Is the price of an unbuilt home negotiable?

Question

I am looking to buy a new home sometime between next spring and a few years from now and I am wondering if the prices of a home built from a plan is negotiable, I have been looking at the prices of many different home builders and it seems that some builders have a much higher cost for a similar home in the same area. I am just wondering how negotiable these prices are, I know that buying a home that someone already lives in is quite negotiable but how negotiable is it with a new house? This will be my first home. Is there any ballpark percentage range that could be a decent rule of thumb as to what can be expected?

Answer 1

Theoretically, yes.

On the other hand, in anything but a full on buyer's market, the developer will likely tell you to pound sand or take a hike. The home isn't even built yet, and you want them to write off some of their usual margin? Not very likely.

This situation turns 180 degrees, though, if they have a finished unit sitting unsold. They've already paid for it, and now they need the money to pay for that to come in.

Of course, in the first situation, you're dictating all of the custom features (and paying for them, of course). In the second, you've got what there is, whether you wanted more, less, or exactly that.

Answer 2

It depends quite a bit on how hot the new housing market is in your area - and also on the cost of raw materials at the time the house is actually being built.

If the market is down, you may be able to leverage for a lower price, or more likely, some free upgrades.

If you are looking to buy a spec home in a development, the price is not really negotiable, they can raise it, but if they lower it, the other owners who purchased at the higher price can sue. Again, though, you can ask for freebies or perks.
You're right, there always seems to be a huge difference between the cost per square foot of one homebuilder and the next. Higher price doesn't always equal a better product though.

If you are looking for the best bargain, try to find a builder who only builds a few different plans, and doesn't allow many substitutions or changes. These builders are usually cheaper, because of lower overhead, and also the final cost can come in much closer to the original bid.

There are also many ways to save $$ with most homebuilders - doing your own excavation, rough electric and plumbing (you contracting the work), also doing the paint and cleanup work - many homebuilders allow this, and it can save you money if you do your homework -- and have the time!

One thing you'll really want to research is the BBB and Homebuilders association in your area - after you narrow your choices down to a few builders, ask if they have references you can call.

I don't know if it's still true, but for awhile, the majority of claims in small claims court were against building contractors.

Bottom line? Pick the builder you are most comfortable with, and that you feel can do the job properly. Saving $20,000 on a $300,000+ project isn't worth all the pain, suffering and frustration that can come from a sub-par builder!

Answer 3

A little research should be a big help. Decide on what you want. Look around at similar homes on the market and what the asking price is. Check on general construction costs. There is a general figure for a rough price estimate. I don't know what is it today, but it's like $XX.XX per square foot. Find out what the square feet is in the home you want and you will have a starting figure. If times are good and contractors are busy, they will bid higher. If times are slow, they will possibly bid lower.

Don't try to get something too cheap. This will only make the contractor cut corners and deliver a poor product.

Of course, deal with a well respected contractor.

Answer 4

Yep. Everything is negotiable. (Cuz, you know you could always offer more than they are hoping for.) However, if you want a better deal, you need to try to find out how much wiggle room exists in the situation you are interested in. This will really depend on the builder, the market and the date. No one wants to lose money, but even a builder will sell a home at a loss if they think they are going to lose more money if they hold on to the home.

Answer 5

Typically I'd expect them to take a hard line since if they lower price for you might need to do so for others. Other people could find this out via internet these days, too.

On the other hand, home sales are slipping so they might be more flexible.

Answer 6

Totally, in fact, as housing market slumps, you can negotiate more on new homes than existing homes. Builders are business that will want to unload their inventory without a heart beat, as individual home owners tend to hang on to property longer affected by their emotions.

Check the following link for negotiation stuff:

http://biz.yahoo.com/brn/060909/19463.html

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http://money.cnn.com/2006/09/08/real_estate/caught_in_the_bubble/index.htm?postversion=2006090814
http://money.cnn.com/2006/09/05/real_estate/Ofheo_home_prices/index.htm?postversion=2006090514

How to value a property during market downturn?

Housing market continues to slump. Now we can calculate true value of a property easily. As price decline, we don't need to guess and factor in the potential price appreciation while calculating home value. Without the guesswork, figures are more accurate.

Let's use following example:

Today, a typical 15 years old, two bedrooms condo/townhouse is priced around $500,000 and $550,000 in Sunnyvale, California. Rent for similar condo/townhouse is $2000/month.

If you are a home owner, $2,000/month in rent means $20,000 a year in profit ($24,000 per year in rent, minus $4,000 maintenance costs). A $20,000 income is equilevant of owning $400,000 bonds or CDs, because current yield of 30 Years U.S. treasuries are 5% (5% of $400,000 is $20,000). Bank CDs have similiar yields.

In our example, the two bedrooms condo/townhouse is 20% to 25% overpriced. They should be priced at $400,000.

It is interesting to note that if we redo the calculation from buyer's perspective instead of seller's perspective, the figures are even more shocking.

Mortgage payment consists of two parts: mortgage interests and mortgage principal. The interests portion is similar to rent. If you pay interest, it disappears and doesn't add equity to the property. To fully simulate characteristics of renting, we assume buyer will apply for a zero down, interest-only loan.

It turns out that rent of $2000/month is equivelant to mortgage payment of a $340,000 loan at 7.0% APR. And comparing $340,000 loan to $500,000 or $550,000 price tag, from buyer's view, the two bedrooms condo/townhouse is 30% to 35% overpriced.

One may ask, why is there a discrepancy between two perspectives of the buyer and owner?

The discrepancy is a result of 2% differences in interest rate that buyer borrow comparing to yields of bonds and CDs that owners would get. We understand that buyer would always pay more. That is the premium of buying to own. However, looking from home owner's perspective, current housing market is probably 20% to 25% overpriced. We recommand investors to wait for a better entry point.

Answer 7

Yes...everything is negotiable.

Listen to Roger Dawson tapes and learn...............

Answer 8

thx for the answers EVERYONE <3