So, you fell in love with a new construction home. It’s easy to see why — with a shiny new everything and designs for a modern day life, a new build property likely has a lot of the bells and whistles. But, we all know homes are more expensive to build than ever. Throughout 2021, the average prices of building supplies rose three times faster than the rate of core inflation. With that in mind, do you really have room to negotiate on a brand new property? Or, will you have to suck it up and pay the builder’s list price?
While negotiating for a new construction property differs from negotiating on a pre-existing property, it certainly can be done. There are ways to get a lower price or ask for upgrades if you know what you’re doing. Hiring a real estate agent with experience in new construction homes can also help you secure the best deal without sacrificing your dreams of a brand new home.
“It’s always a possibility to negotiate. A lot of builders will upfront tell you that this is what I’m selling and I’m not gonna negotiate on anything, but there is no negative to asking,” according to Brad Gore, a real estate agent and builder who works with 74% more single-family homes than the average agent in Taney County, Missouri.
Can you negotiate with the builder when buying a new construction home?
New construction home negotiations may feel impossible when builders often set prices and floor plans way in advance. But, it never hurts to ask. Even if negotiations in price are off the table, you may be able to negotiate the floor plan, appliances, or other home features.
“There’s no shame in trying to negotiate to get the best deal,” according to Gore. Work with a real estate agent experienced in new construction home negotiations to help you get the most bang for your buck. Let’s discuss the home aspects you can try to negotiate.
How to negotiate with your builder
Before you start negotiations on a new construction home, it’s important to know the basics of the process. It’s also helpful to know the stage of the building process, so that you know what you are more likely to successfully negotiate. For example, if the home already has flooring installed, it’s highly unlikely that you will be able to get different flooring for free. Whereas, if the flooring hasn’t yet been installed, you may be able to ask for a different type of flooring to be used at the same price.
Once you are familiar with the process, and you assess where your desired home is in the process, you can try to negotiate with the builder. Here are some common aspects of a new construction home you can try to negotiate.
Financing your new construction home
Most builders have a preferred lender they work with, but that doesn’t mean you must use their lender. You should always shop around with a few different lenders to find the best rates on your home loan. However, using the preferred lender of the builder could help you in negotiating a good deal on the house.
The preferred lender often offers buyer incentives to help sweeten the deal. If the lender doesn’t mention any of these incentives outright, you can still ask. Some options a lender may be able to offer include:
- Covering closing costs
- Lowering interest rates on your loan
- Paying for a home inspection
If you find a good deal with another lender, try bringing the terms to the builder’s lender to see if they can match it. Evaluate the loan terms, closing costs, and lender’s reputation to see which option is the best overall.
Regardless of the deals you get from any lender, make sure you read the fine print. Some options may sound like a great deal, when in reality they are not.
Dreaming up your ideal floor plan
Thirty percent of individuals who purchase new homes do so because they want to be able to customize design features in the home, according to a 2021 report by the National Association of RealtorsⓇ. If this also interests you, you might be looking to negotiate the overall layout of the home. This is definitely something you can try to negotiate, but it has to be the right moment in the timeline of the build.
A builder is unlikely to knock down walls that have already been built — however, if the home is still in the beginning stages of the build, ask about reconfiguring the floor plan. It might not be possible to get added square footage for the same price, but you might be able to get a custom layout that will meet your needs by working with your builder.
Get yourself all the bells and whistles
When it comes to negotiating upgrades, you have a lot of options. And, you are more likely to find success with smaller option upgrades. Think about what matters most for your home, and ask away. Builders may be able to get a deal with a supplier that you wouldn’t be able to get on your own. This means they might be able to offer you a discount on an upgrade and they may even throw in an upgrade for free.
Gore says you can ask for upgrades on pretty much everything — from appliances and countertops to lighting packages and paint colors. You can even try asking for upgrades to the landscaping or ask if the builder will add a security system.
Keep in mind that upgrades can be more complicated if most features are already installed in the home. Something like a refrigerator might be easy to switch out if it’s already in place, while paint color would be more difficult. If you really want to upgrade something that has already been installed, you can ask if they will change it if you cover the labor costs.
Saving on HOA fees
If the new construction home you have your heart set on is in a subdivision, you will likely be responsible for paying homeowners association (HOA) fees when you purchase the home as well as on a monthly basis. Another assist you could ask for from the builder is for them to cover your HOA fees for the first year or more. Some builders will agree to do this in order to help offset the costs of buying the home.
Protecting your purchase
New homes typically come with builder warranties. A standard warranty for new construction homes comes with one-year coverage on structural elements like siding, flooring, and drywall. It also comes with two-year coverage of heating and cooling systems, as well as plumbing and electrical elements.
If you want more out of a builder warranty, try to negotiate for a longer coverage period. You could also ask the builder if they would include things like light fixtures and appliances in the warranty.
