A savvy buyer can often get a fantastic deal on a new construction home by doing two key things.
First, ask for discounts and deals — much like car prices on a sales lot, the price of a new construction home isn’t set in stone. It might take some gumption, but this is an area where negotiating will be rewarded.
Second, realize that publicly-owned residential home builders need to report their sales numbers to investors at the end of their fiscal year. That means that if you do your research and are set to close on your home just before when they report their results, the sales agent is far more likely to give you a discount if the company hasn’t met its annual sales goals.
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What types of deals can you expect? Builders are loathe to give too steep a discount on the actual sales price. That’s because they want everyone who bought into a community to feel like they paid a fair amount — and they want to maintain high expected sales price for homes in the neighborhoods where they build.
That said, there are many under-the-radar discounts you can receive that will functionally reduce the cost of your new construction home. Ask a builder if they’d do any of the following.
Pay for Closing Costs: Depending on where in the country you live, closing costs can run up to $10,000. For example, in Denver, where I work, a typical closing is approximately three percent of the final sales price. If the builder foots the bill, that goes straight in your pocket and is almost as good as a discount on the sale price.
Buy Down Your Interest Rate: Yes, interest rates are very low, but what would you say if the builder was willing to buy down your rate even lower as part of the closing package? It would make your monthly payment that much lower for years to come. A definite positive.
Free Upgrades: Often homes have a standard package with nice-but-not-incredible appliances included. For the higher-end appliances buyers need to pay to upgrade. Ask whether you can get the upgraded version without paying extra. It’s a nice way to move into a new home.
Other Discounts: Builders may throw in landscaping to sweeten the deal, or discount the price of adding in or finishing a basement in the home. Or, you might get a nice automated garage door system, or window coverings. It’s always worth asking.
While all this may seem too good to be true, there are some negatives. Here’s what to keep in mind.
If Business is Good, Deals are Unlikely: While it certainly doesn’t hurt to ask, remember that if the builder is making brisk sales at their preferred prices, they’ll have little motivation to offer you a discount.
You May Not Get To Pick the Exact Home You Want: To get a deal like the above, you’ll need to buy a home that’s already built, or near completion and doesn’t yet have an owner. That does restrain your choices. For some, this isn’t a problem, but for those who want exactly everything like they want it, this might not be the way to go.
The Best Lots Will Already Be Gone: Even if sales are slow, homes sited on the best lots in a development are the first to sell. So the choices you’d have would be on lots that, for whatever reason, are slightly less appealing. For many this isn’t a problem, but for some it could be a major issue.
Particularly if you live in a market where home sales and buyer interest have slowed of late, like they have Denver, it’s well worth investigating what home builders have to offer. First research what local home builders are publicly-held and have upcoming fiscal year ends. To see the top 100 builders this year, click here. For those of you in the Denver metro, see below for the fiscal year-end dates. Those will be your top targets.
Then get out, tour some homes, and see what deals you can find. And, if you have any questions, feel free to ask your real estate agent.