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We bought at the end of a development's construction and got $40k of the asking price pre-build. I am pretty sure it annoyed all the people who bought a year earlier before the market went seriously south, but we had a good realtor who checked comps for us and negotiated the deal. I would definitely plan to negotiate, and to get a good realtor to help you. The nice thing about realtors is that they know the builders in the area and how things are selling and who may or may not have room to negotiate, etc.
Unless you are just a bad negotiator, an agent isnt going to magically make them lower their price more than you can. A buyers' agent isn't always free, because there are ways to get some of that commision back. You should look into this before you decide whether to go with an agent.
You should look at recent sales in the neighborhood or in similar comps in other nearby neighborhoods. Look up appraisal rules to replicate how an appraiser would do it - average price per square foot, adjust for things like 1 or 2 car garage, significantly better lot, porches and decks, etc. Show the sales agent that you have done your homework. Many are still in denial about the housing price drop. Also show that you are not emotionally attached to the house, make sure they know that you are considering other options at good prices.
The above poster is correct - builders dont want to bottom out their price because that will hurt them in the long run, but they will be more inclined to deal on structural and finish upgrades. Some builders make 70% profit on some upgrades, so you have a lot more room to take them down rather than the house, because some builders are listing almost at cost on the base house. Ask to see options prices before you make an offer. They might not let you take it with you but you should walk out if they wont even show it to you. Also, lot premiums are just free money for them - should be the easiest thing to get rid of. If you give them an offer that ignores any lot premium and is something like 5% above list price offer and stipulates upgrades that at list price would be worth 30% of the list price house and attach a big earnest check, I think this will be very tempting for most builders to take. If the sales agent rejects it, tell them to submit it to the builder anyway. Builders are oftentimes less picky than the sales agent. Stipulate several business days to make their decision - sometimes they need more approvals to move down past a certain point so if you demand a next day answer you might not get it. If they do reject it, dont give up, raise the offer a little bit and/or drop one upgrade, and you can think about offering a larger earnest check. This is a big deal to them, but if you are set in your decision it won't cost you anything other than forgone interest.
As far as whether to get a buyers' agent -
If you get a realtor, make sure you get one with new construction experience and hopefully has already worked with that neighborhood.
Dont sign anything at the sales office until you know whether you want to get an agent, or use one of the services that refunds 1% of the commision back to you. SOme sales agents will be more willing to drop their own commision than have to share theirs with a buyers agent. They cant always do this, but you can ask. Some neighborhoods are offering buyers' agent bonuses, often as much as $5k - but they wont tell you, you need to ask if they offer a bonus. If they do and you dont get a buyers agent - you should hardball to get that money off the price. If you cant get any commision or bonus money off, then look for a discount agent/broker who will rebate some of the commision and any bonus back to you. Don't let them say its not legal because I have done it, but you may need to shop around among independent agent/brokers (likely not regular agents at the big RE firms) and you have to make sure you word it correctly in the agent contract, so you might want to get your own lawyer to help you with this.
Good luck!
Last edited by emanresu2; 01-15-2010 at 01:01 PM..
2 things to consider right now when negotiating with builders.....
Make sure the builder is in good financial standing. If he is negotiating with everyone and getting a lot less profit then he needs you may not see him in business in this economy by the time you are finished.
Be prepared if he accepts a real low offer that he may not be the easiest to get along with during the process! Builders are in trouble and getting hit from all sides by buyers taking advantage of the buyers market. If they are stuck with a bunch of lots they need to get off their books and end up building houses for little to no profit you can expect (and need to look for) cut corners and a general 'who cares' attitude. Not something you want to deal with during the build or after (when you have punch items to deal with!)
emanresu2 has an innteresting idea with the upgrades, however I would shy away from vague terms like "30% of the upgrade price, etc"....you can get into a back and forth as to what that actually means later on.
Unless you are just a bad negotiator, an agent isnt going to magically make them lower their price more than you can. A buyers' agent isn't always free, because there are ways to get some of that commision back. You should look into this before you decide whether to go with an agent.
You should look at recent sales in the neighborhood or in similar comps in other nearby neighborhoods. Look up appraisal rules to replicate how an appraiser would do it - average price per square foot, adjust for things like 1 or 2 car garage, significantly better lot, porches and decks, etc. Show the sales agent that you have done your homework. Many are still in denial about the housing price drop. Also show that you are not emotionally attached to the house, make sure they know that you are considering other options at good prices.
The above poster is correct - builders dont want to bottom out their price because that will hurt them in the long run, but they will be more inclined to deal on structural and finish upgrades. Some builders make 70% profit on some upgrades, so you have a lot more room to take them down rather than the house, because some builders are listing almost at cost on the base house. Ask to see options prices before you make an offer. They might not let you take it with you but you should walk out if they wont even show it to you. Also, lot premiums are just free money for them - should be the easiest thing to get rid of. If you give them an offer that ignores any lot premium and is something like 5% above list price offer and stipulates upgrades that at list price would be worth 30% of the list price house and attach a big earnest check, I think this will be very tempting for most builders to take. If the sales agent rejects it, tell them to submit it to the builder anyway. Builders are oftentimes less picky than the sales agent. Stipulate several business days to make their decision - sometimes they need more approvals to move down past a certain point so if you demand a next day answer you might not get it. If they do reject it, dont give up, raise the offer a little bit and/or drop one upgrade, and you can think about offering a larger earnest check. This is a big deal to them, but if you are set in your decision it won't cost you anything other than forgone interest.
As far as whether to get a buyers' agent -
If you get a realtor, make sure you get one with new construction experience and hopefully has already worked with that neighborhood.
