The credit crisis that has been looming over the US financial market for the past year. This financial cloud 
has led to significant changes in many areas driven by financial lending, most predominately the real estate market. Home builders have been particularly affected due to the reduced number of buyers in the real estate market, limited ability to reduce prices, and inventory that has been earmarked for sale long before the market changes fell upon us.
Buyers are currently experiencing a power shift in the world of real estate. This is known as a buyer’s market, signifying an abundance of property for sale with much fewer buyers in the purchase market. To attract these buyers, new home builders are offering home buyer incentive offers. These offers extend additional enhancements to the future home at no cost, or very little cost. Examples of some home buyer incentive offers buyers may capitalize on are free finished basements or garages, upgraded granite counter tops, free hardwood floors, upgraded appliance packages, and enhanced bathroom or bedroom suites.
Here are some of the tricks of the trade when negotiating for new construction incentives.
Know their inventory. Get the lowdown on the inventory your builder is holding. Find out how many properties they are holding on to and for how long have they been trying to sell. Knowing this can put you in a very good position for negotiating price. The more the builder has and the longer its been on the market, the bigger reduction of price you can negotiate.
Scope the competition. The market is segmented by the surrounding area. know what the competition is offering because this could be an indicator for what your negotiating options are. If builder x is offering this, what can builder y offer to get the sale. Don’t be afraid to pit them against one another if the possibility arises.
Talk to the neighbors. Step out of your comfort level and get to know the neighbors take on the negotiation process. Find out what they were able to get from the builder and what they wish they would have asked for. Take a welcoming gift to be more approachable and hopefully you will get valuable information.
Lower that Price. After understanding the neighboring prices for similar homes, also look at economic growth within the area. If the local job market is in the slums, use that fact for negotiating. Homes in areas with an undesirable job market should be ripe for negotiating a price reduction.
Ask for upgrades. If you don’t ask, they might not offer. When builders sell their homes they are part of public record. Some buyers may get upset if the house next door got a bigger break. One way to negotiate is to look for upgrades and incentives that will help build equity in your home, while your builder can save face and keep the housing costs from plummeting.
Be realistic. Buyers market yes, yard sale no. Be realistic in your negotiations. It is less difficult to insult a builder because unlike home owners their stake in the property is from a strictly business standpoint. If you want to come out with the best deal make sure you have evidence backing your offer.
Home buyer incentive offers on new home construction can equate to several thousand dollars worth of upgrades or additions to a home that come at no cost to the buyer. However, typically these home buyer incentive offers come in lieu of reducing sales prices on new construction homes. The value of the incentives offered should be carefully considered by home buyers as well as compared to competing properties, both new and used. Home buyers may find tremendous values in this buyer’s market. Particularly, exploring the various home buyer incentive offers extended by many home builders may uncover bargains in new construction.
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September 25th, 2008 at 11:26 am
I agree buyers must understand where the builer is at in terms of inventory available and also how many units they are selling per month. A lot of builders are still selling a lot of homes and are going to be much harder to negotiate with then the builders who have been sitting on finished inventory for months just trying to unload it.