Negotiating with a Custom Home Builder Means Having the Right Mindset

Building a custom home provides a wealth of opportunities. You can pick or design your own floor plan, get the features you truly want, and build for the future. Making your dream home a reality is an extremely important life decision, and you’ll need to be sure you’re ready to work with a builder you trust. 

Some people, in an effort not to be taken advantage of by their builder, may try to negotiate in the old sense of the word. That means they may give budgets that are lower than they really are, thinking they are defending themselves when they’re really keeping themselves from getting what they want. 

At Turner & Son Homes, we have more than 50 years of experience helping our customers build and afford their dream homes. We care that our customers get exactly what they want, but it’s only possible with a foundation of trust. To us, negotiating means working together to make the best home we can, and that requires full transparency from both buyer and builder. 

We believe that being prepared is one of the most important steps in the custom home design process. So we put together a few pointers to prepare you to negotiate transparently with your builder.

THE RIGHT WAY TO WORK WITH A BUILDER

You may feel the need to sharpen your skills in preparation for meeting with your custom home builder, but this is a defensive mindset that treats interacting with a builder as a hostile relationship. Ask yourself if you really think this specific builder is out to take advantage of you or not. 

Once you have the answer, decide whether or not to proceed. Two of the worst things you can do is proceed if you think something is not right, or proceed as if something is wrong when nothing is.

Once you’ve made your decision, you can start taking the following steps to make this process as successful as possible for yourself, your home, and the builder you’re trusting to make it all happen. 

Determine the Budget

Building a custom home involves so much more than just the cost to build. Unless you’re one of the few people to whom the bottom line means nothing, it would be a mistake to not set your absolute maximum price at the beginning of the process. At this point, you may or may not have selected a custom builder. Budget is one of the factors that will likely play a part of the selection. 

The maximum price is your line in the sand that can’t be crossed and isn’t open to negotiations. Regardless of all the new and unique features the builder suggests, unless there are areas to negotiate that will allow you to fit them in your budget, you should be prepared to say no. And if your maximum price is reasonable for the proposed home, but the builder says he can’t make it happen, you may want to look for another builder. 

Do the Research

Conducting appropriate research will help you collaborate effectively with your builder, potentially saving you both time and other resources. For example, perhaps you plan on building a home or even a barndominium in far southeast Oklahoma City. In that case, you will want to target your research to that more rural area to gain a better understanding of what you want and what is possible.

Talk to local real estate agents and research websites such as zillow.com or realtor.com. Find homes or model homes of comparable size with similar features to help you develop a sense of what you can achieve in that area or price range. You can even talk to owners of existing homes to learn about how their building processes went, and whether or not they would have done anything differently. 

Communicate Clearly

Stanford Graduate School of Business Professor Emeritus Maggie Neale believes negotiation should be considered  collaborative problem-solving as opposed to a battle. Basically, both you and the builder are on the same side and want to solve the same problem — how to build the house of your dreams within your budget.

For this to work when negotiating a design build, you need to communicate clearly what you want. That’s the only way the builder will know for certain your expectations. Ask questions, gather facts and get clarification to make sure you understand everything.

Keep Your Cooly

Keeping emotions in check will help through all steps of the process. While communication should be clear and concise, try to keep your emotions out of it. Whether you are excited to be meeting with a popular builder or angry at your existing builder for a construction problem, the best route is to keep a straight face and even tone, and address the issue at hand.

What can (and can’t) be negotiated?

Building a home is a multifaceted process, with different parts affecting the cost individually. The truth is that the cost of the home is driven mostly by the design, the features, the land, and the market conditions, all which leave little if any room for fluctuation. 

The Builder’s profit and overhead are of course part of the equation, but a much smaller percentage than everything else. This is part of why “negotiating” in the common sense of the word doesn’t really work with an honest builder.

While you should pay attention to the financial aspects of building your home, the real value a builder brings is creativity and thoughtfulness of design. It takes a deep understanding of design and cost to build, along with a willingness to spend the time and energy to create something new, to create a design that not only provides you with a concrete manifestation of your vision, but one that is realistically buildable within the budget.

A builder can’t change the cost of materials, land, or features — although they can help you prioritize to get your desired features within the bounds of your budget. To be completely honest, a builder who is going to do right by you is worth paying for. So while you can certainly try to save money on constructing your dream home, this isn’t something you want to do on the cheap. 

That being said, here are a couple of areas you can look to save in. 

FINANCING 

There are many options available to finance buying a new home. Be sure to understand your options and choose what makes the most sense for you.

• HOA fees — homeowners association fees can often run into the thousands annually. This is another expense a builder may cover. Ask if yours will pay the fees for the first year.

• Preferred lender — many custom builders work with preferred lenders, which can help to keep overall costs down. This is because a good working relationship between the builder and the lender creates simplicity and predictability, eliminating the need for additional administrative fees and lowering the cost of back-office overhead.

THE COST OF UPGRADES

If you fail to get a discount on the cost of the build, don’t lose hope. Go for the next best thing — upgrades. While upgrades cost money, getting them at a good price can increase the value of your home over time. 

Consider these types of upgrades that add value: 

• Hardwood flooring 

• Elevated ceiling 

• Crown molding

• Custom tile work, particularly in the master bath

• Also in the master bath — radiant floor heating and spa-like amenities such as a towel warmer

• Roughed-in plumbing and electrical — makes for easy additions

• Heated garage or deeper basement

A Final Word

We’ve discussed how negotiating with the custom home builder is all about your mindset. It’s not you versus the builder. The two of you have to work together from a basis of trust if you want the home of your dreams. The value a skilled and honest builder will bring is well worth it. 

Don’t Go to Your Home Builder Consultation Without this Checklist

We’ve prepared a checklist — 10 questions to ask a home builder — to help you find the right custom home builder. When you’re building your dream home, accept nothing but the best!

Download the checklist here!