Purchasing a model home is similar to purchasing a car that has only been driven for test drives: In most cases, you can expect a discount.
Here are some strategies for negotiating the best price on a model home with a builder.
Important Points to Remember
- A model home is a sample home that showcases a builder's home in a new subdivision's design, layout, craftsmanship, and creativity.
- Although model homes are typically used to sell other properties in the neighborhood, you can also negotiate to buy one.
- When negotiating a model home, make sure you research the builder's reputation and have your own legal representation.
Inquire about all of the available model homes
Builders frequently sell homes before they are built, based on the layout and design of the model home. It's only natural that they want the model to look its best, so they don't skimp on the decorations. Most model homes have free upgrades, designer paint, and designer window coverings as standard.
Please make a point of seeing them all before deciding on the model with the best upgrades, layout, and location.
Employ Your Own Agent
When you visit the sales office of a new housing tract, bring your buyer's agent with you. If you arrive unaccompanied the first time, some builders will refuse to let your agent represent you. Most buyers have no recollection of signing anything because salespeople are so efficient.
Be aware that, regardless of what the builder's sales agents may tell you, they are paid to represent the builder. Many will try to persuade you to sign a contract by using high-pressure tactics. Your own agent will represent you as your fiduciary, which means they have a duty to watch out for you and represent your interests. They must reveal both the benefits and drawbacks of the deal.
Inquire as to whether the model home has been occupied in the past
This does not necessarily imply that someone lived there. Find out if the house was ever used as a sales office, and if so, how long it was used for. The kitchen appliances are unlikely to have been overused, but the bathroom fixtures may not be in perfect condition.
You can use this information to argue that the home isn't as new as it once was and thus is worth less.
Examine Sales Comparables
If the builder does not list on the Multiple Listings Service (MLS), your agent will be unable to obtain comparable sales. A title company can still provide you with hard data. However, it's possible that you won't be able to tell which homes came with which upgrades. The advertised sale price is meaningless.
Check to see how many deeds were sent to the address on the property. How many were sent to other addresses? Based on this information, some of the homes may be owned by investors. One of the reasons you're buying in a new subdivision is to be surrounded by other buyers rather than tenants when the market declines because investors are frequently the first to leave.
Before signing a contract, seek legal advice
Before you sign, have your contract reviewed by a real estate lawyer. Standard purchase agreements are intended to keep everyone out of court, but they may or may not include language protecting the buyer. The majority of these contracts, which can be 100 pages or longer, protect the builder.
Take into consideration using your lender
Builders frequently prefer their lenders because they will be kept up to date on your progress. It's like a one-stop shop for the contractor. However, a builder's lender may not be able to provide you with the best loan or interest rate. Furthermore, the lender may be owned by the builder. Request lender recommendations from your agent.
Invest in a home inspection
Hire a qualified inspector, not your uncle or a contractor friend. Get a real inspector on the job. Ask questions and be present during the inspection. Even a brand-new house can have flaws. It's possible that the HVAC system is too small, or the plumbing is installed backward. Construction workers are human, and they can make mistakes.
Look into the reputation of the contractor
When a buyer has a poor experience with a builder, word spreads quickly throughout the community. Still, you won't know whether the bad rep is an isolated incident or if the builder's corporation regularly brings bad publicity to itself. For lawsuits, check and double-check public records.
Negotiate the Model Home Furnishings and the Price
It's standard practice to leave the model home's furnishings in place. If you ask, the furniture, wall artwork, and knickknacks are frequently kept within the house. Make it clear in the contract that these items will remain with the house regardless of consideration or warranty.
Tip: Don't be scared off by a builder's agent who says the price is set in stone. Rarely is a price set in stone. Negotiate from a strong position. Seek advice from your agent. Builders are frequently willing to work out a deal.
Attempt to purchase the last model home available.
The best deals are frequently found at closeout sales, and if you purchase one of the final models, you won't need to worry about whether the other homes that were promised to be built in the community will actually be constructed. They are, after all, already built.
There's also no need to be concerned about future new home sales, which may be at lower prices, lowering your market value. If at all possible, choose the most recent model.
Most Commonly Asked Questions (FAQs)
What is the price of a model home?
If the model home has been heavily used before you purchase it, you may be able to negotiate a discount to compensate for the wear and tear. Remember that everyday wear and tear may call for home repairs or replacements, which could reduce the amount you save from the sale.
When purchasing a model home in a new development, is it necessary to hire a real estate agent?
A buyer's agent isn't required to purchase a model home, but you'll almost certainly want one. An agent will look out for your best interests, and they can protect you from problems with the house that an inexperienced eye might overlook.