Profile picture for homebuyer5106

What is the best way to negotiate with home builders on inventory homes?

How do you know if you are getting a good deal on materials/upgrades, etc.?
  • February 11 2009 - Katy
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

Answers (17)

Profile picture for vishnukaushik
First thing do your search without realtor and let use your friend or wife name while filling information sheet at model homes. Get following information from sales agent
- deal discounts etc 
- % and extra bonus to realtor

Do you a comparison of similar inventory homes in locality to get average per sqft price. Better build a sheet having Builder name, floor plan, sqft, price and discount with link to the listing at builder website.

Now use any realtor because for new home realtor do nothing for hot market and negotiate % or amount he can pay back to you.

Go to the builder office and show him the comparison sheet to negotiate the price and represent yourself as strong buyer then emotional buyer and let your real estate agent also support you.    

 
  • April 30
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Joan, I had already been e-mailed by the moderator.  I didn't need you to point out the "Be A Good Neighbor" thing.  I had already learned just after I posted, but could not remove anything.  I have bought six homes brand new from builders personally, so it's not like I don't know anything about builders and buying new homes.  I wasn't just a realtor that stepped off with my realtor's license and decided to post.  Just be cause you have been in Zillow for a long time does not give you the right to cut me down and make me look like a fool and accuse me of self promotion.  I was only following the TREC rules which state that you cannot hide behind a posting.   You have to disclose that you are a realtor and put your brokers name and phone number.  
  • January 30 2013
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Joan, I only do real estate part time, and it's for fun.  I also work a full time job as an executive assistant.  There's no need to cut me down or tell me I'm a money hungry realtor.  I worked hard to become a realtor.  We now have to take six courses and pass numerous tests and homework.  It costs around $2,000 by the time you pay everyone off to get the schooling, license and get into the associations.  Don't make it sound like we did nothing because it was hard work.  I was new to Zillow when I posted and we are required to put our brokers name and phone number normally when we write something.  So, I thought I had to do it here.  I later learned that we didn't since my profile already states I'm a realtor, but there was no way to remove the post.  Please don't be so hard on people and realtors.  
  • January 30 2013
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Lora, I see you are fairly new here. If you notice, right underneath the answer box, placed quite obviously, is this: Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion!

Answering an almost four year old question with the sole intent to self-promote, while stating "Not all realtors are in it for the commission" probably doesn't show you in the best light.

Also, as much as I respect all the great agents out there, the training required to become an agent is woefully lacking. 
And becoming a Realtor(forgot how to do the little trademark thingy) has nothing to do with making a person who tends towards dishonest and unethical behavior, honest and ethical.

Sorry, feeling a bit snarky this morning.  Showcase your knowledge and your consumer advocacy with your answers and you will be a lot more successful in making a great impression to consumers.
Just sayin'.
  • November 21 2012
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Buying a home without a realtor is like going to court without a lawyer.  The builders will tell you they will give you a great deal if you don't have a realtor, but are they going to really?  They are looking out for #1, themselves and the builder.  Even the contract you sign is constructed by the builder and their lawyers and puts them out on top.  I'm not saying all builders are bad, but the people that are working in the homes selling them are out to make bucks for themselves and are really good at convincing others that their giving you a great deal.  Relators sell homes every day, new and used.  They know the market and know what all the houses in the area are selling for.  We know if you are getting a good deal and will represent you like it was our own home we're buying.  Not all realtors are in it for commission.  I'm in it because I love real estate and love to help people live the American dream.  [Promotion and phone removed by Zillow moderator. Please see our Good Neighbor Policy for information.]
  • November 20 2012
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Profile picture for davidslavin
First, n00bzilla doesn't know what they are talking about.  Experience shows that builders will sell a house for the same amount whether a Realtor is representing the buyer or not!  Why would you want the builder to ake a larger profit when you can have a Realtor representing you looking out for your best interest at no cost to you?  

The best way is to make an offer for the amount you feel comfortable paying and see what happens.  Many builders are willing to negotiate on inventory homes.  
  • March 12 2010
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Profile picture for kaniam

n00bzilla or anyone else, what do you mean by, "Ask for a 8%, 10%, 15% for future depreciation???"

  • January 17 2010
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Profile picture for n00bzilla
(continued)

A few steps I'd recommend:

1. Find out what home prices were in the area between 1997-2001 (look at sq ft, lot, etc)

2. Play with those numbers based on relative strength of neighborhood (nice schools, lawns, or future ghetto, etc)

3. Add an 8%, 10%, to 15% discount for future depreciation (but it might go lower, that's the risk you take to get the home today)

4. Consider adding another discount because you don't get landscaping on a new home and that will cost you $8K to $15K

5. Add another discount if many of the homes are not occupied, 50% vacancy, 4%-6% discount in my book

6. After factoring all the above, discount some more, between 2%-5% (what you think the builder will not do, but enough to show you're serious, nevertheless, don't let the builder know you're padding the discount so add it to the other discounts, if the builder raises you by this amount, that's okay, that's why you pad it)

Now put this on the builder's desk and explain why they should sell at that price. There are no secretes, everyone knows the risks. Show them some stats on underwater homes that were purchased between Sep-Dec '08. Say, "look what happened to these guys". And don't buy any of that "but that's below our cost", bs. Of course it's below cost. No builder expects to make a profit in this environment, they're only minimizing their losses.

