Builders have a bottom line for negotiations that depends on supply and demand, their numbers, their financing, inventory on the ground, timing and your ability to buy with no contingencies.
Real Estate is Local
Real estate is a local business. The market in your city is likely different from the market in the Triangle. You should have a buyers agent familiar with new construction to help you. New home representation is a specialty and takes experience with new homes and different builders to know the sweet spot for negotiations. Make sure the builder knows you want representation so they will pay your agents fee.
When negotiating on a new home, supply and demand is a big factor.
Raleigh is building more new single family homes than anywhere in US. According to Forbes, December 2015, The Triangle Area of NC (Raleigh) has more single-family new construction as a percentage of the existing housing base than any other city on the country. Raleigh is #2 if you factor in multi family construction. So if you want a new home, move to the Triangle.
The demand for new homes in the Triangle is high too. Some neighborhoods in Cary are pre-selling by lottery. You can look out over hundreds of homes, all pre-sold. There are no deals there. The builder reps say to make your best offer above the base price.
A little farther out from the RDU Airport and RTP, in Apex, Holly Springs, and Chatham County there is new construction. The possibilities of negotiating are better there.
National or local builders
The Triangle has a variety of home builders. National, regional, semi regional, local and custom. Most are production builders. You can read about the differences on my page Who is the Best Builder in the Neighborhood? National builders are all about their numbers so if sales are slow or the neighborhood is just getting started you have a better chance to get free upgrades. Local custom builders seem to be more focused on the end of the year sales for reductions or incentives.
It’s really hard to negotiate on a pre-sale. The builders will charge you a base price, add options and a lot premium. Some builders include much more than others and depending on the price the same builder will include more options in the price in one neighborhood than another.
Negotiations sometimes happen though. The buyers of the pre-sale above were able to get some seller concessions because the neighborhood was just getting started and we asked for them.
It is hard to really know how much your home will cost with a pre sale because with a production builder you don’t choose the options until you are in the design center and you are already under contract at that point. When visiting a new home neighborhood I don’t pay much attention to the base price. I ask the on site agent to show me the model and an inventory home and compare the prices of each. I always ask how much the typical upgrades run for that builder in the neighborhood. With a production builder upgrades can be an extra 20%.Custom builders often include pretty much everything.
I always ask about incentives too. These could be an appliance package, design center options, or closing costs. Occasionally the incentive will a price reduction for a short period. The on site sales rep will sometimes tell me when incentives are going to change and what they will likely be so if a good deal is coming up we can wait or go ahead and make the offer with the new incentives.
It’s very rare, but sometimes you can get something off or added upgrades plus the incentives especially in a neighborhood with several builders. If the builder knows there is a good chance you’ll go down the street they are more likely to do something for you. I’m not talking about something really big like hardwood floors or a screened porch but maybe a refrigerator or a couple of thousand toward upgrades. I want to emphasize this is the exception because most builders have a firm policy not to deal on a pre sale.
It is rare to have a discounted price because the builder needs to keep the appraisals up in the neighborhood and because they often have to borrow money to build the house and need certain ratios. Even if the builder is self financed they need the numbers to look right.
Move in ready
We used to call these specs. Some production builders only do pre-sales because they want to sell from a totally upgraded model and are selling a dream. Some custom builders don’t have the financial backing to do spec homes.
If you want a deal, a move in ready home is what to buy. You can sometimes get extras when you buy the home before it is completed but a home sitting finished , especially a home sitting finished at the end of the year is ready for a deal. I would consider a good deal 1-6% off asking price with extras added in for the 1%-2% off. If the house has already been reduced you won’t get that much and maybe nothing as the builders have a bottom line that they won’t and sometimes can’t go below because of their financing.
Your timing and the builders timing can be a factor in negotiations.
If you buy at the end of a quarter, the end of the year or the builders fiscal year (Google the builder to find out the year-end) you have a better chance to negotiate.
If the builder is leaving a neighborhood they usually want to be completely out so the last home or two will go at a great price. With multi-family homes an investor may be able to pick several units at a big discount.
If you are pre-approved and can close quickly on a finished home with no contingencies, make an offer. Because the house is finished, asking for options isn’t an option so ask for a price concession and anything that can be added. Sometimes it can be a washer/dryer, fence, window blinds, extra landscaping.
The sweet spot is important
This is my best advice. Know what the sweet spot is and don’t get greedy. If you ask for too much you likely won’t get anything. The sweet spot depends on the factors I discussed above. Realize that builders have a bottom line that depends on supply and demand, their numbers, their financing, inventory on the ground, timing and your ability to buy with no contingencies.
Call me or email if you want buyer representation with a new home.
Marianne Howell Wright