How to Negotiate New Construction Homes in a Buyers' Market

Purchasing a new home in a slow market offers numerous advantages for the prospective buyer.

The term "buyers' market" is used by real estate professionals to describe a time when buyers have an advantage over home sellers due to economic conditions creating a housing glut of unsold residential units and condominiums. New homebuilders have the ability to adjust home prices, offer a variety of upgrades, or modify the features on a new home to better meet the buyer's needs. Buyers with a planned negotiation strategy end up with a new home at a reduced price and typically with a few extra features.

Things You'll Need

• New home brochures
• Area new homes feature lists
• Area resale homes comparative sales reports

Instructions

1. Shop the new home market in your area and collect brochures, features lists and base-price lists for the homes. The lists provide a reference of prices to begin your negotiations.

2. Make a wishlist of new home features and rank the most important structural components and optional features according to your wants and needs.

3. Narrow your new home search to one or two builders and visit the building sites to determine the availability of lots and the status of current construction. The unsold inventory in the eastern American states typically increases in the winter months and declines during the summer. Builders negotiate the largest discounts on completed homes, known as "spec homes," that have been left unsold for a number of months. Tour these homes to determine how closely the offerings meet your wishlist.

4. Make a spreadsheet that includes a price list for the desired home features. Use categories for each builder and list the cost of each home feature next to the construction company. This helps determine an overall price for the home best meeting your needs. Fill in the prices for similar features for each of the developers on the same line. For instance, on the first line list the price for standard kitchen cabinets for each builder. On the next line note the price each builder charges for kitchen cabinet upgrades, if this feature is important to your purchase decision. Add price information from the current completed homes available from each builder if you have some flexibility in your model selection.

5. Visit the builder's site agent and make an appointment to negotiate an offer for your target property. Set aside a time for uninterrupted negotiations and request that the meeting include a representative with the power to adjust pricing. At the meeting, ask the builder to contribute upgrades, such as kitchen appliances, higher-quality cabinets, a fireplace and wood flooring, to improve the price for your new home.

Tips & Warnings

• Inquire about builder partnership programs with mortgage lenders. The discounted lending fees, interest rate or possible contribution by the builder to the buyer's down payment can add significant advantages when selecting your new home.

• Obtain all agreements for discounts, upgrades and offers for mortgage discounts in writing. A written offer and signed paperwork agreeing to the terms eliminates any confusion or misunderstandings in construction or during escrow.

References

• Wall Street Journal: Consumer Finance -- There Are Upside to New Construction, If You Can Stomach the Price
• Bankrate.com: 4 Tips For Buying a House in a Buyer's Market
• Bankrate.com: Haggling Over Price of a New Home
• NOLO: Newly Built Houses -- Pros and Cons of Buying
• Washington Metro Realty Council: New Homes in Northern Virginia and Maryland