My wife and I are considering buying or building a home this fall, and I’d be interested to hear other people’s experiences with either buying a new home or picking a plan and getting it built. Is there any wiggle room in the price if you build from scratch, or is it the equivalent of ordering a new car from the factory instead of off the lot? What’s negotiable? What went well, what do you wish you had done differently?
You get a plan. You take bids on building the house. You choose who to go with, and that doesn’t mean somebody that under bid your favorite by a hundred dollars. You’re not obligated to take the lowest bidder. Be sure of what you want. People can double the cost of the house by changing their minds during construction over and over again. My brothers are still in construction. They’ve been building homes for years around Portage as a central base.
I’m actually talking about a single homebuilder who develops the neighborhood and offers the plans. This one in particular, since my son already goes to school in one of their neighborhoods. Can you still negotiate in that case?
The price would be varied by what materials and floor plan you select in the design. Unless the developer is desperate for money you’re not likely to get a price break. They’re going to expect a certain amount for each home of a certain design on the properties they are developing.
That’s not “building” a house, that’s just buying a house before it’s finished. Choosing a standard floor plan and various options isn’t “designing,” either.
Yes, it is very much like ordering a car through a dealer.
We bought our current house from a developer just like this. We picked our lot from what the developer had available, picked a set of plans from what the developer offered, picked our options (color of the siding and cabinets, etc.), and put down 10%. After the house was completed, we closed with a mortgage from our credit union.
There are pros and cons to going this route versus buying a lot and hiring a builder. With a builder, you have to first buy the lot, then get a construction loan from a bank or credit union, and get payment draws as the house is completed. However, all of the major steps are usually estimates, particularly for the subcontractors. If the excavation contractor or the framer raises their price, you’re usually stuck. You also have little recourse for delays, and subcontractors going from job to job often don’t show up when they say they will. This can delay the whole job while you make payments on the construction loan.
With a developer, you avoid most of these problems. In particular, you don’t have to come up with the money (except the deposit) until after the house is completed. However, there are other pitfalls. The biggest one is that even though it’s going to be your house, you don’t own it until it’s completed, and you are contractually mandated to purchase it upon completion upon penalty of losing your substantial deposit.
What this means is that you are stuck with this developer the whole way through, and if you are unhappy with something in the construction, and can’t convince the developer to correct it, then you don’t have much recourse.
Oh, and with our developer, there was absolutely no negotiation. Everything was a set price, and the prices only increased with time. To a certain extent, this might have been because we bought at the height of the housing boom.
For us, the problems started right off the bat, when we were picking the options for house. It seemed like just about every feature in the model home we liked was not included in the base house, but was an upgrade. We managed to add some $60K in upgrades just in our initial order, along with another $20K after that. I like to think that we did some smart upgrades, like going from 2 x 4 construction to 2 x 6 construction. I didn’t find out until later that the price for this ($1,500) was for going from 2 x 4 at 16" on-center spacing to 2 x 6 at 24" o.c. It was another $1,000 to get 2 x 6 at 16" o.c. Those upgrades add up quickly.
What made me particularly incensed was that all of these prices were absolutely non-negotiable. Take it or leave it. And for something like the framing, it wasn’t like we could upgrade later. In most cases, the price for the upgrade in question was more than the cost of the materials themselves, instead of the difference between the base materials and the upgraded materials. The developer’s rationale was that it was a pain for them to keep track of upgraded materials for one house when they were building several houses simultaneously.
Another example was the carpet. We didn’t realize that the base carpet was this threadbare crap. It was bad enough paying the developer’s outrageous price to upgrade the carpet, but worse when he charged us for the entire floor space enclosed by the outer walls of the house instead of actually measuring the rooms. When we protested, he responded once again, “take it or leave it.” :mad: One neighbor got so pissed off at this that he ripped all of the base carpet out of his brand-new house immediately upon closing and replaced it himself.
By the end, we were barely on speaking terms with the developer’s representative. Other people in our neighborhood had similar experiences. One of our neighbors was actually banned from entering the property on which his house was being built, because he was allegedly interfering with the construction workers. In actuality he was just trying to make sure his house was being built to code, since our local building inspector was basically useless.
We had some neighborhood block parties the first couple of years after moving in. Much of the conversation revolved around how much we all hated the developer’s representative. All in all, it was not at all a pleasant experience. Personally, I would never go with a developer again if I ever built another house. YMMV.