One last thing, don't worry about interest rates, if they go up, just knock it off the price. Builders play the interest rate game like a violin. It works both ways and they know it.
  • April 15 2009
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Profile picture for n00bzilla
"You will want to discuss each detail with your Realtor."
...
"A Realtor that is a good negotiator can usually get a better deal"


Excuse me but...

The best thing you can do is NOT use a realtor for the following reasons:

1. They need their cut. Surely you don't think the builder will pay that out of their pocket, do you? It's all priced in.

2. The big picture spells and obvious conflict of interest: what realtors really want is to get you to pay the MOST possible, while still thinking you're getting a deal. Think about it, the lower the home price, the lower the commish. If you get a very low price, it suppress real estate values even more.

Realtors are scared to death of the housing crash and will do anything to hype up a sale. It's just the fox guarding the hen house. And lot's of realtors own multiple homes themselves and it just pisses them off if you get a better than expected deal. Envy/jealousy.

  • April 15 2009
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Profile picture for supercub

Homebuyer, If you want to know what kind of deal you're getting on the options, ask for the options sheet with pricing. On appliances etc, they will list model numbers and brand. Look them up or check at your local appliance dealer for comparison. Keep in mind, the prices with the builder are installed prices and you won't pay for delivery...well, you are in the price of the home, but not in addition. On structural upgrades you will also find that it's a lot cheaper if it's done by the builder, permits are already in place and theres's no disruption and your financing it with the house. On things like light fixtures, faucets, and carpet, don't be swayed, no matter what they tell you. From an appraisal standpoint, a light is a light and carpet is carpet, period! Bottom line, tell the builder it's all well and fine, but!!!!!!!

  • April 15 2009
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You will want to discuss each detail with your Realtor. Make sure each of the decisions you make on upgrades are going to improve future value...but not to the point that you have an over improved home for the neighborhood. Your Realtor can pull a group of like sales to point out which features, types of homes, and size of home work for a specific neighborhood. Although the new builder in many cases will hate to see you walk in with a Realtor (because they know they may have to work a little harder) do what is in YOUR best interest and bring along an expert (at no cost to you!)
  • April 15 2009
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Profile picture for davidslavin
Here's the deal with builders.  They are hurting!  Most of them are giving great deals... on inventory homes.  If you pick a lot and build then you aren't going to get the best deal possible but you will get to pick the upgrades you want in the house.  A Realtor that is a good negotiator can usually get a better deal for you than trying to negotiate on your own since the builder will know that they are dealing with a professional and not the average person off of the street.  If the builder tells you that you will get a better deal without a Realtor, they are lying.  Keep in mind who the builder's salesperson works for... and its not you.  A Realtor will be working for you looking out for your best interests throughout the transaction. 

As far as cost of upgrades, most builders charge the same or more for the same/similar items you can get installed.  The benefit of having the builder make the upgrade is it should be covered under their warranty.  Many times if you don't make the upgrade when building the house, it just never gets done after you move in.

Let me know if you have any further questions.  I'm Always At Your Service!
  • April 10 2009
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Right now, builders are offering incredible deals on spec homes.  With builder incentives and financing incentives, it is a great time to purchase a new construction home. 

As a professional real estate agent, I highly recommend contacting an agent to negotiate for you.  They will also be able to run comps and history on the area that can help you. 

Good luck!
  • March 23 2009
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There are 3 profit centers that an agent that knows home builders well can help you understand how much room is available in that profit center.
1. The percentage mark up for the home
2. The lot premium
3. The upgrades added to the home

Understanding the profit in each of these areas allows you to know where the builder will end up actually losing money. Some people think that they got a great deal because the builder knocked off $150,000 off of an $800,000 home.  Well, if there was $250,000 of profit, was it really that good of a deal.  In this market, probably not.  There are many builder tricks out there that can fool the average buyer or agent....thinking hey, let's knock 20-30% off and we got a steel.  Not necessarily true.  There are builders that have actually increased pricing on homes prior to putting them into the MLS in order to play this game.

The market will determine the final answer.  The offer is your question.
  • February 15 2009
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One aspect of negotiating inventory homes is to seek out potential sales data through a good buyer's agent to see how the builder may be negotiating with other home buyers.
  • February 12 2009
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You have to keep in mind with builders is that they are selling a product just like anyone else.  My advice to you is to shop around and make yourself knowledgeable with other builders. 
  • February 11 2009
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I have been selling new homes for years.  This year is so different from the last decade. I am having clients ask 20 - 30% less in the asking price.
Some are getting it.  My clients use to get 5 -10 % less. 
If the home has been on the market for awhile they get more off.

To get a good deal you want to see how many upgrades are in the home and what the home costs.  Then look in the subdivision and surrounding areas to get comparables on the new home.
This should be a great start.
Here is a article on How to find a good deal on a spec home.
http://www.rebateontexashomes.com/html/new_home_tips.html#Allbuilderlinks
Email me if you want a more indepth answer, but this is a start.
  • February 11 2009
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