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I am at the very beginning stages of negotiations with a builder. What type of things are negotiable?
We have not got into details yet the only thing I know at this point is the appliance allowance which seems low at $1,000. I was also able to upgrade to granite tile in the kitchen and hardwoods in my great room for $5,000. Is it typical to go way over for cabinets and lighting fixtures? This is not a large development it is mainly a lot that we located and the total the builder gave us.
Thanks
It sounds as if your builder is not including very much for the price of the home. Is this a custom builder you brought in or is he the owner of the lot?
They own the lot. They are a real estate agency but they specialize in building. (If that makes sense).
Since they own the lot maybe that is where I should be negotiating.
Because it sounds as if the builder is providing very low allowances for standard items, you need to be extremely careful. You can very quickly end up with a very expensive house.
$1000 allowance for appliances will be gone in an instant just with the purchase of a decent refrigerator and stove. This will leave you nothing for a dishwasher or microwave.
The builder should be including standard finishes in the price of the home and anything you would want to change from standard, such as hardwoods in place of carpeting, would be your upgrade. However, cabinets, appliances, fixtures and lighting should all be included in a standard package.
If the price for the home to be built is only for the structure, make sure you have the financial planning in place as you will end up spending alot more simply to finish it to live in.
I would get in writing exactly what is included and take a look at another house they have built to make sure you like what they are offering. If not, you may be able to negotiate some of the upgrades. The builder may be less willing to negotiate the land since it is already overhead for him. If he were willing to negotiate there, you will then be under contract with the land and at that point, he may not negotiate on anything else in an effort to make that money back.
The builder should supply to you a detailed breakdown of what is in the base house they plan to put on the lot. It should list the allowances for each of the major items, from the siding, stone, brick planned to the lighting fixtures and kitchen amenities. This is typical for a customer builder. As the other poster wrote it all depends on if its customer builder or not.
It is easy to go over the budget on kitchen/bath cabinet's, lighting fixtures, floor coverings (hardwood, rug, linoleum), decks, porches, land scapping. All of these are typically priced within the builders budget. How you decide to upgrade from that basic budget is up to you.
I know from our experience its very easy to go over budget. Even though we had a custom builder who had a lot of upgrades in his basic house cost we ended up upgrading in many areas. For each upgrade you ask for I would suggest you get your builder to provide a price sheet for it so that at the end of the project it is very easy for both sides to see where the actual finished cost is. Could save you some headaches on seeing the final price of your new home.
Everything is negotiable to some extent. Now is the perfect time to ask ALL your questions before they actually start constructions.
Good luck in the process and congratulations on the purchase of your new home!
As a 2x homebuilder, I can tell you that you need to have everything itemized. Be sure that the builder "Signs All Changes". We were burned with our first builder by falling for the nice guy theory. He reassured us that he would take care of everything. Wrong, he ended up losing about $3500 that I withheld until he finished his work. In the long run, you will thank yourself. They have this tendency to tell you what you want to hear, and after they installed the cheapest garbage they could find, they conveniently forget your requested changes. Trust me. You should do yourself a favor and have EVERTYHING itemized. Good Luck. Shannon
Whether it's $50,000 or a million, doesn't matter. Get everything in writing. It is your only recourse should something not be as you expected. Even then, you need a paper trail for everything you discuss so after each conversation, also restate it in an email. This will also help ensure that how you interpreted a conversation is the same as the builder did, again, helping to avoid a misunderstanding.
I know this sounds like overkill but it is always better to have everything that happened or was said to refer back to should there be an issue down the road.
Just to echo everyone else, please get everything in writing. Also, see if they can recommend people who have purchased from them recently so that you can talk with them. We have had a couple of people call us and come through our house who are having a house built from our builder. It may give you insight into different people's experiences and it will help you see what is done in the their houses as far as upgrades.
Do you have an agent? right now, the sales team (builder it seems in your case) are not truly representing you, they have their own interests at heart. A buyer's agent represents you and only you and can help you with negotiations, etc. The buyer's agent is paid by the seller, not the buyer, so it is no loss for you.
Regardless, this is probably one of the biggest purchases you will make in your life, please get everything in writing.
Leigh
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