When purchasing a home or condo in a new development are the prices quoted firm or can the buyer negotiate the selling price with the broker? Are the costs of “upgrade options” negotiable.
The definitive answer: Maybe.
New home sales is a retail business. The builder has to move current inventory to finance the future inventory, just as Sears has to clear out all the Fall and Winter goods to make way — and pay — for the Spring line.
Sometimes builders have more business than they need — and in consequence nothing is negotiable.
Sometimes — like now — builders need to move inventory, and they are willing to Make Deals, as they say down at the new car lot.
Even then, the deals may be set by higher ups, with the on-site sales staff authorized to smile and say the same things over and over again.
But what is that classic car dealer’s line: “What’s it going to take to get you into a Cadillac today?”
If a salesperson says something like, “If the only thing standing between us were the carpet upgrade, would that make a difference?” — that is a closing question, but it’s also a hint about flexibility. Even then the salesperson may not be able to make concessions, but the hint is that concessions are possible.
If you’re truly interested in the home and if you can be persuaded by a better deal, now is the time to sit down and dicker. Even if you have to leave the deal on the table for referral back to the main office, you may have won.
As with cars, upgrades are where the profit margins are highest. If you can arrange for and pay for your own granite countertops, don’t buy theirs unless it’s free or deeply discounted. Seven-inch stainless steel sinks are crap, buy you can buy a top-quality sink at Lowe’s for much less than that same sink at the builder’s design center.
There can be exceptions, though. For example, right now in Arizona, a great deal of spec home inventory is being sold at huge discounts. People bought new homes contingent on the sale of their old home, then had to cancel the purchase when the old home didn’t sell.
In consequence, many builders are essentially giving away upgrade packages for free: You pay for the base price of the home and whatever upgrades the former buyers had ordered are thrown in gratis. These upgrades will not be worth their imputed value, since the mark-ups are so high, but they can be worth a lot. The whole package-deal may be non-negotiable, but it may be an excellent value nevertheless. These sorts of deals are a temporary phenomenon as builders sell down excess inventory.
For my own part, I’m not crazy about new construction. Unless you buy near the build-out of a subdivision, dirt and dust are on-going problems, there are no window treatments or ceiling fans, landscaping is anemic where it is not entirely absent. On the other hand, generally speaking, you can buy a lot more home in a new home subdivision than you can buying resale.
And here is the iron law of negotiability: You’ll never know if you don’t ask.
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Dave Barnes says:
Greg wrote: “For my own part, I’m not crazy about new construction. Unless you buy near the build-out of a subdivision…”
Not to mention that if you have to sell for some reason, the builder will be competing against you.
,dave
December 1, 2006 — 4:37 pm
Kris Berg says:
Absolutely, they negotiate. A couple of weeks ago, a past client called me to say that they were enamored of a new home project and wanted me to represent them. Dutifully (the builder was offering a coop fee to brokers), I marched in and through expert negotiating, secured a $15,000 price reduction for the buyers. The punch line is that 48 hours later when we waltzed in to sign the purchase contract, the builder handed me the corporate flyer that had been faxed over that very morning offering any buyer of any lot in the phase a total prize package of $35,000. Fortunately, my clients were thrilled, instead of disappointed that I hadn’t done better in the first place. Another fortunate result was that the corporate flyer also announced an increase in my coop concession. 🙂 (I am crediting the buyer the balance, by the way. It was the right thing to do).
December 1, 2006 — 7:05 pm
geno petro says:
I’ve been selling and listing NC since 2000 in Chicago. My pat response to the buyer (or agent) used to be “We almost always get full price, many times we go over list, rarely to we negotiate anything but the close date
and maybe earnest money,,,”
These days it depends on the builder’s bank more than anything and if his interest reserve is shot due to long market time. My pat response to my builders lately is to paraphrase a quote from Will Rogers (not Roy as I know you have an affinity for Westerns)”Sometimes its best to just get a return OF your money rather than a return ON your money. A resounding “maybe” to be sure.
December 1, 2006 — 10:07 pm