Do’s and Don’t of Buying Tract Home | Be Careful When Building with Large National Builder

It is the American dream to be a homeowner, and most families likely prefer to own a new home vs one already lived in. Don’t get me wrong that doesn’t mean there is anything wrong with a pre-owned home, but just like new cars knowing it’s brand new just gives you a warm and fuzzy feeling.

If you want a new home there are a few things to consider before you get started with your decision, as there are different types of new home construction. You could obviously build one yourself by hiring your own builder, purchasing a spec home from a local spec builder, and the most common is buying one from a large national tract home builder. Most home buyers readily figure this to be the best and most simple option to getting that new home. However, there are some pro’s and con’s to buying from one of these large national builders like: Beazer, Pulte, Centex, DR Horton, or Lennar.

National builders’ profits are built in a few different ways, and by knowing some tips will save you a lot of money.

1.)  – use a real estate agent to represent you in your purchase, an experienced agent will know the tricks of saving you money. Do not go to the development without an agent. You will get yourself in trouble and cost yourself money. That’s exactly what these builders want you to do, to be that unsuspecting and naive buyer who talks way too much and “shows their cards”. 

It’s best to wait until you can have someone accompany you to see the model home. A real agent knows all the tricks, smoke, mirrors and sales pitches that the onsite agents try to feed visitors who come to see their community. Don’t forget having a buyer’s agent there with you does NOT cost you ANYTHING. In fact having an Charleston SC real estate agent will Save you money and protect YOUR interests not the builder’s.

These large national builders make their money from how they purchase the dirt / land they develop the neighborhood on. So if they are lucky they can charge a premium on each lot once they have subdivided the dirt. The goal of national builders is to buy ALL the land they can get their hands on so you as the buyer are forced to purchase from them.

What’s a Lot Premium? Lot premiums are when builders add an additional cost for the lot they would build your home on. So for instance Oyster Point Mount Pleasant   by DR Horton is a wonderful community and like all builders what they advertise for the prices of the homes are the price WITHOUT the “lot premium”, So really the cost of the home is probably $20,000 more before you choose finishes or upgrades.

 

NEW CONSTRUCTION HOMES IN CHARLESTON SC

Mt Pleasant SCDowntown CharlestonJames IslandDaniel Island SCSullivan’s IslandIsle of PalmsJohn’s Island – West AshleyFolly Beach

 

Another way they make their profit is markups on materials. Honestly, there isn’t much you can do about that. They buy it in bulk from their suppliers and then tack on additional profits from what they paid for it. They have the cost of these materials built into the base cost of the house so there really isn’t any reason to try to negotiate those from the base price. The builder knows exactly what it costs them to build each floor plan. For example their cost may be $90 a sq ft to build, and the base price they sell to you without upgrades may come to $106 sq ft. Notice I said upgrades.

That’s where they get you.  Upgrades and changes to the base plan. They will offer their “standard” package which usually consists of a base floor plan, “builder grade” materials and fixtures. Builder grade means cheap low-end. Who really wants that stuff? – and trust me they know that. So you’ll want to ask for a different, and nicer product, and who wouldn’t. DON’T, get suckered in by this. For instance you want nicer hardwood floors, or you want a nicer trim package like crown molding, or a screened in porch they will charge you thousands of dollars for something that might cost under a thousand. For example: I had a client build a large nice (semi-custom) home with a large national builder, and he wanted a fence built in his backyard. The builder was going to use the same fence company as my client to build the fence for him and the builder was going to charge my client $4800, but my client hired the same fence guy himself and got it built for $2500. For the SAME exact guy and plan. You can save a lot of money just by having them build the house with the base, standard materials and then do the work later yourself or hire someone else to come back and do it. I know it seems so much easier to “just let them do it”, and it is, but if you are pinching pennies, and want to be smart trust me it’s not worth it. That additional $10,000 or $15,000 financed over the life of you owning the home will cost you so much more money.

Conclusion

Buying a new home is very exciting, but take a real estate agent with you if you are interested in a new home development by a large tract builder. Two, try not to get swept up in the “extras and upgrades”, as they are their to sucker you into overpaying for things that just aren’t worth the drastic upcharge.