Buying a new home is exciting, but if it’s a brand new house that’s just been built, possibly even more exciting. If you’re the type of person who either hates DIY or is simply hopeless at it, then a new build house is the way to go. But how much can you negotiate off a new build house, so you don’t too much value when you come to sell?
If you get your timing right you can negotiate up to 20-30% below the developers asking price off a new build house. But this depends on the property’s location and the strength of the housing market. If you can move fast and it’s the last one or two houses left, the more chance of haggling more.
The best way to be in a position to negotiate is to research sold house prices in the area where the new build house is located. Whilst you will almost always pay a premium for the house being brand new, you don’t want to be paying an over inflated price.
It’s a good idea to include in your research the sold prices of other new build houses. You can find this out by checking Land Registry for actual sold prices, but bear in mind that it can take up to two months for Land Registry to update for house sales.
What if you cannot negotiate the price on a new build house?
If you are not able to haggle on the price of a new build house, you may be able to negotiate for extra things or upgrades to be done on the house. However, any incentives you receive from a builder that exceed 5% of the property’s value, need to be declared to your mortgage lender.
Things and upgrades to include in haggling on the price of a new house:
1. Closing costs
Closing costs will include legal fees, stamp duty and the cost of a survey. Some developers will offer to pay your Stamp Duty (SDLT), or offer to pay your legal fees to reduce your closing costs. But if you are a first time buyer, you may not be required to pay Stamp Duty, so you may be able to haggle on the price instead.
2. Upgrade to better fixtures and fittings
Instead of getting money off the purchase price, which will affect future appraisals, you may be able to negotiate better fixtures and fittings. The extra cost to a builder for better fixtures and fittings will be marginal, as the cost to fit them will be the same.
But you will need to ask for these before they have been fitted, as a builder is unlikely to replace fixtures and fittings already installed. So timing is important, as you’ll need to get to the site before the fixtures and fittings have been installed.
3. Upgrade the whitegoods
You may be able to get better whitegoods and appliances in the new build property from the developer. This includes better fridges, freezers, hobs and ovens.
4. Ask to keep the furniture in the show home
If you end up buying the show home on the development, you may be able to negotiate to keep the furniture the builder has used to sell the site. This could save you many thousands if you don’t already have furniture, or if your furniture is old and out of fashion.
Why developers don’t always like to negotiate the price of new build houses
Most builders are reluctant to negotiate on the purchase price, as they want to keep the final sold price high to avoid affecting future valuations in the neighbourhood. Each house that’s sold at under value will affect the value of the surrounding houses.
When is the best time to negotiate the price of a new build house?
1. Last plot or two
At the end of a development the builder will be keen to get off the site and will want to minimise on-going costs associated with any further marketing of the last one or two houses. It is at this stage when you may strike lucky and negotiate a good price to take the last property off the builder.
This won’t necessarily apply to small house builders, as they may not have another site to move on to until their current site is completely sold. Plus their overheads will be very much lower than the larger house-builders.
2. Developer’s year end
As it gets closer to a developer’s year end, they will be more likely to haggle on price. With the larger developers they will be keen to make their year end accounts look good and improve their share price if they are a publicly listed company. Improved numbers will also help with future financing of projects too.
You can often get a better price on a new house if you buy off-plan. Many developers use off-plan sales to help finance the rest of the development. But be careful with buying off-plan, as you can sometimes come unstuck if house prices fall between the time you buy and when the house is built.
Final thoughts about how much can you negotiate off a new build house
Builders are often reluctant to drop their prices as they are keen to maintain a certain value for the neighbourhood, which protects them on future projects, it protects the value of your house and other homeowners in the area.
However, if a builder give upgrades to homebuyers instead of money off the price of the house, it’s an easy way for them to maintain the value of houses in the neighbourhood. But upgrades provide a better deal on the new house.
Depending on the market, you are more likely to get more from negotiating upgrades than you are from negotiating on price, but that doesn’t mean it’s not worth trying to haggle, especially if you are buying the last house on the development.
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Article written by Russell Bowyer who has been investing in property since purchasing his first commercial property in the 1990's for his own Chartered Accountancy business. But his first property investment project was to turn an old dilapidated restaurant into a large 5-bed home, which he purchased for £117,500 and sold for £450,000 (to see an "after" photo of the house before it was sold see here: About). Russell owns a number of investment properties, which includes houses, flats and HMO's. More recently he has turned his creative side to investing in property using lease options. His largest lease option deal to date was to acquire 12 properties worth over £2 million for just £12, which means he paid just £1 to acquire each property!
