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Buying a New Home from a Home Builder

Updated on July 7, 2009
Photo by Bergeron Photography, New Orleans
Photo by Bergeron Photography, New Orleans

Buying a new home from a builder first means deciding on what type of new you want. Do you want a completely custom home, a semi custom home or a production home? Besides the obvious decisions like location, will you take a standard plan with builder's grade materials or do you want the best of everything. If you do, be prepared to pay. Most builders actually make less profit on a completely custom home but you also have little room to negotiate. Top builders will give you his price and unlikely will discount from that. On the other hand, if you are buying a production home, there may be considerable room to negotiate.

Learn everything you can about the builder. Ask the builder for referrals from his buyer list. Search the Internet completely. Call the home builders association. Is he even a member of the association? Search the Better Business Bureau on the Internet or call them.

You should also learn as much as you can about the local market at the time you wish to buy. If is a buyer's market or a seller's market? Is a particular neighborhood hot or selling slowly? Does the builder have one or two lots he needs to build on to close out that development? Knowledge is power going into a negotiation. And buying a house should be a negotiation.

Look at buying a new home in the same way you would buy a used home. Strongly consider hiring a buyer's agent to negotiate for you. If the seller will not pay his commission, then add it to the price of the home. You may come out ahead in money and certainly will in time, but hire an agent who is willing to work for you. Your agent will be responsible for uncovering and disclosing any defects to you.

Get pre-approved for a mortgage just like you would if you were buying a used home. The builder often has a preferred lender and there may well be a financial reason for that. Shop for your mortgage just like you would for a used home mortgage. Get this out of the way before you start negotiating for your home.

Use a good real estate lawyer. Remember this is the largest purchase of your lifetime and you are signing legally binding agreements. Have a lawyer review them in the same way you would have any important contract reviewed. Your agent may be able to suggest a lawyer.

You or your agent should try to negotiate directly with the builder. You may not be able to do so with a large builder. If you are buying from a local builder, even one who builds a hundred houses a year, you may well be able to. The easiest deal points are the upgrades and any changes you want made to a standard house plan.

The longer a house has sat on the market, the easier it will be for you to get a better deal. Find out when the house was finished. If it has sat long enough, the builder may have little or no profit left in it but he needs to get the construction loan off his books. The costs are eating into his margins every month. Don't settle for a price list; everything is negotiable with a house that is sitting unsold.


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    • shibashake profile image

      shibashake 8 years ago

      Some really good advice.

      I did look at some new homes when I was house-hunting a year ago, but I found that the new homes were not in as good locations as older homes. Most of them were in large housing projects, and in this economy many of them will be sitting empty. It could be a decent investment, but for a house I am going to live in, I prefer the older homes that already have nice established neighborhoods around them.