Negotiations with builders?

11 years ago

Hello all,

We are planning to build in a community in a community that requires we choose from their preferred builder list. After meeting with 6 of the preferred builders, we really felt drawn to one in particular. Several days later, we wrote the builder to express our interest in working with them. Fast forward to this week after meeting with a realtor to sell our home. This realtor essentially told me that I needed to hold my cards much tighter, that I needed to essentially create communication that would encourage the builders to bid for for our home, or place us in a position to negotiate the price down with our "chosen" builder. I'm just a pretty straight forward, open person; thought I was doing the right thing by being open with our finances, wishes, etc. Question for you all: What in the world is she talking about? What kinds of things were you able to negotiate? Did you use a realtor on the buying end- what were the pros/cons of this? I feel in over my head, and we haven't even started yet!

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PRO

Springtime Builders

11 years ago

It gets personal but from a custom builder's perspective, this is a red flag. If the house is spec thats one thing but if its a custom home from scratch I would prefer to work with someone who sees the value in what we do and will have a collaborative mindset, not adversarial. Clever builders usually find ways to make back any perceived discounts throughout a custom build process. It depends on the area and type of project but trying to set up a competitive, lowest bid scenario may not result in the greatest of outcomes.

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Comments (9)

Michelle
11 years ago
I can only speak for myself, but we did not use a realtor, except for the purchase of the lot. And we are doing a custom home, so there were no bidding negotiations. We received several bids then chose the builder we knew we wanted to work with. He wasn't the least expensive, but we had the most confidence in him.

Did you get bids from several builders?
gwlake
11 years ago
We did the same I met with a few builders I carefully looked at some of the homes each was building and got an idea of what they offered per sq It seemed each builder had their standards. I do not begrudge a builder making a profit I am a capitalist. At the end of the day I wanted to work on this project with someone I felt comfortable with and who had a strong business presence. The builder we picked calls me back or texts me back immediately. I do not except things for free. I want a quality product, and I want someone who follows through to be my builder.
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Vith
11 years ago
last modified: 11 years ago
Sounds like the realtor wants the contractors to do a bidding war for work. In the end you should go with the contractor you feel comfortable will do the job right. Money is always a factor though, so having a ballpark idea of what it costs helps. If you only get one bid then you don't get that ballpark idea. However, if you already know approx what the cost should be for your area then I would not stress about dealing with more bids.
houses14
11 years ago
You do not need a realtor for custom home building because builder could add their commission to your price
PRO
Springtime Builders
11 years ago
How about you suggest to the realtor that he should have to negotiate his commission?
Lizzie
Original Author
11 years ago
Exactly, Springtime Homes. The realtors have all told me that the builders automatically build in 3% into their costs for realtor commissions. Yet, I've yet to find a realtor to help me understand their utility; explanations have been full of vague statements and within the realm of what I can do myself. So, I think I'm better off not using a realtor, and negotiating the 3% off the sale price with my builder. Have any of you done this?
PRO
Matteson Custom Homes
11 years ago
A realtor has their place but it sounds to me like you don't need one other than to sell your current home. We only build custom homes and just as springtime suggest we collaborate to get a truly custom home. In fact, we've turned clients away who throw up red flags. Having said that, you should simply ask the question if there are ways to reduce the cost if the builder you would like to work with is out of your budget. I would be cautious in doing this as cheap builder can sometimes mean cheap build.
Lizzie
Original Author
11 years ago
Thank you for your feedback. We've been meeting with one particular builder and really feel great about the rapport, quality, communication, and experience. We met again today, and I decided to take your advice and disregard the realtor's plan- just spoke openly about our budget, realistic plans, etc. and it felt "right." Thanks again!