Finding wiggle room in price
You might find more success in negotiating if the price of the home stays the same but the builder adds more upgrades. However, you may need a lower purchase price to be able to afford your dream home.
If this sounds like your situation, there are a few scenarios where you are more likely to negotiate a lower price. Builders will typically stick to their guns on price because they don’t want to set a precedent for future property sales in the same neighborhood. However, if it’s the last home on the lot, they don’t have to worry about the precedent so much. You may also find wiggle room in price if you are purchasing the model home.
It’s not common, mainly because when builders value the lot into the price of the home, they’re trying to spread those costs evenly over all the lots. So I think from our perspective as consumers, certainly we think that this lot isn’t as valuable as that lot. But, from the builder’s point of view, they’re all worth the same because it cost him the same amount.
- Brad Gore Real Estate AgentCloseBrad Gore Real Estate Agent at ReeceNichols Currently accepting new clients
- Years of Experience 18
- Transactions 242
- Average Price Point $197k
- Single Family Homes 193
Things you might not be able to negotiate
It never hurts to ask the builder about a change or a lower price, but there are some things that a builder is less likely to negotiate with you on. Builders will typically stay firm on certain elements of a new construction property, so don’t expect them to budge when it comes to these things.
Trying to get a lower price on the lot
When it comes to negotiating the price of a less desirable lot, Gore says, “It’s not common, mainly because when builders value the lot into the price of the home, they’re trying to spread those costs evenly over all the lots. So I think from our perspective as consumers, certainly we think that this lot isn’t as valuable as that lot. But, from the builder’s point of view, they’re all worth the same because it cost him the same amount.”
Asking for a shorter timeline
From 2021 to 2022, there has been insufficient supply for all kinds of items, including many building materials. This means that there isn’t currently much room for negotiating the timeline on a new home.
Builders have little control over when materials will arrive. Delays can happen during any part of the build with some of the more common delays happening in windows and HVAC systems in 2022, according to Gore. Building a new home in 2021 took a little over 7 months on average, according to the U.S. Census Bureau, with many homes taking even longer. This means that those purchasing new construction homes don’t have much room to negotiate a timeline where there is little control in the hands of all people involved.
Negotiating a lower price is (typically) off the table
Paying a lower price than the list price on a new construction home doesn’t usually happen. Besides a few exceptions, builders won’t typically negotiate a lower price for the home.
In fact, due to supply chain issues and inflation, it is more likely you will have to pay more than the list price. Builders are more commonly including escalation clauses in their purchase agreements to account for changes in building material costs and delays due to supply chain issues. Working with an experienced agent could help you here to avoid an unrealistic escalation clause if you are unsuccessful negotiating the purchase price.
Cutting home inspection costs
While it is more common in 2022, waiving a home inspection — especially on a new build — is a risky move. A home inspection is an important step to watch out for shoddy workmanship or defaults in your new home. Gore says, “…it is most typical for the buyer to pay for all inspections, even on new construction.” Even if the builder has an inspector of their own that completes quality checks, you will want to hire your own inspector to make sure the work was done properly.
Tips for negotiating
Negotiating is an art. To negotiate well, know when to give in and when to walk away. Whether you are asking for a different light fixture or hoping to lower the price of a new build house, here are some tips for the negotiating process:
- Work with an experienced agent: You’ll want to find a real estate agent experienced in buying new construction home negotiations. An expert agent will have all the tricks for negotiating and will be able to give you specific advice for new construction homes in your area.
- Know your stuff: Research the market in your area (alongside your agent), so you know how to negotiate the best deals with a builder.
- Investigate the timeline: Knowing the stage of a build or a neighborhood will give you the info you need to negotiate what you can.
- Get creative: Think creatively when it comes to negotiations. If you need a lower price than the list price, consider purchasing a model home, or even ask the builder what it would take to get to a price within your budget. You might be able to save by making some of the upgrades yourself.
- Know your limits: Often, buyers have a budget to work within or certain home features they don’t want to live without. Know what your limits are so you can walk away from a purchase that doesn’t give you what you need.
Buying a new construction home doesn’t mean you have no room to negotiate — it just means you have to know how to negotiate a new build home. Do your research on the builder and the type of new construction you hope to buy, so you can negotiate like a pro.
Hiring the right pro will help, too. Look for real estate agents in your area who have helped clients purchase new construction homes before. Use HomeLight’s agent matching tool to meet agents in your area who go above and beyond.
Header Image Source: (Brett Jordan / Unsplash)
- "Talking Points: Addressing the Supply Chain Crisis," National Association of Home Builders
- "2021 Home Buyers and Sellers Generational Trends Report," National Association of Realtors Research Group (March 2021)
- "Warranties for New Homes," Federal Trade Commission Consumer Advice (May 2021)
- "How Builders Are Dealing with Rising Lumber Prices," National Association of Home Builders