Save Big: Smart Strategies for New Home Construction

If you asked one of your friends or family members if they’d like to get a great deal buying their new home, what do you think they’d say? “Yeah, I'd love to get the best deal possible, but how are we going to do that, especially with new construction homes?” This question is more common than you might think, and today, we’re diving into how you can save money on buying a new construction home.

Now, let’s examine how you can save green when buying a new home.

Understand the Contributing Factors

First, let’s break down what influences the pricing of new construction homes. When you see the price of new construction, there are six main factors builders consider:

  1. Location:  This is one of the biggest factors. Prime locations come with a higher price tag.
  2. Cost of the land:  The expense of the plot itself can vary significantly.
  3. Size of the home:  Naturally, larger homes will cost more.
  4. Cost of building materials:  Fluctuations in the price of lumber, steel, and other materials impact the final cost.
  5. Cost of labor:  This varies by region and availability.
  6. Builder impact fees:  These are charges local governments impose on new construction.

Knowing these factors helps you understand why prices are set as they are and gives you a foundation for negotiation. 

The Importance of a Buyer’s Agent

One of the first steps you should take is to hire your own buyer’s agent. You might wonder why you need a buyer’s agent when a new home sales agent is on site. Well, consider this: who does that agent work for? They represent the builder’s best interests, not yours. Having your buyer’s agent ensures someone is looking out for you and working hard to get you the right deal in the current market.

Research and find a buyer's agent with experience in new construction homes. Check their online ratings, reviews, and past sales performance. Ask about their experience with new construction and their negotiation strategy. This can save you a lot of money and ensure you get the best possible deal.

Timing Your Purchase

Timing can significantly impact how much you pay. Large builders, like Lennar, Toll Brothers, Pulte, and D.R. Horton, are often publicly traded companies. They report to shareholders and aim to show profitability and growth. Towards the end of a quarter or year, these builders are more likely to offer incentives to boost their sales figures.

So, plan your home buying around these times. Your buyer’s agent can help you identify when a builder is most likely to be flexible on price. This tactic can save you a substantial amount of money.

Leverage SEC Filings

Here’s a pro tip to give you a powerful real estate negotiation edge: use the builder’s SEC filings. Publicly traded companies must submit quarterly (10-Q) and annual (10-K) reports to the Securities and Exchange Commission (SEC). These documents can reveal valuable information about the incentives builders have offered in different regions.

Search these filings for terms like “incentives” to see what deals builders have been offering. For instance, if you find that a builder has been giving a 3% incentive in your area, you can use this information to negotiate a similar deal. This can be a game-changer in getting the best deal possible.

Understand Builder’s List Prices

When you see a home listed at a certain price, remember that builders often prefer to offer incentives rather than reduce the list price. Lowering the price can set a precedent that affects future sales in the community. Instead, builders might offer credits toward the design studio, closing costs, or other perks. Review this information with your buyer's agent to understand these incentives so that you can negotiate effectively and maximize your savings.

Explore Builder’s Inventory

Pay attention to the builder’s inventory. Sometimes, you can get the best deals on homes ready for quick move-ins or standing inventory homes. Builders are often keen to sell these homes quickly because they incur carrying costs for each day they remain unsold, including taxes, utilities, and maintenance. This creates an opportunity for you to negotiate a better price or additional incentives.

Get Everything in Writing

Always get every agreement and promise in writing. This might seem like common sense, but it’s crucial. Verbal agreements don’t hold up if disputes arise later. Ensure you leave the sales office with a hard copy or a digital copy of every negotiation and agreement.

Be Realistic About Model Homes

Remember, the model home you tour is often upgraded to the nines. While it’s great for getting ideas, be mindful that what you see might not be what you get. Builders use these models to pull at your heartstrings, making you visualize yourself in a fully upgraded home. The cost of these upgrades can add up quickly. On average, buyers usually spend 7-15% above the base price on upgrades. Budget accordingly and prioritize which upgrades are most important to you.

Consider Buying the Model Home

Consider buying the model home if the builder is closing out a community. These homes are often spectacularly upgraded and might be available at a discount compared to buying a base home and adding all the upgrades yourself. This can be a fantastic way to get a fully upgraded home for less money.

Research the Builder

Before committing, thoroughly research the builder. Look up online ratings, reviews, and past customer testimonials. This gives you insight into the builder’s reputation and the experiences of other buyers. Drive through the community, talk to future neighbors, and ask about their experiences. This firsthand information can be invaluable.

Consider the Builder’s Lender

Builders often offer incentives if you use their preferred lender. However, it’s crucial to research this lender as thoroughly as the builder. You’ll be sharing personal financial information and committing to a significant financial relationship. Make sure you’re comfortable with their terms and service. Sometimes, using an independent lender can offer better rates and terms, so weigh all your options carefully.

Negotiate Smartly

Finally, remember that everything is negotiable. Don't hesitate to review negotiation strategies with your buyer's agent, whether it’s the price, the incentives, or the upgrades. Use the information you’ve gathered from SEC filings, builder reviews, and your buyer’s agent to leverage the best deal. The goal is to ensure you get the most value for your money.

Additional Resources

For further reading on buying new construction homes, consider these resources:

These articles provide additional tips and strategies to help you navigate buying a new construction home.

Buying a new construction home can be an exciting journey. With the right knowledge and strategies, you can save significant money and get the home of your dreams. Always have a trusted buyer’s agent by your side, research thoroughly, and negotiate smartly.

Click here to find a top agent near you.  If you are planning on buying or selling a home in the Las Vegas, Nevada, area, please feel free to contact me.

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