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A Buyer’s Guide to New Home Construction

Sold before they’re built 

In a new home process, most homes are sold before the build begins. If you’re interested in a new home community, it is likely the builders of that community will have built model homesites for interested buyers to view first. Many times there will be more than one floor plan and more than one location to choose from so that buyers, like yourself, can design a home that will be a perfect match for their lifestyle. Buyers are able to get a sense of what their new home will look like and feel like by deciding between offered fixtures and finishes while the home is under construction. Is it important to know that although a specific style, location in the community, etc. may be chosen, the actual contract can only officially be signed once the builder completes the inspection and approval processes.

 

Be aware of the builder’s sales cycle

Builders of new home communities sell in three phase sales cycles. When buying your brand new home, make certain that you are aware of which phase of the sales cycle your builder is in. If you are a first buyer in phase one, there is a lot more room to negotiate the best discounts. The reason being that builders want to bring positive news to their lenders to show them that their investments would be capitalized on. If a builder has 100 homes to sell, and in the first phase can announce that they have the majority under contract in just a few weeks, the project will become more desirable to both future buyers and investors of the builder.

If you’re coming into a sale in one of the two later phases, make yourself aware of the previously completed contracts from phase one – it can determine the price and any discounts that the builder would be willing to give. In new home communities, If the first 10 homes sell quickly at the asking price, and the market continues to do well, the builder can raise the prices on the second or third phase. The last phase could end up being priced 10 percent or more than phase one, simply because the real estate market has appreciated. If the first and second phase did not sell quickly or if the builder has limited time to complete all phases (although they generally last several years) discounts may be obtained in order for the builder to close the project.

 

Go for the gold (or stainless steel) with upgrades

If you are interested in the new home nearing the end of a builder’s sales cycle, they may be willing to negotiate discounts in the form of upgrades. Generally price is the last thing a builder will wish to negotiate. If the builder lowers the price and the project closes, that price will go on public record. But, if they offer you hardwood flooring or high-end appliances in place of a price drop, there is no way to publicly track that and the sale will remain on record as completed at full price without giving future buyers to refer to “a great deal they saw.” In turn, thousands worth of upgrades in your new home could indeed be better than a price drop and make your home worth more in the long run – especially if as a first time buyer, or if this is not going to be your “forever home”.

 

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