Making An Offer On A New-Construction Home

Older homes may offer character and charm, but more than 60% of U.S. buyers prefer new-construction homes. For other buyers, both new-construction and existing homes are viable options, with both offering benefits and drawbacks.

One of the challenges of buying new-construction homes is that it tends to be more expensive than buying an existing home, which leaves some buyers wondering whether it’s possible to successfully negotiate on a new build.

What Is A New-Construction Home?

A new-construction home is one that’s just been built and hasn’t yet been lived in. There are several types of new-construction homes, such as custom builds and spec homes.

A custom home allows buyers to choose specific finishes, such as flooring, cabinets and other finishes. Spec homes are built with the speculation that a buyer will purchase the home and the builder will turn a profit.

How To Make An Offer On A New-Construction Home

Making an offer on a new-construction home is similar to making an offer on an existing home. However, it’s important to do your research on the builder and take a few other key steps before you put your offer in writing.

Find A Reputable Lender

Once you know where you want to live, you should first connect with a reputable lender that will help you understand how much house you can afford and the type of mortgage you qualify for. They may provide multiple financing options, and they’ll guide you through the process from application to closing.

Work With A Local Real Estate Agent

After you’ve selected a lender, it’s time to choose a real estate agent who has experience working with new-construction homes in the area where you want to buy. Your real estate agent (who might happen to also be a REALTOR^®) will represent your interests throughout the home-buying process, such as during the contracting and negotiating stages.

Research The Builder

Along with seeking a lender and real estate agent that both have a solid reputation, you’ll want to take the time to find a reputable builder. A new-construction home isn’t necessarily flawless, and it’s important to work with a builder who’s known for constructing quality homes and standing by their work.

A quick internet search should tell you about the builder’s reputation, the quality of the materials they use and the experiences of others who’ve purchased from the builder. You can also look at the Better Business Bureau (BBB) to see if the builder is accredited and has complaints and reviews from customers.

Visit Model Showrooms

Once you’ve done your research on the builder, take some time to visit model showrooms to explore your options. A builder’s showroom will give you a better idea of the floor plans and finishes they offer, which can help you decide if the builder’s style is right for you.

Decide How Much You Want To Offer

Rather than telling the builder you want a discount, think about how much you’re willing to offer. It’s wise to choose a number you can realistically afford but that the builder will take seriously.

Your lender will help you understand how much you can afford, and your agent can help you come up with a number that’s competitive and realistic. Before making a formal offer, remember to include the closing costs and down payment in your calculations.

Put The Offer In Writing

With a preapproval letter in hand and your real estate agent by your side, you’re ready to make an offer. In some cases, the builder may have their own contract. If they don’t, you can speak with your real estate agent or a real estate attorney about drawing up a purchase agreement.

The contract will include your name and contact information along with the builder’s contact information and the terms of the agreement, such as the purchase price, deposit amount, contingencies, and the settlement and possession dates.

Before signing the contract, be sure to carefully read through and understand all the terms. If you have any questions, don’t be shy about asking your real estate agent or lender.

Can You Negotiate On New-Construction Homes?

Are new-construction home prices negotiable? In some cases, a builder may be willing to negotiate on the price of a new-construction home. However, if it’s a seller’s market and homes are in high demand, the builder may not be willing to consider budging on the price.

Even if you can’t negotiate the price of a new-construction home, you might still be able to negotiate for some valuable upgrades, such as premium cabinets and countertops or even an extra bathroom.

How To Negotiate A New-Home Price With The Builder

Negotiating a new-home price with the builder can be like playing chess. You’ll need to be strategic, think ahead and possibly even sacrifice some of your must-haves in a home to get something more important in return.

Here are five tips for negotiating the price of a new-construction home.

1. Understand The Market

Understanding the housing market is paramount when negotiating a new-home price. Does the market favor sellers or buyers? Are a lot of other new-construction homes available in the area where you’re looking? How motivated is the home builder?

The more you know about the market in the area where you want to buy, the better your chances of successfully negotiating the price of a new home.

2. Get The Timing Right

When you make your offer can be almost as important as the amount you offer. For example, successfully negotiating in May or June during peak buying season will likely be much more challenging than doing so in December when the market typically slows down. Builders may also have sales deadlines toward the end of the year, potentially making them more flexible on their price.

3. Control Your Emotions

Though it’s normal to feel emotional when buying any house, it’s a good idea to keep your emotions in check when negotiating with the builder. Home builders are businesspeople, and so getting too emotional about a home might give them the upper hand in your negotiations. When you control your emotions, you can think clearly and maintain a more level playing field with the builder.

4. Be Willing To Walk Away

Walking away from your dream home can be hard, but it’s sometimes one of the best negotiating tactics. When you walk away, you have a distinct advantage because the builder must come back to you with a more attractive offer if they want to continue negotiating.

5. If You Can’t Negotiate On Price, Ask For Other Incentives

Many home builders are unwilling to bend on their price because they want to keep property values in the area higher and prevent prospective buyers from buying at a discount. Real estate transaction data, such as the sales price, is typically public record. So, if you get a discount, other buyers may see that and use it to negotiate.

If asking for a lower purchase price doesn’t produce your desired outcome, see if the builder is willing to offer other incentives, such as a credit at closing, upgraded finishes or an extended home warranty.

The Bottom Line: Be Strategic When Negotiating A New-Construction Home Price With A Builder

Successfully negotiating the price on a new-construction home is possible, but whether it happens will depend on the builder, the home and the specific situation. New-construction homes are often very desirable, pushing prices higher and making it harder to successfully negotiate. Though you might not get the discount you’re looking for on a new home, you may still be able to take advantage of other builder incentives – particularly if you know the market and get the timing right.

Looking for a trusted lender to partner with on your new-home purchase? Start the approval process today with Rocket Mortgage^®.