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Buying New Construction

I’ve recently had interactions with several buyers that have bought or are in the process of buying new construction homes.  In these situations, the buyer did not bring their own agent into the purchase process and are now realizing these issues:

  • Builders are giving good discounts off of the “base model” of their homes, but buyers will upgrade many of the items, so the price climbs.
  • On a $400,000 house, it is not unusual to end up with $40,000 – $60,000 in upgrades.  This is often well above the buyer’s expectations.
  • Most builders hold firm on the price of upgrades because many of these items constitute healthy profit margins for the builder.
  • In this market, almost everything is negotiable, but you have to know what to ask and when.  Most new construction buyers are not familiar enough with the process to know these things.
  • Builders will sometimes clear their “spec homes,” houses which were built without a signed Purchase Agreement, at pricing substantially lower than the custom-built version of that same model.
  • The builder’s representative will be very helpful and friendly, but is there representing the builder and is doing everything they can to get you to buy from them.
  • When a builder is finishing up a development, they will often substantially drop their prices on the last few homes in an effort to get out quickly.  Just this weekend I saw a $400,000 new construction two story home in Albertville for sale for under $300,000.  There was another one that was $350,000 but is now reduced to $275,000.

Most builders offer a buyer’s agent a commission by default (anything in the MLS is required to have a cooperative commission) and it most often does not change the price if you bring in your own agent or not so it is in your best interests to interview several agents and choose to work with one before you choose to purchase a new construction home.

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Tony Bauer
Tony Bauer

Getting your own agent along for a sale has its own benefits as well. For one, the agent can be objective about the property that is going to be purchased and provide his/her valuable opinion. You may have to pay for the service, but think of it as a small investment to augment a greater (real estate) investment.


TwinCitiesRealEstateBlog.com is not a Multiple Listing Service MLS, nor does it offer MLS access.
This website is a service of Aaron Dickinson of Edina Realty, a broker Participant of the Regional Multiple Listing Service of Minnesota, Inc.