There is no transparency in new construction pricing.
Read this if you plan on buying a new construction home in 2023.
Builders are manipulating prices to convey a price reduction or value. But in reality, you may be paying more for the same home despite thinking you are paying less.
For the first time in the last two years, builders finally find themselves in a position where they must negotiate.
Builders have to offer incentives and lower their prices. They must do something to get these homes sold.
However, it is more complicated.
Gimmicks Builders are Using to Sell Homes
I see more and more gimmicks from every builder and price point.
Their gimmicks typically come down to three primary tactics to sell more homes.
Lowering the Base Price
The most common tactic builders use is to lower the base price of their homes or reduce lot premiums and raise the cost of their most popular options.
Builders will do anything to sell: lower sales prices and eliminate lot premiums.
On the surface, this looks great. However, pay attention to the options.
I was just in this situation with a client of mine. The lower sales price and elimination of the lot premium the builders offered was a great deal. But as I looked at the options, I noticed they were significantly higher than just one month earlier - up to 30% higher. Fortunately, I had a pricing sheet from the previous month. Because I had the price sheet, we were able to negotiate.
Builders manipulate prices by lowering sales prices or offering additional incentives.
However, they will remove what may have been a standard option for previous buyers.
For example, the previous home price may have been higher but included options such as a sunroom or finished basement.
Now, builders are advertising a lower price; however, that price does not include many previous standard options, so it isn’t a lower price because you are getting less than you would have previously.
You are now paying for those options instead of being included, which means you aren’t getting a deal.
Below Market Interest Rates
The third tactic builders are using is below-market interest rates.
Builders are telling homebuyers not to worry about the sales price but instead to focus on the monthly payment.
If the focus is on the monthly payment versus the price of the home, that is a huge red flag.
You should purchase the home because it is well-priced and represents a good value- not because builders are willing to pay down your interest rate - savvy buyers do not focus on that.
Arm Yourself with Knowledge When Buying a New Construction Home
It is vital that when you go into a new home community and begin comparing value and reviewing incentives that the builders are offering you, you are armed with the right questions.
Ask questions like: Have the prices of options gone up? What were the previous base prices of this home, and what options were included? These questions will help you decide if the deal makes sense.
If anyone you know is in the market for a new home, please share the above video with them. It could easily save them thousands of dollars.
If you have any questions about buying new construction homes in Washington D.C., Maryland, or Northern Virginia, please feel free to reach out.