Negotiate the Best Deal with a Builder
If you are looking for a home but aren't completely sold on the notion of living on someone else's property, then you may consider purchasing a newly constructed home instead of an existing one. However, before you put your name on the signed line, you should be aware that the purchase of a home that is under construction has both positives and negatives associated with it, particularly in terms of negotiating the best possible bargain.
When purchasing a brand-new home from a builder, it might be challenging to convince them to negotiate the purchase price. Because they are in the business of making a profit, builders are acutely aware of their financial standing at all times. You'll discover that the vast majority of builders are extremely reluctant to lower the price, and they will frequently refuse to bargain on the basic price unless specific conditions are met (more on that later). Even yet, there are a few things you can do to improve the terms of the contract so that they are more favorable to you.
When negotiating with a builder, it is important to keep the following seven ideas in mind in order to ensure that you get the best possible price.
1. Know the Builder’s Incentives
It is essential that you comprehend the reasons behind the seller's decision to sell, just as you would if you were purchasing an already-existing house. The same can be said about contractors. Making a profit is the single most important consideration for a contractor.
Builders want to maintain a high sales price for newly constructed homes whenever they make a transaction. When they sell one of their homes at a higher price, not only will they make a profit, but they will also have created a benchmark for the prices of their other available properties. This indicates that they are able to rationalize selling their comparable new construction at the same price point.
What should you do then in order to negotiate the best possible deal with a builder who is refusing to drop the price of the new development you have built? You, as the buyer, and the builder, on the other hand, have a few options for reaching an agreement that is satisfactory to both parties.
2. Shop Around for Financing
When you are trying to find a lender to help you finance the purchase of a newly constructed house, you might feel inclined to go with the builder's recommended financial institution. Production builders almost always have a favored lender with whom they enjoy working, and some even run their own mortgage companies. They will frequently offer consumers some sort of incentive in the hopes of persuading people like you to cooperate with them. To put it another way, they make it difficult and expensive for you to avoid making use of their services.
Take a closer look at the conditions that the desired lender is willing to work under, even though using that lender could appear to be an obvious choice. Preferred lenders will typically provide credit at the time of closing; however, this does not guarantee that they will give the most competitive mortgage rates or terms. Additionally, it is in your best interest as a buyer to look around for cheaper rates that come with reduced origination fees. The charges that you will pay to get a loan are referred to as origination costs. Banks typically charge between one and two percent for these costs, but if you work with the builder's preferred lender, you will probably be eligible for a discount on these fees.
If you are successful in finding a lender who can offer you a better deal, that lender may even be willing to give you credit for the same amount that the builder's recommended lender provided you.
A useful piece of advice is that if you find a better offer with an outside lender, you should take it back to the builder and see if they can beat it. It is possible that you will be able to convince the builder to make the incentives that are provided by their preferred lender available to the outside lender as well.
Why would they act in such a way? The longer a builder keeps a home in their inventory, the higher the cost of maintaining that property will be (and the lower the builder's profit margin will be once the home has been sold).
3. Ask About Upgrades
The ideal location to negotiate a deal with a builder is to finish upgrades and change order items if you want to get a good deal. Upgraded lighting fixtures and floors are just two examples of how finishes can be improved. Items that are considered change order items include customized additions, such as built-in speakers or non-standard build-ins.
Check with the builder now to see if he will be willing to collaborate with you on making any adjustments that you might be interested in making after everyone has moved in (without you having to pay extra). Place the majority of your focus on the aspects of the construction that can be completed by the builder, and that, if you did them yourself, would cost you more money.
There are occasions when builders will further include enhancements such as a landscape package, an appliance package, improved appliances, or a washer and dryer in the sale price. If you choose to proceed in this manner, make it a point to inquire about the aforementioned alterations before you consent to sign anything.
4. Request Your HOA Dues to be Paid
If you buy a house in a neighborhood that is part of a community that has a Homeowners Association (HOA), then you will be responsible for paying the monthly dues to the HOA. Typically, the costs involved with the upkeep of common facilities, shared structures, and exteriors are covered by the dues that are paid. Monthly HOA dues can be significantly lower than one hundred dollars or significantly higher than several hundred dollars.
When you buy a newly constructed home in a neighborhood that was created through planned development, there is a good likelihood that the community will have a Homeowners Association. Asking the builder if they will pay your homeowner's association fees for the upcoming year in advance is one strategy you might use when negotiating with them. This could amount to a big cost reduction for you, depending on the HOA costs that you pay.
Choose Forged Homes today! No matter what your circumstances are, the team at Forged Homes is committed to providing you with a cash offer that is both authentic and competitive for your home.