Considering the current housing crisis, buying a new construction house from a builder is
not a bad idea. Inventories are high. Prices are falling. Mortgage rates are low. All the
cards are stacked in your favor. But there are still tricks and mine fields to get around
before you sign the deal. You deserve more. And you can get a lot more.
To save money consider which upgrades you can do yourself after closing. Remember
that the builder makes his profit on the upgrades. Therefore he can sell the property at
construction cost, if he has to.
Get your upgrades in cash.
Free upgrades always come with a catch. The builder wants something from you. He
might want you to sign a deal immediately. He might want you to use his real estate
agent or his lender. At worse, he might want you to pay list price.
Do not fall for the builder's shell game. Ask for cash. If he is willing to give thousands of
dollars in upgrades, he can pay you cash. Choose the upgrades that are essential. Then
price the other upgrades. You might be able to do these by yourself.
Buy as a group.
There's strength in numbers. Find other buyers who are interested in the same
development and form a purchasing unit. Imagine four or five families being presented to
the builder as potential homebuyers. The builder will definitely offer better discounts.
Stick to your closing deadline.
We all realize that the closing date for a new construction is unpredictable. The builder is
dealing with a dozen or more sub-contractors and about thirty suppliers. It is chaotic and
there are obvious delays. However, once a date is fixed all parties should try and meet all
their obligations by this date. As a buyer you can allow up to seven days after the closing
date. Anything after this should be assessed a per diem penalty. I would ask for $100 per
day. This would cover some of the hotel and other living expenses.
Give the minimum dollars upfront.
Builders like to get a sizable downpayment when you sign the purchase contract. It might
take a year to close the transaction, so this is a long time to have your money tied up. A
better strategy would be to make about six payments to the builder. These payments
would be at various stages of construction. Always negotiate for the lowest payments.
Hire your own real estate agent.
The builder's agent is paid to represent the builder, not you. They might say otherwise.
Most of the time the seller pays a real estate agent for selling a house. In new home
sales, it's a bit different. The builder already has his team, and a compensation plan is
already in place. Therefore the builder might not pay the full commission to your real
estate agent. You might have to pay something out of pocket. But it is worth it.
Too many investors buying is bad.
Some builders will sell to owner-occupants only. Investors need not apply. If a
development has more than fifty percent investors, there is a problem. You will be faced
with hundreds of renters. The turnover could be high, which causes the community to
have a transient feeling. A true neighborhood never flourishes.
Hire a home inspector.
Always have your house inspected by a licensed home inspector. The house might be
new, but the contractor are not perfect. Mistakes are made.
Buying A House From A Builder: Tips That Will Put Cash In Your Pockets