Home builders love to play the Incentives Game. In the peak of the last building boom, Centex Homes was giving away a free year of house cleaning, Ryland was giving away flat panel televisions, and there was even a builder in California giving away a mini-cooper with a home purchase. Why would a builder do this? It is just another way to channel the buyer's emotions. The more emotional ties you have to the house purchase, the less you will negotiate ทาวน์เฮ้าส์มือสอง ราคาถูก on the price.
When I was a new home salesperson, I felt like Kurt Russell in the movie Used Cars. We always had a sales incentive to compete with the builder across the street.
The competition would give away a PlayStation 2 and then we would give away stainless steel grill! Remember the ace-in-your-pocket for a good negotiation is to know what the other builders are giving a way. Builder hate to lose a sale, especially to their direct competitor.
When the builder lets you select a dollar amount free upgrades, I would elect for structural upgrades. They tend to have the best re-sell value. Examples are a bonus room, vaulted ceilings, a front porch, a balcony or an exterior front (elevation) that has more curb appeal. In a future article I will talk more about the best upgrades on a new home purchase. For now I want to stay on topic of winning the incentives game.
Remember, builders have padded margin into the upgrades. When the builder talks about incentives - push to get a dollar amount of the incentive. When you can not negotiate any further (this can take days and weeks), try to move the incentive to another arena:
1. Land - If you negotiated $5,000 in free upgrades that is great. Just keep in mind that the builder makes a profit on every upgrade so you probably only came out $3,000 ahead on the negotiation. Now turn the tables and ask to trade the $5,000 discount on the lot premium for a corner lot or cul-de-sac homesite. A larger lot is better for your long-term appreciation.
If the builder developed the land which is not likely in this economy - they could swallow the cost a little easier. If the builder bought the land from a developer they might be hurting to allow a $5,000 discount. Land is my favorite incentive trade, but if they will not budge you still have another play.
2. Financing - Remember that $5,000 is only $3,000 in the world of free upgrades. An expensive carpet will only last 4-7 years. Why not buy down the interest rate with the builder incentive money and enjoy paying $125 less per month for the next 30 years! How about coming to the closing table with less money.
Even if the builder will only give you $4,000 on financing incentive instead of $5,000 of upgrades, this still may be the best choice.
Just one word of caution, the larger builders have their own mortgage companies. Just make sure that the $5,000 is not wasted buying down an over inflated rate of 7% down to 5.75%
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