8 Tips for Negotiating the Best Deal on a New Construction Home
Redfin agent Connie Durnal explains why this month is an optimal time to score discounts or savings on upgrades for a new home
Is a brand new home on your wish list? The end of the year is the best time to lock in a deal on a new construction home—if you know what to ask for.
“Even though overall housing market activity dies down as the holidays approach, late December is the best time to negotiate a deal on a new home,” said Redfin agent Connie Durnal, who’s based in Dallas. “Builders’ sales deadlines align with the calendar year, so they are motivated to get homes under contract to meet sales targets at the end of each month, quarter and year. December is all three.”
This December has turned out to be particularly lucrative for buyers in the market for a new home, as builders’ sales have slowed this year, leaving the largest supply of new homes for sale than we’ve seen since at least 2012.
“I’ve been a real estate agent a long time and I’m seeing builders offer more incentives right now than I can ever recall,” Connie said.
Many builders are attracting buyers with competitive pricing and complimentary upgrades in order to move increased inventory before 2019.
So, how can you negotiate successfully? Read on for Connie’s go-to guidelines and advice for purchasing new construction homes:
1. Negotiate on upgrades, not price
“Most builders won’t sell below base price. If it’s listed at $400,000, they’re not going down to $399,000. But they will throw things in on top, like a huge $10,000 credit at their design center for custom color cabinets, extra lights, or other features that are going to cost you.”
2. Keep emotion in check
“A builder is a corporation; treat it like a business transaction without emotion. This is where having an agent whom you trust and who has your best interests at heart is critical. I will often tour a community with a client, and then suggest that they head home so I can talk to the sales rep by myself. They can’t know how badly my buyer wants the home. It’s like playing poker; don’t show the sales rep your hand.”
3. Be prepared to walk
“Be willing to walk out the door. Many times I’ve said, ‘this isn’t going to work,’ and get out of my chair and walk out. There’s a big chance they’ll come running to ask what they can do to get you to stay.”
4. Consider finished homes first
“You’ll get the best deal on a move-in ready home because the builder knows exactly how much it cost to build. Builders don’t know today how much concrete will cost in March, or the future price of shingles, so they tend to price in that uncertainty. Either way, you can still get a better deal by negotiating before year’s end.”
5. Read the fine print
“Before you sign anything, ask questions to make sure you thoroughly understand what’s on every page you sign. Every builder writes their own contracts, which can be one-sided in their favor.”
6. Keep up with the neighbors
“Earlier this year my customer was one of the first to buy into a new development. A few months later, the buyer discovered the base price was reduced. If this happens to you, don’t hesitate to reach back out to the builder and request the same price, even though you’re under contract. If the builder says no–which is unlikely with a reputable builder–let them know you’re prepared to walk away. Be very sincere, but play hard ball.
That’s what happened with my client. The amount of good will the builder ‘bought’ by reducing the sales price is beyond measurement. The buyers are even more of an advocate for the builder now, and if a builder knows you’re going to ‘spread the word,’ chances are they’ll jump through hoops to serve you well.”
7. Factor in mortgage rates
“Talk to a lender early on to understand how your mortgage rate will affect your monthly payment amount and when your rate will be set in stone, especially if the home isn’t yet built. While most lenders are unable to lock in a mortgage rate for a whole year, they might be able to lock in today’s rate for 30, 60, 90, 120 days. The interest rate can play a huge role in determining if it’s best for you to buy a home that’s already under construction or to build from the ground up.”
8. After you negotiate, negotiate again
“One huge thing to ask every single builder is, ‘do you have a preferred lender?’ If the answer is yes, ask if there’s an incentive for using that lender. Here in Texas, you’ll almost always get the title policy paid for, and that’s worth 0.5 or 0.6 percent of the purchase price.”