. Even if you don't want to buy a house from them, you may be able to use what you learn when you negotiate with your builder.
Inquire as to what incentives and discounts your developer is offering. For instance, if your developer is offering $5,000 worth of extra features and 3 percent closing costs, you'll want to start negotiating with those numbers already built in. In other words, if you want a $10,000 discount, your target should be $15,000 since the $5,000 discount is already built in.
Request incentives or upgrades that go beyond what you want. For example, if the house comes with laminate countertops and you prefer better quality ones, ask for expensive granite. That way, you can compromise by dropping back to the ones you want. Note that your builder's actual cost to upgrade the home is probably much less than the price quoted in the property brochure.
Ask for a rebate of the fee that would be paid to a buyer's agent if you're representing yourself. If you choose to do this, it's a good idea to have an attorney look over the contract, though, since many builder contracts are written to limit your rights and protect the builder.
Negotiate for an already-built spec house; these are houses that the builder constructs to sell as-is. You might not have any flexibility on floor plan, although you can sometimes get upgrades and decor changes, but if the builder's motivated, you might get a good deal.
Don't fall for the builder's negotiating tricks. When the sales representative acts surprised about a discount offered by a competitor or tells you that a lower price really hurts you by reducing the value of your home, he's probably tell you something that he read in a book or learned in a seminar. These are all standard negotiating tricks, so be ready for them.
- MercuryNews.com: Negotiating the Purchase of a New Construction Home
- VA Home Loan Centers. "Top 7 Reasons – Why You Should Get a Real Estate Agent." Accessed Feb. 26, 2020.
- Freddie Mac. "Keep Calm and Shop On." Accessed Feb. 25, 2020.
- Federal Trade Commission. "Shopping for a Mortgage." Accessed Feb. 25, 2020.
- National Association of Home Builders Economics and Housing Policy Group. "Builder's Use of Incentives Falls Back to 2002 Levels." Accessed Feb. 26, 2020.
- Consumer Reports. "How to Choose a Home Inspector." Accessed Feb. 25, 2020.
- Don't fall for the builder's negotiating tricks. When the sales representative acts surprised about a discount offered by a competitor or tells you that a lower price really hurts you by reducing the value of your home, he's probably tell you something that he read in a book or learned in a seminar. These are all standard negotiating tricks, so be ready for them.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.