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How to Buy a Model Home From a Builder

10 Tips For Getting the Best Deal On a Model Home

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model homes and welcome sign

Buying a model home can be a great way to save money on a new home.

© Big Stock Photo
Buying a model home is a little bit like buying a car that's been used solely for test drives. Everybody knows that a dealer will generally discount the price on a car with very low miles. Builders will often discount the price for a model home, too, but not for the same reason. It's unlikely that the model home was ever used as living quarters.

Here are 10 tips to help you get the best deal on a model home from the builder:

1) Ask to See All The Model Homes

Most model homes include free upgrades, designer paint and designer window coverings. Builders often sell homes before they are constructed based on the layout of the model home, so they want the model to show beautifully and spare little expense decorating it. Then they sell the upgrades separately to buyers who purchase a home that is not yet built. Pick the home with the best upgrades and layout.

2) Hire Your Own Agent Before Buying a Model Home

Before you step foot into a new home sale's office, bring your buyer's agent with you. Some builders will not allow your agent to represent you if you arrive unescorted.

The builder's sales agents are paid to represent the builder, regardless of what they may tell you. Many will use high pressure tactics to persuade you to sign the contract. Your own agent will represent you, be your fiduciary and is required to disclose the positives as well as the negatives.

3) Ask if the Model Home Had Been Occupied

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, the bath fixtures might not be in pristine condition. You can use this information to argue that the home might not be considered new anymore, and therefore, worth less.

4) Examine Comparable Sales in the Subdivision

If the builder does not list the homes in MLS, your agent will not be able to obtain comparable sales from MLS. However, you can still obtain the hard data from a title company, but you may not know which homes were sold with which upgrades. The advertised sales price means very little.

While you're looking at comparable sales, check to see how many deeds were mailed to the property address and how many were mailed elsewhere, indicating that some of the homes might be owned by investors. If the market suddenly dips, investors are typically the first to bail and, besides, part of the reason you are buying in a new subdivision is to be surrounded by other buyers just like you, not tenants.

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 contracts protect the builder and run 100 pages or more.

6) Consider Using Your Own Lender

Builders often prefer their own lender because the builder will be kept fully informed of your personal progress; it's one-stop shopping for a builder. But a builder's lender might not offer you the best loan and interest rate. Moreover, the builder may own the lending company. Ask your agent for lender referrals.

7) Hire a Home Inspector

Hire a qualified inspector -- not your dad or your buddy contractor -- get a real inspector. Be present for the inspection and ask questions because a new home can contain defects. The HVAC system might be too small or the plumbing could be installed backwards. Construction workers make mistakes. (And let's not even talk about the empty Taco Bell Big Drink cups stuffed in wall cavities.)

8) Check out the Builder's Reputation

If a buyer has a bad experience with a builder, the word spreads rapidly throughout a community. 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 without checking and verifying the public records for lawsuits.

9) Negotiate the Price and Model Home Furnishings

In some new home communities, it is standard practice to leave the furnishings in the model home. This means the furniture, artwork on the walls and knickknacks stay with the home, if you ask for them. When putting these items into the contract, state they are to remain with the home without consideration and without warranty.

Don't be intimidated by a home counselor or builder's agent who may tell you the price is firm. The price is rarely firm. Offer what you feel is a fair price and then discount it. Builders will negotiate.

10) Try to Buy the Last Model Home

Close-out sales often carry the best prices. Plus, by buying one of the last models, you don't have to worry whether the other homes will be built because they are already constructed. There is also no concern that future new home sales at possibly lower prices could drive down your market value because you bought the last model home.

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

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