How to Negotiate in New-Home Sales

African American couple (20s) standing in house under construction talking with builder (30s).
When it comes to new construction homes, there’s a lot that you can negotiate with the builder on behalf of your buyer.

Most experienced Realtors have developed negotiating techniques to support home sellers and homebuyers when handling a resale transaction.

These techniques include things like scheduling a mutually agreeable settlement date, a possible rent-back for the seller, which items will transfer to the owners, closing cost assistance and, above all, the home price.

But when it comes to negotiating on behalf of a buyer of a newly built home, some of the tried-and-true points to discuss are simply not part of the transaction. And, depending on the builder, local market conditions and the phase of development of a community, even the home price may not be on the table.

Realtors with experience in new-home sales have learned to negotiate a better deal for their customers by developing skills that cater to both builders and buyers.

“Each builder has a different way of going about negotiating,” says Randall Hix, a broker and sales associate with Coldwell Banker Residential Brokerage in Morristown, N.J., and a former sales and marketing director with D.R. Horton and K. Hovnanian Homes. “Realtors need to understand how to negotiate with builders and understand that builders have a structured process for negotiating.”

Price Negotiations

There’s no rule that says buyers can’t ask for a lower price for a new construction home. In fact, in some markets, it’s as common with newly built homes as it is on existing homes to ask for a reduced price.

“When a buyer asks me what I can do for them, I tell them that I can usually shave one or two percent off the price of the home based on comparable sales,” says John Bolos, broker/owner of Century 21 J. Bolos, a real estate agency in Columbia, S.C. “The best time to ask for a discount on price is at the beginning of a development, because builders want to get some residents in place as soon as they can. You have to be willing to live with the construction mess, but you’ll usually build equity pretty quickly.”

Bolos says that some builders automatically increase the price by $1,000 for each new home they build in a community. As a result, by the time the 50th home is purchased, the price is $50,000 more than what the first buyer paid. He says that some builders’ sales agents are also willing to negotiate on price when they are near the end of a fiscal year because they want to get some extra homes off their books for the next year.

“Realtors need to find out what the builder’s price is based on and find out if the builder is willing to negotiate around price before starting to negotiate,” says Hix. “In order to gain the respect of your clients and the builder, you need to know the builder, the sales people and the comps so that you can negotiate from a position of strength.”

Hix says buyers should be educated about what it’s like to negotiate with a builder so they’re not disappointed if the builder says no.

“Many builders don’t want to negotiate deal by deal and some don’t negotiate at all because they’ve included everything in the price and have priced their properties well for the market,” he says.

Realtors with experience in new-home sales have learned to negotiate a better deal for their customers by developing skills that cater to both builders and buyers. Elizabeth Lucchesi, a Realtor with McEnearney Associates in Alexandria, Va., says that price negotiations depend on whether the builder is competing with resales in that particular neighborhood and on the delivery schedule of homes.

“If the builder has a home that’s ready or nearly ready for move-in, they may be more willing to adjust the price in order to avoid carrying the expenses of that house for a few extra months,” says Lucchesi.

Building Relationships for Better Negotiating

Hix says that most builders have programs with incentives for buyers such as closing cost assistance or the inclusion of some optional features for buyers who use a preferred lender and closing company. He says Realtors should stay up-to-date on current incentive programs and talk to builders’ sales representatives frequently so they know about potential negotiating points within those programs.

“I try to always work with the same sales representatives from each builder, even if they’re not working at the community where my buyer is looking,” says Bolos. “You get first-class service when you become committed to working with a particular agent and developing a relationship. I’ve worked with some to sell as many as 20 homes.”

Lucchesi says she always asks sales representatives about incentives for buyers and any time window or requirements that buyers need to meet to take advantage of those incentives.

Non-Price Negotiations

“Builders are numbers-driven, so it’s usually easier to ask the builder to provide extra features rather than change the price,” says Bolos. “The client can get something like hardwood flooring in more rooms or better appliances, but the builder can still hit the number he wanted for the transaction.”

Realtors can negotiate with the builder to pay transfer taxes, property taxes or insurance costs as part of the closing to reduce the amount of cash buyers need to bring to the table, says Lucchesi.
“It’s pretty common for builders to offer something like a finished basement or an upgraded kitchen or bath, but Realtors can negotiate around those items and ask for cash instead if that’s their buyers’ preference,” she says.

Hix says builders are sometimes willing to delay a closing to allow buyers to sell their home or will agree to let buyers space out their deposit payments over time to make it more affordable for them.

“The most important thing a Realtor can do is to know their market and make a well-based argument for anything they’re asking for, rather than just throwing stuff against the wall to see if any of it will stick,” says Hix.

About the author 

Michele Lerner

Michele Lerner is an award-winning freelance writer, editor and author who has been writing about real estate, personal finance and business topics for more than two decades. She writes for regional, national and international publications in print and online for a variety of audiences including consumers, real estate investors, business owners and real estate professionals. Her work has appeared in The Washington Post, The Washington Times, Urban Land magazine, NAREIT’s REIT magazine, National Real Estate Investor Magazine and online at Bankrate.com, HSH.com, The Motley Fool, DailyFinance.com, Insurance.com, Fox Business, MSN, Yahoo, Investopedia.com, MoneyCrashers.com, GetRichSlowly.com and in numerous state and local realtor association publications.

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