NEw construction: builder upgrades and selling price question

[Coronita]

Asking for a friend.

If you’re buying a new construction home, and you decide you want to do a lot of the builder upgrades, can one request those upgrades to be billed separately?
For example, if you decide to spend $25k upgrade to include solar, can you request from the builder to bill that separately from the selling price of the home?

How would this be different if you bought a resell home, and then did a bunch of upgrades afterwards?

[Hobie]

Wouldn’t it be better to add upgrades to 30year low interest mortgage? Cheaper than Heloc. Higher mortgage interest deduction.

Downside, you may want your own contractors to perform upgrades. Quality, etc.

[all]

[quote=Hobie]Wouldn’t it be better to add upgrades to 30year low interest mortgage? Cheaper than Heloc. Higher mortgage interest deduction.
[/quote]

Property tax.

[Hobie]

Bingo, all.

[plm]

Yes, on both of my new house purchases, they allow you to pay for upgrades separately. And usually they make you pay half up front in case you don’t go through with the purchase. I have found that the builder charges quite a bit more for upgrades but your kind of stuck using them unless you want to replace it yourself later.

[ocrenter]

[quote=plm]Yes, on both of my new house purchases, they allow you to pay for upgrades separately. And usually they make you pay half up front in case you don’t go through with the purchase. I have found that the builder charges quite a bit more for upgrades but your kind of stuck using them unless you want to replace it yourself later.[/quote]

Yes, that’s my experience as well. You got to watch them like a hawk about it because the great majority of folks just include everything in the sales price so the “default” for the sales staff is to just mindlessly adding the upgrades into the sales price.

Also, when possible really best to just hire your own guys to do the upgrade unless the builder somehow was competitive with their prices, which usually isn’t the case.

[Coronita]

Thanks everyone. I’ll pass the word along…

[an]

Too bad you can’t order the base house w/out flooring and kitchen so you don’t waste money tearing it out.

[CA renter]

[quote=AN]Too bad you can’t order the base house w/out flooring and kitchen so you don’t waste money tearing it out.[/quote]

I’ve often wondered this. Is it because you can’t get financing if the house isn’t complete?

[CA renter]

[quote=ocrenter][quote=plm]Yes, on both of my new house purchases, they allow you to pay for upgrades separately. And usually they make you pay half up front in case you don’t go through with the purchase. I have found that the builder charges quite a bit more for upgrades but your kind of stuck using them unless you want to replace it yourself later.[/quote]

Yes, that’s my experience as well. You got to watch them like a hawk about it because the great majority of folks just include everything in the sales price so the “default” for the sales staff is to just mindlessly adding the upgrades into the sales price.

Also, when possible really best to just hire your own guys to do the upgrade unless the builder somehow was competitive with their prices, which usually isn’t the case.[/quote]

Agree with all about not paying property taxes on these overpriced upgrades. One option would be to put down more than 20%, and then do a quick refinance after it closes to pull that money back out and use it to do the upgrades. That way, you can still deduct the mortgage interest, and you have more control over the cost and quality and of the upgrades.

One possible way to get “instant equity” is to time the purchase seasonally. Not sure about new developments, but prices on existing homes are often quite a bit less expensive during the fall/winter months vs. the spring and summer months. If that’s the case with new homes, you can buy during the slow time and then refinance in the spring/early summer, which could potentially give you some extra equity over and above your extra down payment. Of course, this is a pure gamble, but it might be worth a try.

[ocrenter]

[quote=CA renter][quote=AN]Too bad you can’t order the base house w/out flooring and kitchen so you don’t waste money tearing it out.[/quote]

I’ve often wondered this. Is it because you can’t get financing if the house isn’t complete?[/quote]

Yes, that’s the reason.

Out financing guy “looked the other way” and allowed the second floor to stay bare while we used our flooring allowance on linoleum on the first floor. The linoleum then served as the base for our travertine later on.

[Coronita]

[quote=ocrenter][quote=CA renter][quote=AN]Too bad you can’t order the base house w/out flooring and kitchen so you don’t waste money tearing it out.[/quote]

I’ve often wondered this. Is it because you can’t get financing if the house isn’t complete?[/quote]

Yes, that’s the reason.

Out financing guy “looked the other way” and allowed the second floor to stay bare while we used our flooring allowance on linoleum on the first floor. The linoleum then served as the base for our travertine later on.[/quote]

Interesting…I often wondered if it’s possible to opt out of the builder’s options in kitchen and flooring and just put in what you want because it seemed like the builder’s markup was pretty big for upgrades and it didn’t make sense to me to put stuff in and then take them out again.

So did you have to put in a kitchen cabinet, counter via the builder, or were you able to get around that too?

[ocrenter]

[quote=flu][quote=ocrenter][quote=CA renter][quote=AN]Too bad you can’t order the base house w/out flooring and kitchen so you don’t waste money tearing it out.[/quote]

I’ve often wondered this. Is it because you can’t get financing if the house isn’t complete?[/quote]

Yes, that’s the reason.

Out financing guy “looked the other way” and allowed the second floor to stay bare while we used our flooring allowance on linoleum on the first floor. The linoleum then served as the base for our travertine later on.[/quote]

Interesting…I often wondered if it’s possible to opt out of the builder’s options in kitchen and flooring and just put in what you want because it seemed like the builder’s markup was pretty big for upgrades and it didn’t make sense to me to put stuff in and then take them out again.

So did you have to put in a kitchen cabinet, counter via the builder, or were you able to get around that too?[/quote]

We were lucky in that the base cabinets were already quite nice.

The base granite, on the other hand, was quite mediocre. So we just had our contractor remove the base granite. As for the bathroom, according to my contractor it was very easy knocking out the base white tiles as it was still very new.

The bank was able to look the other way as long as they were able to take photos showing a fully done kitchen, and fully done bathrooms. That’s why bare floor on the second floor was ok but no countertop for kitchen and baths were not.

[CA renter]

That makes sense, though it would be nice if buyers could opt out entirely from the builders’ cabinets, flooring, etc., in exchange for a credit or discount on the price — wouldn’t it be nice if the price discount were the same as they charge buyers for their installations and upgrades! Then, the buyers could put in their own finishes and get a certificate of occupancy in order to fulfill the terms of their financing. Seems a lot less wasteful, not to mention more cost efficient.

Thanks for sharing your experience, OCR.

[joec]

My guess is they make the bulk of the extra money in these upgrades…

I’ve seen most people just buy closer to the bottom list price without many upgrades and just live with the cheap stuff, then after a few years, replace it.

They don’t give you any credit if you don’t so you might as well use the cheap carpet or what not for a few and upgrade in 5.

The things dealing with extra rooms, baths, etc…are probably worth not having to deal with changing the floor plan though so those are probably worth the upgrade prices.

With young kids, you also are glad to see the carpet get all messed up and imagine when you will replace all of it when they’re more grown up.

[Author]

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