How to Negotiate With New Home Builders


Building a new home involves negotiating the terms of a contract with a home builder. Some builders provide a homework list to potential clients. This list collects specific information about fixtures, appliances and other elements that affect the total cost. Use this list as a starting point to understand your costs and do some preliminary pricing research. Understanding each factor that generates a cost and maintaining control of cash flow are essential to minimize expenses.

Building a new home presents several negotiating points that factor in to the final cost (Reference 1). Some points involve material expenses, labor expenses, the time frame for the project and even bartering.

  • Get an estimate from the builder that breaks down the cost of all the elements of your project including materials, labor, licensing, permits and other expenses.

  • Tell the builder that you are willing to purchase the materials out-of-pocket to reduce the total of the estimate. Purchasing materials yourself gives you control over how material expenses are applied. Purchasing materials out-of-pocket can eliminate mark-up costs and avoid overly generous material purchasing. Verify that the builder does not have significant discounts with suppliers, before agreeing to purchase materials out-of-pocket. Visit suppliers' showrooms on your own and price your selections (Reference 1).

  • Offer to complete some of the work yourself. Some home-building tasks are time-consuming but don't require a great deal of skill. Taking on some of the builder's responsibility can remove entire days from the project bid, and potential eliminate a full week of labor costs. Some basic tasks include varnishing the floorboards or crown molding, attaching electrical face plates, installing window screens and painting.

  • Ask the builder if extending the term of the project or changing the start date reduces the cost, and give him the option to spend more time on your project. Extending the term gives the builder more time to work on other projects and run multiple operations at the same time. However, do not extend the term for builders who are not well established, because it may lead to non-completion or other complications.

  • Use your business, professional skills or relationships to bargain for a better deal. Homebuilders need to take on new projects and promote their services. Offer the builder leads if you know people who are going to build a home soon. Offer advertising space in front of the building site or other properties for your builder's signs. Offer the builder something he can use to develop his business. Barter with your professional services or services you can get from someone with whom you have an established relationship. Accounting, medical, legal, photography, promotional, graphic and interior design services are just a few examples.

Tips & Warnings

  • Find out what kind of warranty the builder offers.
  • Document all changes that occur during the construction.
  • Create leverage by getting bids from multiple builders
  • Let an attorney review the final contract before you sign it.

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  • Photo Credit Bathroom image by Nikolay Okhitin from
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