How much % can you negotiate down with a custom builder these day

topmanMarch 12, 2011

Just wanna gather some information from anyone here who has signed a contract with a custom home builder recently or over the past one or two years. How much % were you able to talk down from the quote they gave you? Or is this negotiable? If it is, what is considered a reasonable %?


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That depends on the builder. Some will let you supply certain things (appliances, lighting/plumbing fixtures, etc). Some will let you take on certain responsibilities (painting, tile work, etc). Some won't. Remember these types of things cut into the builder's bottom line if you're doing cost plus & they may or may not decide to find another area to make that $$ back up. From the builders we have spoken with of late, their fee is non-negotiable (unless they are open to you taking on certain responsibilities & you are ready & willing to do so.) We were quoted 35% reduction in their fee (the plus part of cost-plus) if we (homeowner) handled pulling all the permits, released them (the builder) of any liability associated with the jobsite & build, & we took over every aspect of the build once the house was dried in. Don't think I'm ready for that!

    Bookmark   March 12, 2011 at 6:04PM
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Got it, we were hoping with the market these days, there may be more room to negotiate!

    Bookmark   March 13, 2011 at 3:27PM
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Topman-- There may be more wiggle room depending on the builder. This was just one experience. We had a builder C but I wasn't as confident in his work so we didn't try to talk him down. Builder A for us at this point is Schumacher Homes--they will build their plans or yours (we thought they only built their plans). At this point, we've upgraded to all the preferred brands of the bells & whistles we want and we're coming in way under Builder B who had downgraded everything. They work very hard upfront to confirm all your specs so there are no surprises along the way and then they guarantee the cost to build. If you come in underbudget on your allowances, you get that credited back at closing (i.e. appliances come in under budget). If the cost of sheetrock or lumber or anything else they're supplying goes up, they eat the extra cost. As with any build, if you make changes along the way expect a change order fee. We worried about quality, but from what we saw when we toured their model yesterday the quality was there (at least with our local office). So you may want to try your local Schumacher & see what they have to offer. Even though they're a national company, you really have to judge them by their local work as they use local subs not national ones.

    Bookmark   March 13, 2011 at 6:08PM
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In our case, we were negotiating with a small custom builder who already owned the city infill lot that we were interested in. His bid was $425,000; we offered $405,000, and he accepted. We initially had some concern that he would just lower the quality of materials or construction by $20,000, but the new bid included the same allowances for materials as the original, and we knew from talking to references that he was a very ethical guy who wouldn't compromise on quality.

Our construction loan required an appraisal, which came in at only $370,000--a fair appraisal given the current housing market, I think. We qualified for the loan, since we were putting a high percentage down, but we still almost backed out at this point. Our builder offered one more incentive that helped convince us to continue--he offered to do all our upgrades and change orders at cost, which was a significant savings to us during the build. So that's another thing you could think about negotiating.

    Bookmark   March 15, 2011 at 1:01AM
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We signed our contract at the end of January after negotiating for a month or so. In the end, there was very little wiggle room on the part of the builder. That's just the way he works. Ultimately, he thru in a few upgrades, totaling approx $5,000 - not much on a 500K house.

Good Luck!

    Bookmark   March 15, 2011 at 3:48AM
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I guess I am weird but when Dh and me were building a couple years ago our builder "spelled" everything out so well we just didn't see or think of asking for more money off of the build!! He explained in great detail of how and why he pays each member of his crew, which were only 4 guys. Everything was very clear in the contract. I just have to say that by the time we had our home built we were very comfortable with the price and knew why everything was priced the way it was. It just comes down to very honest communication and I think you know right away if someone is good at what they do by how they do business. Anyway, just another view of things!
Good Luck!

    Bookmark   March 15, 2011 at 11:02AM
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twotogo--a builder's flexibility on price definitely depends on how much profit he is making on the build--it sounds like your builder was transparent with you about his profit, and that there wasn't much wiggle room. The housing market in our area was really hot for years, so builders made large profits on each house. Buyers didn't mind because their house was worth what they paid or more the day they moved in.

If we had made the offer we did a few years ago, our builder surely would have said no, knowing that someone else would pay full price. But in the current market, prices for existing homes are relatively low, so the new construction market is really slowing down. Obviously you can't expect a builder to build at a loss, but I don't think builders can expect to make their past high profits in today's market.

    Bookmark   March 15, 2011 at 12:18PM
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I work for a custom builder. Negotiating is simply dependent on a few things. Scarcity and quality.

Lots of work means the builder can have a higher profit at the same quality.

Right now we can not build a quality structure at what many builders are willing to bid the job at. Most quality builders(who need the work) will give you there best price right up front. They can't afford to play games. If you do your homework( proper bid documents and proper research on those builders you will ask to build)you should get the best price for the quality you want right up front.

    Bookmark   March 15, 2011 at 12:48PM
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