How to Buy a Model Home From a Builder

10 Tips For Getting the Best Deal On a Model Home

A modern kitchen
••• Big Stock Photo

Buying a model home is a little like buying a car that's been used solely for test drives. Everybody knows that the dealer will generally discount the price on such a car with very low miles.

Builders will often discount the price on a model home, too, although it's unlikely that the home was ever used by anyone as living quarters. You can take several approaches to getting the best deal on a model home from a builder.

No. 1 Ask to See All the Model Homes for Sale

Builders often sell homes before they're constructed based on the layout and appearance of the model home. It only makes sense that they want the model to show beautifully so they spare little expense in decorating it. Most model homes include free upgrades, designer paint, and designer window coverings.

Make it a point to see them all, then pick the model with the best upgrades, layout, and location.

No. 2 Hire Your Own Agent

Bring your buyer's agent with you when you go to a new home sale's office. Some builders won't allow your agent to represent you if you arrive unescorted the first time. Most buyers don't even recall signing anything—that's how smooth the reps are at sales offices.

The builder's sales agents are paid to represent the builder regardless of what they might tell you. Many will use high pressure tactics to persuade you to sign a contract. Your own agent will represent you and will be your fiduciary, obligated to look out for and act in your best interests. He's required to disclose the positives as well as the negatives of the deal.

No. 3 Ask If the Model Home Has Ever Been Occupied

This doesn't mean that someone actually lived there. Find out if the home was ever used as a sales office and, if so, for how long. Although it's unlikely that the kitchen appliances have been used to death, the bathroom fixtures might not be in pristine condition.

You can use this information to argue that the home might not be considered new anymore and it's therefore worth a bit less.

No. 4 Examine Comparable Sales

Your agent won't be able to obtain comparable sales from MLS if the builder doesn't list there, and many don't. But you can still obtain the hard data from a title company. You might not be able to tell which homes were sold with which upgrades, however. The advertised sales price means very little.

Check to see how many deeds were mailed to the property address. How many were mailed elsewhere? This can indicate that some of the homes might be owned by investors. Investors are typically the first to bail when the market suddenly dips, and part of the reason you're buying in a new subdivision is to be surrounded by other buyers like yourself, not tenants.

No. 5 Obtain Legal Advice Before Signing a Purchase Contract

Consider hiring a real estate lawyer to review your contract before signing. Standard purchase agreements are designed to keep everybody out of court but they don't necessarily contain language that protects the buyer. Most of these contracts protect the builder and can run up to 100 pages or more.

No. 6 Consider Using Your Own Lender

Builders often prefer their own lenders because they'll keep them fully informed of your personal progress. It's something like one-stop shopping for the builder. But a builder's lender might not offer you the best loan or interest rate. Moreover, the builder might actually own the lending company. Ask your agent for lender referrals.

No. 7 Hire a Home Inspector

Hire a qualified inspector—not your dad or your buddy who's a contractor. Get a real inspector. Be present for the inspection and ask questions. Even a new home can have defects. The HVAC system might be too small or the plumbing could be installed backward. Construction workers make mistakes.

No. 8 Check out the Builder's Reputation

Word spreads rapidly throughout a community when a buyer has a bad experience with a builder, but you won't know if a bad rep is an isolated experience or if the builder's corporation repeatedly brings bad publicity to itself. Check and verify public records for lawsuits.

No. 9 Negotiate the Price...And the Model Home Furnishings

It's standard practice to leave the furnishings in the model home. The furniture, the artwork on the walls, and the knickknacks often stay with the home—if you ask for them. State that they're to remain with the home without consideration and without warranty when you're putting these items into the contract.

And don't be intimidated by a builder's agent who tells you that the price is firm. The price is rarely firm. Negotiate from a position of strength. Ask your agent for advice. Builders will often negotiate.

No. 10 Try to Buy the Last Model Home

Close-out sales often carry the best prices and you won't have to worry about whether the other promised homes in the community will be built if you buy one of the last models. After all, they're already constructed.

There's also no concern that future new home sales at possibly lower prices will drive down your market value. So go for the last available model if possible.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.