On the other hand, I have heard other horror stories from friends who have gone with builders.
Robby, thanks for the insight. Sorry you had such a horrible time with it. The developer I linked to seems to have a pretty good reputation by comparison. Still, it’s kind of sobering to hear how quickly the costs can shoot up, and that’s my biggest fear.
That particular home seller has a “design showroom” where you pick out all of the things you want, and we stopped by a few weekends ago to look around. It’s quite impressive, and the costs for most things are laid out - if you want this light switch, it’s included, if you want the fancier ones, they’re a dollar apiece more; this carpet’s included, but this upgrade is $.25/sq ft more, etc.
It also doesn’t seem to make sense paying $219,000 for a brand new, base-model 3-bedroom when there’s a 4-bedroom that’s 5 years old listed at $224,000 a block away. Yes, it would be nice to pick out exactly the paint colors and countertops and appliances and flooring and get it all right the first time rather than having to rip it all up later, but I’m not so confident in my employment that I know I’ll be here for the 10 years it would take before it would appreciate to the point where I could break even on it. I mean, if I spent $235,000 on a house that was just right and tried to sell it in a year, I doubt I could get $200,000 for it. But somehow, they’re still building spec homes in this neighborhood and they’re selling. I guess if you have a job where your employer will cover the costs if they transfer you, it might be worth it.
Well…to sound boring…
I bought a yet-to-be-built house froma builder. It went very smooth. We picked a lot and style of house. They built it. We moved in 
Things I was expecting to be a problem weren’t. The allowances for the many things of the home were reasonable and we stayed pretty close overall. There wasn’t any surprises. I was expecting to pay significantly more than what was quoted but that wasn’t the case.
It was fun going to the builder stores and picking out stuff, like what carpeting, appliances etc etc etc.
The only complaint was that, it seemed, my wife dragged me out to stare at the hole in the ground EVERY SINGLE FREAKIN DAY! 
EDIT - ALSO…when you build a home things that are normally expensive are dirt cheap. You can put in power sockets and cable outlets EVERYWHERE. Hell, we put in multiple cable outlets in each room because it was so cheap.
In addition, you can wire stereo and speakers to all rooms of the house cheap because there are no walls yet. Security system? Same.
Go nuts!
Different country and stuff, but in Spain an upgrade that consists of “adding more stuff” (within reason), for example more electric outlets, is pretty cheap. Replacements on the other hand can be quite expensive, specially if you go “off catalog”: let’s say the builder offers “off-white walls everywhere”, with set prices for upgrades for “bone-white” and “radical white”. If you insist on having the house painted in three different colors, none of which is listed in the offerings, they will charge you as much as the painter would, plus comision. Why? Because that’s basically what’s happened, the painter has had to bring a bunch of stuff specifically for you. And if you ordered it after the windows and doors were already in place, he’s had to do the same work as to repaint an existing house (protecting frames, etc.) rather than the much easier work of painting rooms where the frames aren’t in place yet.
Bathroom fittings in an off-catalog model? It’s not a matter of ordering “23 toilets in model A and 1 in model B”, they had already ordered “24 in model A”. Upgrades requested later tend to be more expensive, again for the reason that they often involve ripping things off or canceling orders, not “just do it the other way”.
Yea YMMV but for me it was meeting with the electrician and him asking if you want anything extra besides the norm. Ask how much $$$ and he says some low number. Sure! But a socket here and here and here and a cable outlet here and here and here etc etc etc
Your contract will be very detailed as to what is included in the base price. From type of molding, cabinetry, countertops, fixtures, etc. You will invariably have change orders (you and your wife decided that you want a different style of granite in the kitchen, or you want a different brand of faucet in the bathrooms, or a different size toilet in the guest bath.) These change orders will result in changes to the price of the house before you close.
You will be amazed at the amount of time you will spend on making decisions. You will probably spend more time at the plumbing supply store picking out fixtures for the bathrooms, than you did making a decision to buy an entire house previously.
As I understand it, a builder is a guy who ties together all the subcontactors who are needed to build a house-foundation guys, framers, roofers, drywall guys, electricians, plumbers, etc. He hires them, makes sure that they show up and do the work properly, arranges for the town inspections, etc., and delivers a finished house.
