Austin area Realtor, Sam Sheikh, shares 6 tips to get the best deal when buying a new home from a builder.
1. You’re better off getting a Realtor!
Going to a new home builder thinking you can save the Realtor’s 3% commission is ambitious. Realtor commissions usually come out from a separate bucket. Help and guidance from a Realtor skilled and experienced in negotiating with builders will almost always get you a better deal.
2. Be willing to walk-away (multiple times)
It’s extremely important not to show emotion in the sales office but rather to be strictly objective, and to gather information in order to leverage yourself in negotiation. The sales counselor must know that you are not attached to the property and will shop around until you get what you want at the price you are comfortable with. Being willing to walk away is essential. Sam once gave firm requirements and walked out with the clients. The builder called back 3 days later to negotiate.
3. Ask for builder CMA
CMA stands for Comparative Marketing Analysis. When Sam is working on a new build home contract, after the client selects the home they want along with the upgrades, he requests the builders to provide a CMA on that model to ensure that the home will get appraised. In most builder contract clauses, it requires the buyer to come out of pocket to make the difference in appraisal value if it comes in lower than contract price. Most people don’t know this as it’s the opposite when buying an existing home. Requesting recent new home sold comps, not only protects the buyer but also helps in knowing if there is room on the table to negotiate further, and not over pay. Sam recommends never paying $1,000 over the last sold comp with the same exact upgrades as the builder’s reasoning is prices go up periodically. Ideally, Sam tries to get the builder to match it.
4. Negotiate upgrades
Usually, builders have significant design upgrade selection credits available to sign the deal that day. On top of this, if you stay firm, you can often get away with one or two additional items. Be sure to negotiate category of materials up front. Builders will give you a specific category of wood or counter top and ask you to make selections in a Design Studio later. Often times when you go to the design studio, you want a better category of material and you will have to pay extra. Ask upfront for each upgrade how many categories of material there are and negotiate a higher category so there are no surprises later.
5. Negotiate lender
Most builders have affiliated lenders that they refer to who also offer incentives such as paid closing costs, etc. On one transaction, Sam’s buyer’s main concern was the interest rate. Sam made his buyer contact another lender, and requested to compare apples to apples and the other lender ended up matching all the incentives and giving an additional sum in buyer closing costs. Always have at least two lenders compete for your business.
6. Give them your firm criteria of what you want!
Remember, everything is negotiable. Demand what you want, but be realistic. Ask for extras to further sweeten the deal. Sam was able to get one of his new build clients the first year’s HOA fees credited on top of significant upgrades, negotiating lower earnest, premium lot and overall price reduction.
Sam Sheikh is a home selling specialist serving the greater Austin, TX area. He is a savvy negotiator with his clients’ interests at heart, whether they are buying or selling. When searching for a Realtor, ensure you find one that goes to bat when it comes to negotiating.