Giveaways, freebies, discounts, free upgrades, and prepaid costs – the list of incentives offered to buyers by new home builders is endless. These incentives can certainly save you money and are one of the main reasons that buyers often choose to buy a new construction home over a resale. However, some incentives may seem like a great deal at first glance, but you will later find out that they come with a catch. Buying a new construction home is a very important financial decision, therefore it’s vital that you properly assess the true value of any incentives being offered to you as part of a sale. Read on to learn more about the types of incentives new home builders commonly offer and how to assess their true value in your new construction home purchase.
Types of New Home Builder Incentives
Some of the incentives new home builders offer to sweeten the deal for home buyers include:
- Free upgrades and options
- Gifts and giveaways
- Concessions for using the builders’ lender
- Prepaid costs
These Sound Great, So What’s the Catch?
These incentives certainly are enticing, and some may actually save you money, but others may not. Let’s take a closer look at the different incentives that new home builders offer and how they may or may not be beneficial to you.
Free Upgrades and Options
One of the main perks of buying a new construction home over a resale is that you are able to personalize your new home by selecting upgrades and customization options. On average, new home buyers spend 10 percent of their purchase price on these types of upgrades and options. Getting them for free can therefore save you a significant amount of money, but they often come with terms and conditions. To be eligible for these free upgrades and options, a new home builder may require that you:
- Make an offer and buy immediately
- Make a non-refundable deposit
- Use only the builder’s lender or agent
It’s important not to feel pressured into making a quick decision just to take advantage of the free upgrades and options on offer. Unless you’re looking at the last home available in the community or plan, chances are good that the deal will still be available at a later date. So take your time to decide if this is truly the right home for you and your family, regardless of the freebies being offered.
Gifts and Giveaways
From free TVs and entertainment systems to cars and luxury vacations, new home builders offer all kinds of gifts to entice buyers. If your decision to buy a new home is being influenced by these types of tactics, you may need to consider whether or not you truly love the home you’re about to buy. In addition, the value of these giveaways is often not as high as it may appear. Free cars are usually offered on lease terms and therefore must be returned at the end of the lease period. Electronics, such as TVs, depreciate in value quickly, and therefore you may be better off shopping for a good deal on your own.
Concessions for Using the Builders’ Lender
Many builders require that you get prequalified through their lender if you want to buy a home from them. While there’s no harm in doing that, don’t be fooled into believing prequalification with a lender means you have to borrow from that lender as well. The builder may claim that their lender will offer you lower interest rates, better terms, and faster closing periods than others; however, you do not know if this is true until you do your own research. Just a one percent difference in interest rates can cost you thousands of dollars over the life of your loan. Be sure to shop around and compare the rates and terms of several lenders before choosing one.
NewHomesMate is giving new construction home buyers a smarter way to shop around for a mortgage with their pre-approval tool. Getting pre-approved through our website gives you access to Morty’s mortgage marketplace, which allows you to compare a range of mortgage rates and loan options from many lenders.
A builder may offer to prepay your closing costs, property taxes, or homeowner association fees to sweeten the deal on your new home purchase. While this may sound like free money, it’s not actually that simple. Remember, a new home builder is in business to make a profit, and giving things away for free is not likely to help them make money. In many cases, when a builder offers incentives such as prepaid costs, they have actually inflated the sales price of the home to cover the cost of these so-called “freebies.” Instead of saving you money, these actually cost you more in the long run, since you end up financing them through your home mortgage as part of the final sales price, and therefore you end up paying interest on them.
So How Do I Ensure I’m Getting a Great Deal on My New Home Purchase?
The housing market is highly competitive, and new home builders are competing with other builders, as well as sellers in the resale market. While some incentives do come with terms and conditions, many of them can actually save you money. Becoming an informed homebuyer who is able to make confident and educated decisions is key to your success. Here are some tips that will help you get a truly great deal on the home you love.
Read the Fine Print
Now that you’re aware that those freebies that catch your eye may actually come with a catch, it goes without saying that you should always read the fine print before making any decisions. Make sure you understand all the terms and conditions associated with an incentive being offered to you, and don’t be afraid to ask questions if you don’t understand all the details.
Don’t Make Hasty Decisions
Take time to carefully think about any decision you make regarding your new construction home purchase. Don’t feel pressured to sign a contract or buy immediately just to take advantage of a discount or incentive. After seeing a home you like, it’s always a good idea to take at least a few days to think about whether the home is right for you and your family, regardless of any incentives being offered, before making a final decision.
Assess the True Value of All Incentives
Once you understand the terms and conditions associated with an incentive, you need to do your research to assess their true value. This may involve shopping around to compare mortgage rates, determining the dollar value of any prepaid costs being offered to you, and researching other new construction homes and communities to compare your options.
Use Your Own Agent
The salesperson you meet when you visit a new construction home or community is likely to be highly knowledgeable about the homes and the neighborhood they are selling in. While they can provide you with a lot of useful information, it’s vital to keep in mind that they represent the builder only. They are being paid a commission to sell only the new construction homes within that community, and therefore they are not necessarily interested in finding the best home and community for you.
When you’re making a decision as important as the purchase of a new home, you need a qualified professional to represent you and your interests. NewHomesMate’s agents are here to represent you, and only you. They have in-depth knowledge of their local areas, good relationships with local builders, and expertise in the new construction housing market. They will not only help you find a home you love, but will also assist with reading the fine print of your contracts, understanding terms and conditions, and assessing the true value of all incentives you are offered. With our new home experts on your side, you can be sure that you’ll have the advice and guidance you need to find the right home for you and your family, while getting the best terms and options available on your purchase.
Allow NewHomesMate to Assist You With Your New Construction Home Purchase
No matter where you are in your journey towards buying a new construction home, NewHomesMate is here to assist. On our platform, you can search for and tour thousands of new construction homes and communities in your area. Our agents are ready to guide you through every step of the home buying process, and will provide you with expert advice to ensure that you get a truly great deal on a new construction home that you love.
Start searching with us today!