Negotiation on new homes

May 23, 2005 2:14 PM

Is it possible to negotiate prices on a new construction -- specifically, a small-to-medium builder in a somewhat-hot market (Raleigh NC)?

We don't have a buyer's agent, which would make such negotiation more difficult for us amateurs but also reduces the builder's costs by 2-3% (assuming they would have paid the agent fee). We'd be expected to put a contract down before picking options (including major options like a basement), so there's the worry that if we did negotiate they'd just bump up option prices to compensate. There's plenty of competition from big builders in the area, but not many other options for this type of thing (~1-acre wooded lots, $~350 base price), unless we go for buying our own land and a very small custom builder, which seems more expensive and difficult, especially as we're not local; moreover, there's only 1 decent lot left in this particular neighborhood, so we don't have a tonne of leverage if we decide this is what we want. How should we approach this -- and what should we shoot for, if anything?

posted by SeanCier to home & garden (3 comments total)

Is the lot tied to the builder? I would guess at this moment in time you have little to no leverage. Instead consider how the home can be modified so that you cando with less for now (e.g. a basement would not fit into this approach although a finished basememt would.

Materials are expensive right now, margins are thin and labor is hard to come by.

A lot of good, small architectural practices can be found in the area. You sound like you might be a candidate for one.
posted by Dick Paris at 2:43 PM on May 23, 2005

This sounds like you are in a market that isn't going to prove particularly flexible.

I've built a couple of houses and sold quite a few more and this business of forking over a down payment without so much as a floor plan makes me leery. I know that it is common, but the horror stories are proportionate. Worst case, you could find yourself locked in (or priced out, they are the same in the end) to a home you wouldn't otherwise choose.

Without knowing the specifics or if you have a compelling reason to live in this particular development, my advice would be to look elsewhere. You lose any leverage that your money would otherwise entitle you to by buying into an area that is in such high demand. There is no incentive for the landowner or builder to work with you -- if it falls through, they have a list.

Myself, I'd take a compass, draw a five (or ten) mile circle around this location and start hitting up brokers.

This is your home. This is better than a quarter of a million dollars (sound like a whole lot, put that way) and you should not be dependent on the whims of any particular contractor. The builder isn't going to lose, if your deal heads south at the last minute he can always buy you out and sell it as a spec house later. This is a no-win for you.
posted by cedar at 3:05 PM on May 23, 2005

I think Cedar has nailed this one. I can't really add much to it except to say that high demand areas are never the place you want to go at the end of the building cycle. Things get more slapshod the closer they get to taking the money and going. When you're one of the first people in, they'll pamper you like you gave birth to baby Jesus...because you can destroy them with bad publicity. By the end, they've already sold everything, there's nothing you could do to them from a large scale financial picture. Suits against builders can take years and years and they have armies of attorneys.

And if you don't know anything about construction, you're going to get screwed. You may not know you've been had...but trust me, they will cut all the corners they can, if they know you're not going to be on site every day checking up on them. You wouldn't believe the sheer amount of stuff I had the builder tear down and redo because they did it wrong, or used the wrong tile/wood/windows/door/etc. They waited until they knew I'd be gone for 4 days and laid the floor and hung walls...hoping that when I came in to inspect, I wouldn't notice that they'd used laminate (about 2.00 a square foot) vs the sand and stain hardwoods I'd paid for (8+ a sqf). Because the walls were in, it couldn't really be changed...but I wouldn't have gotten a refund on the floor if I hadn't known what I was looking at. Same thing in the bathrooms...they hung regular drywall in the bathrooms instead of the water resistant/mold resistant drywall that is code in new houses. I made them tear the bathrooms out and do it again. Windows, walls, I swear to you, they built my house 4 times before I was willing to consider it finished...because they did it wrong, over and over and over again.

If I had been the last house, instead of the first house...I would have been *so* screwed.
posted by dejah420 at 8:05 PM on May 23, 2005