Buying a model home is a little like buying a car that's been used solely for test drives: You can generally expect a discount.
Here are several approaches to take with a builder to get the best deal on a model home.
- A model home is a sample home that shows off the design, layout, craftsmanship, and creativity of a builder's homes in a new subdivision.
- Although these homes are primarily used to sell other properties in the neighborhood, you can also negotiate to purchase a model home itself.
- When negotiating a model home, you should check out the builder's reputation and be sure you have your own representation.
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.
2. Hire Your Own Agent
Bring your buyer's agent with you when you go to a new housing tract's sales 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.
Be aware that 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, which means they're obligated to look out for you and act in your best interests. They're required to disclose the positives as well as the negatives of the deal.
3. Ask Whether the Model Home Has Ever Been Occupied
This doesn't mean someone actually lived there. Find out whether the home was ever used as a sales office—and if so, for how long. Although it's unlikely the kitchen appliances were overused, 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 is therefore worth a bit less.
4. Examine Comparable Sales
Your agent won't be able to obtain comparable sales from the Multiple Listings Service (MLS) if the builder doesn't list there, and many don't. But you can still obtain the hard data from a title company. However, you might not be able to tell which homes were sold with which upgrades. 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 information 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 rather than tenants.
5. Obtain Legal Advice Before Signing a Contract
Consider hiring a real estate lawyer to review your contract before signing. Standard purchase agreements are designed to keep everyone out of court, but they don't necessarily contain language that protects the buyer. Most of these contracts protect the builder and can be 100 pages or more.
6. Consider Using Your Own Lender
Builders often prefer their own lenders, because they'll be kept fully informed of your personal progress. It's 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.
7. Hire a Home Inspector
Hire a qualified inspector—not your uncle 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.
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 whether a bad rep is an isolated experience or whether the builder's corporation repeatedly brings bad publicity to itself. Check and verify public records for lawsuits.
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 a warranty when you're putting these items into the contract.
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.
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, if possible, go for the last available model.
Frequently Asked Questions (FAQs)
How much does a model home cost?
If the model home has been heavily used before you buy it, you may get a deal for that wear and tear. Keep in mind that the wear and tear could force you to make repairs or replacements around the house, and that could cut into your savings on the sale price.
Do you need to have an agent when you're buying a model home in a new development?
You might not need to have a buyer's agent to purchase a model home, but you'll probably want one. An agent will have your best interests in mind, and they can help protect you from issues with the home that an inexperienced eye might miss.