Dont sign anything at the sales office until you know whether you want to get an agent, or use one of the services that refunds 1% of the commision back to you. SOme sales agents will be more willing to drop their own commision than have to share theirs with a buyers agent. They cant always do this, but you can ask. Some neighborhoods are offering buyers' agent bonuses, often as much as $5k - but they wont tell you, you need to ask if they offer a bonus. If they do and you dont get a buyers agent - you should hardball to get that money off the price. If you cant get any commision or bonus money off, then look for a discount agent/broker who will rebate some of the commision and any bonus back to you. Don't let them say its not legal because I have done it, but you may need to shop around among independent agent/brokers (likely not regular agents at the big RE firms) and you have to make sure you word it correctly in the agent contract, so you might want to get your own lawyer to help you with this.
Good luck!
"Some neighborhoods are offering buyers' agent bonuses, often as much as $5k - but they wont tell you, you need to ask if they offer a bonus."
Just as importantly, and actually more commonly, some neighborhoods are offering commission rates as high as 4% and 5%.
I saw where Standard Pacific is offering 6% in Charlotte neighborhoods.
A year ago they offered 8% in the Triangle briefly.
Marion Jones offered a Maserati.
Regardless:
If anyone hooks up with an agent who conceals from you that compensation offered varies from that to which you have agreed in your Exclusive Right to Represent Buyer agreement, Section 4 (b), Page 1, just call the North Carolina Real Estate Commission.
They will be positively delighted to hear from you.
"Some neighborhoods are offering buyers' agent bonuses, often as much as $5k - but they wont tell you, you need to ask if they offer a bonus."
Just as importantly, and actually more commonly, some neighborhoods are offering commission rates as high as 4% and 5%.
I saw where Standard Pacific is offering 6% in Charlotte neighborhoods.
A year ago they offered 8% in the Triangle briefly.
Marion Jones offered a Maserati.
Regardless:
If anyone hooks up with an agent who conceals from you that compensation offered varies from that to which you have agreed in your Exclusive Right to Represent Buyer agreement, Section 4 (b), Page 1, just call the North Carolina Real Estate Commission.
They will be positively delighted to hear from you.
I think much of it comes down to common sense Mike,first time buyers need to educate themselves,otherwise their like deer in the headlights.Way back in '91 when I bought my first house I was terrified,and ignorant to the process,thank goodness I had an agent that didn't rake me over the coals, because at the time I really didn't think for myself I took her word as gospel.That women probably could of had me pay over the ask if she wnted to be a bad girl!
I think much of it comes down to common sense Mike,first time buyers need to educate themselves,otherwise their like deer in the headlights.Way back in '91 when I bought my first house I was terrified,and ignorant to the process,thank goodness I had an agent that didn't rake me over the coals, because at the time I really didn't think for myself I took her word as gospel.That women probably could of had me pay over the ask if she wnted to be a bad girl!
Just to respond to my own words,you also need to be realistic and not expect to get a property for nothing.You can't just pull a price out of the air, because thats what you want to pay.
I think much of it comes down to common sense Mike,first time buyers need to educate themselves,otherwise their like deer in the headlights.Way back in '91 when I bought my first house I was terrified,and ignorant to the process,thank goodness I had an agent that didn't rake me over the coals, because at the time I really didn't think for myself I took her word as gospel.That women probably could of had me pay over the ask if she wnted to be a bad girl!
samdan,
It is definitely the law in North Carolina, and fairly recent, since 2008, that a buyers agent must establish with the client what they expect their compensation will be.
And, in a timely manner, the agent must inform the buyer if there is additional inducement to show the property, or if the cobroke commission is less than expected, and the buyer would be asked to make up the difference.
This is a protection built into the NCAR Exclusive Right to Represent Buyer agreement that is meant to penalize agents who show homes with higher commission offerings instead of showing homes that best fit the client.
The consumer has the opportunity to document the agent's commission and compare it to commissions on homes that the agent presents for showings.
If people scoff at the protections, they should have been in CE last year to hear the wailing and moaning from agents who think this is a hardship.
How will consumers educate themselves on this topic?
I'm not sure, unless the topic is regularly presented by those who work with it every day.
Consumers probably should not ever interact with an agent for any material amount of time without a chance to take and review a sample copy of the agency agreement they will be asked to sign at some point.
Yes! I just did it. They will act like you insulted them...then say they will check with their manager. And they will definitely lower the bid. If you still don't like the number counter bid again. The worst thing they can do is say no. Don't let them intimidate you, and don't think negotiating is something "below" you.
Also, get a buyers agent. They are paid by the builder...NOT YOU!
Yes! I just did it. They will act like you insulted them...then say they will check with their manager. And they will definitely lower the bid. If you still don't like the number counter bid again. The worst thing they can do is say no. Don't let them intimidate you, and don't think negotiating is something "below" you.
Also, get a buyers agent. They are paid by the builder...NOT YOU!
I deal with so many onsite agents and just like everyone, SOME are sweet and appear to be helpful and SOME are just pushy and mean! However, they ALL work for the builder and are trained on how to negotiate.
Think of it this way...a buyer may negotiate once every 5 years. An onsite agent may negotiate once a day! Who has more experience and will come out ahead? Don't get me wrong...I have friends that are onsite agents and I know quite a few of the onsite agents in this area but I also know what goes on "behind the scenes" and all I have to say is...GET A BUYER'S AGENT!
Yes, yes have a buyers agent. Also if it is a relatively small to medium size builder they may have multiple agencies representing them. Not all of those agents will be the same and some more easy to work with than others. It still amazes me talking to neighbors and finding out how we got a better price and much better treatment. Not just because of our agent but because we were dealing with different sellers agent then most dealt with. They were not very happy with the other seller rep and we were very happy with ours. Don't know why they didn't use a buyers agent but they didn't and it cost them.
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