When looking at new construction in Central Indiana you will find no shortage of builders to choose from. Pulte Homes, Lennar, DR Horton, Pyatt Homes, Dress Homes, Beacon Builders, Larry Good Homes, Silverthorne, Ryan Homes, Olthof Homes, and so many more. Just choosing a builder can be overwhelming. Once you decide on where to build, the next step is negotiation! Your ability to negotiate a great deal depends on so many factors. Here are some things to keep in mind when negotiating....

  • Discounting Purchase Prices - Builders are less inclined to reduce purchase prices, and would rather give more closing cost credit incentives. The purchase price of all homes are publicly available, so other buyers, appraisers, real estate agents, or anyone can see that price. Lower purchase prices can potentially hurt them for future sales.

  • Closing Cost Credits - This is where builders are usually very negotiable. Many builders own the lender and title companies. They charge higher closing and lending fees and you don't always see the breakdown until you have signed a purchase agreement. Getting a sizable closing cost credit may sound great, but paying 2x-3x more closing/lending costs does not always gain you anything.

  • Interest Rates with Builders Preferred Lender - Because many builders have their own lender you can potentially get some great deals on interest rates. I have found that builders have some REALLY good interest rate incentives, but usually if you want these they can be less negotiable on other parts of the deal. At this point you have to do some math to figure out the best deal. Sometimes taking a slightly higher interest rate is better if you negotiate in other areas of the deal to keep more cash in your pocket.

  • Quick Move In Homes - These are spec homes built by the builder with no end buyer. Generally, if they are in the early construction stage the builders are not looking to discount very heavy. They have plenty of time left to sell. But if the home is nearing completion then they usually are more motivated to get it under contract. Completed homes that are unsold make the builder look bad. You can score some good deals on these toward the end of construction.

  • Build From Scratch vs Quick Move In - When you build from the ground up and pick your finishes you usually have less room to negotiate compared to the quick move in's. When the builder has to customize a home it's a lot more work with the home building process than the builder just ordering a whole spec house finished out right from the get go. The buyer is involved with everything along the way with built from scratch homes.

  • Upgrades - If you decide to build from the ground up you can potentially get some additional discounts if you are looking for a lot of upgrades. Upgrades are high profit margins for the builders. Some of the up-charges are high, and not really worth it, but overall you can potentially use them in negotiation.

  • Lot Premiums - Depending on the builder these can be crazy. Locally I've seen $30,000+ extra lot premiums for specific lots that back up to woods or are larger lots. Those are pure profit for the builders. While you might not be able to negotiate that specific line item, you can negotiate your whole deal more when you are selecting premium upgrades and lot choices.

  • Supply and Demand - At the end of the day it really comes down to this. If the subdivision is brand new they want to initially sell lots fast to build demand. Overall if they are selling properties fast they will be less willing to discount. If lot sales are slow and the subdivision is newer you may want to stay away from it, otherwise you end up building a brand new house (and paying top dollar), only to have them selling brand new homes for similar prices for the years to come, leaving you underwater.

  • Selling the Final Lots - Once builders get to the final lots, they are ready to close it out. This means renovating the model home to an actual home and listing it, and selling the last several lots and spec homes. This is also where you can score a great deal. The sooner the builder is done the more they save on overhead, and move their resources to the next community. Most of the time they have to take care of all road maintenance, snow removal, insurance, utilities, and common area maintenance until they reach 90-100% sold. At that time the particular town and permanent HOA take over.

As you can see there is a lot that goes into negotiating with builders. Getting the best deal is a combination of purchasing a home in a strong neighborhood and evaluating the sales and comp history. Once you have done your homework finding your preferred neighborhood in your budget, it's time for negotiation! Are you considering new construction? About 50% of new construction buyers are represented by a real estate agents - at NO COST to the buyer. Real Estate agents have access to comps and networking with agents who have negotiated with that particular builder. Reach out to me today and lets run some detailed comps on your preferred neighborhood!

Related Blog: Do I need an agent for new construction?

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