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Negotiating the Price
Does the builder negotiate on the price?
That depends, but often the answer is no. Builders hate lowering the price because, unlike preowned home sellers, they often own many if not hundreds of homes in the same neighborhood. Lowering the price on one lowers it on all of their homes.
Occasions I’ve seen a builder negotiate on the price are:
- Existing inventory (i.e. completed homes) that have been on the market without selling for a while
- It is one of their last few homes in a neighborhood
Custom builders or to-be-built homes almost never negotiate on the price. You are paying extra to get exactly what you want in a home, and you are likely going to be paying full price for it.
The Process
The process for writing a contract may depend on the type of builder you are working with. Generally, you will meet with the builder or their sales associate in person with your agent to draw up the contract together. You can then negotiate in real time for any concessions.
Concessions
In the Fort Hood area, it is common to get fairly generous seller concessions from sellers, including builders. Seller paid closing costs, owner’s title policy, and survey are often contributed.
Especially large builders may have an in-house title company or lender that they work with, and make the seller paid closing costs contingent on using their own preferred lender.
Lastly, builders may have an upgrade budget or may be open to negotiating upgrades (instead of the price, which they are loathe to negotiate). Common items that are often not included in standard builder packages but worth asking for and negotiating for are:
- Refrigerator
- Garage door opener
- Front and back sod
- Landscaping (shade tree in front/back)
- Sprinkler system
Builders can even use closing cost concessions on things not related to the house, like paying off your car mortgage. It is worth consulting with your agent about what is important to you, and what is likely to be negotiated from the builder. Again, custom builders often have the least flexibility when it comes to negotiating.
The Contract
Many builders have their own contracts. This is especially true of larger national builders like D R Horton or Centex. These contracts often have a lot in common with local contracts, but still, consult your agent or even a lawyer with questions.
Other builders may use the TREC/TAR contracts for incomplete construction or completed construction.
Other builders may use the Texas Association of Builders contract.
These contracts usually have a lot in common with the typical resale contract, but often with more specificity regarding how the home is constructed. Often the closing date, if it is specified at all, is a distant date well after the estimated completion time in case the building time runs over.
The Inspection Period
Unlike resale contracts, builder contracts seldom include option periods. That does not mean that you can’t or shouldn’t get an inspection. You absolutely should! The builder is required to build the home at least in accordance with the local building code. Having a third party inspector verify that is the best way to ensure you are getting the quality.
You can even have an inspector inspect at various stages of construction for a to-be-built. They can insect the foundation, the FEMP (framing, electrical, mechanical and plumbing), insulation, and a final inspection after completion.
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