In good times, its a mind-boggling job-because tradesmen always take on more work than they can handle.
Now that the market is flat, you can get good deals-and maybe even act as your own builder-if you want to!
To everyone saying it’s non negotiable-- here in good ol’ Bakersfield, CA there are just acres and acres of these developments, all started in the housing boom and now sitting stagnant. Tens of thousands of lots.
So, developers here are drooling for business. I have several friends who have bought houses this way and each and every one of them negotiated hard- just like you would when buying a new car. In the end, they all got all kinds of extra not originally offered, as well as paid fair less than the advertised price.
Note I said unless desperate for money. There are a number of contractors desperate for money and ready to go under too. There are currently a lot of subcontractors that have been screwed over by these contractors and gone under. Be very careful right now.
With respect to paint and fixtures, our experience matched Nava’s. We paid through the nose for any upgrade. The cost to paint our window frames and baseboards white instead of the same color as the walls (cream/off-white) was $2,000! (And having your window frames and baseboards painted the same color as the walls looks terrible.) Having the walls painted a color other than off-white was not even an option.
With respect to extra electrical outlets, cable outlets, and telephone jacks, which indeed should have been cheap, our developer charged between $250-$300 per outlet. It wasn’t cheap by any stretch. We did add a few additional outlets, but we certainly didn’t go wild. Not with our thief of a developer.
IIRC, we added something like five additional electrical outlets, three cable jacks, and three telephone jacks, and it came to nearly $2,000. Some CAT5 cabling and speaker wire between rooms was another $1,500.
Sure, because the housing market is currently in the toilet. This is a great situation for someone who is renting and looking at buying a house. For someone who needs to sell their current house, the deals being offered for new homes is mitigated by the loss they’d probably be taking on the sale of their old home.
For us, we happened to buy at the height of the housing boom (mid-2005), which is why everything was non-negotiable. We paid through the nose for our new home, and it was definitely a seller’s market. On the other hand, we made a lot of money on the sale of our old home, which appreciated by 44% in the three years that we owned it. (We cleared nearly $80K on that sale.) So either way, it’s somewhat of a wash, unless you are in the unfortunate position of having to sell in a down market with no opportunity to buy, or if you happen to buy into a market bubble without also being able to cash out.
The market value of our current home continued to rise after we bought it, then dropped with the housing crash. Based on a recent appraisal (for a refi), it’s currently worth about what we paid for it.
We had pretty much the opposite experience with our builder. It was 40 bucks a drop, wherever we wanted a drop to go. Surround sound wiring ended up being 160. Cat 5 to every room that wanted it was 280. I think we got every wire we could think of for under 750, with control panels in the basement.
My dad’s lives in a house that was built by a builder for that builder to live in. They have a network cabinet that would not be out of place in a medium sized office. Every wall has cable, cat 5, and phone. So for the builder to go that hog wild I am guessing the actual cost of doing such things is pretty low.
With all due respect and genuinely no offense intended, robby, it sort of sounds like you just got a very raw deal for buying when you did. Your experience is not typical of anyone I know who has bought from a builder (including my own mother, who bought in 2001).
Thanks for all the posts… Once we’re a little closer to buying, we’ll probably call up the builder and price something out, see where it ends up. Hopefully we can get a solid number before signing a contract. The housing market here is in between Robby’s experience at the height of the bubble and DiosaBellissima’s experience in thoroughly-depressed Bakersfield. The housing market never really bubbled here, but foreclosures are on a steady climb, and a report out today says housing prices will continue to decline through late next year.
And I’m actually on both sides of this issue - I have a house in KC I’m renting and will be trying to sell, and I’m currently renting a shitty apartment that I would like to get out of as soon as possible. I’m trying to get in touch with the tenants renting my house so I can offer to sell it to them if they would like to claim the tax credit. I’m just sorry I didn’t think to call them sooner, but my wife thought of it over the weekend.
WHAH???
WTH?!
Maybe I am going senile but I remember outlets at $15 a pop and cable jacks at $35…and these were good jacks! I remember going wild over the house with outlets, telephone and cable jacks everywhere for a couple hundred.
The speakers and speaker wire through the house I cannot price because it was the whole deal at it cost IIRC about $4000 but that included speakers and receiver etc. however that price probably came within spitting distance of your $1500…