Tips for Saving on Newly Built Homes

Wouldn’t it be nice if buying a new home was as easy as buying, say, a new car?

You could read consumer magazines to check up on the latest models and the best deals. Laboratory technicians would “road test” several home designs and report back on which models had the best floor plans, energy efficiencies and future appreciation. After “test-driving” several models, you’d haggle with the builder for a big rebate and other freebies.

Ah, if only life were that easy.

More than 35,000 people in Southern California will buy a newly built home or condo this year, according to Jeffrey S. Meyers, president of the Meyers Group, a consulting firm that tracks new-home issues for builders and banks. And they all want to know how to get the best deal on a new home.

In researching our book on building a new home, we found many strategies that could save you thousands, if not tens of thousands of dollars, on the purchase of a new home. To discover the best deals and the biggest mistakes, we interviewed dozens of home buyers and builders in California.

The result is a process we call “Guerrilla Home Buying,” because getting a good deal on a new home is much different than haggling on a car or major appliance. Instead of cashing in on rebates, you have to play the “upgrade” game, do homework on unfamiliar items, such as windows and mechanical systems, and make sure the design really fits your lifestyle.

One key point to remember: Builders are loathe to cut the prices of new homes--it displeases their shareholders, not to mention the buyers of last year’s models. So, instead they offer “incentives” such as upgraded carpeting, free landscaping and money toward closing costs. That way they still technically sell the house for full price, even though they’re giving you $5,000 in closing costs and another $5,000 in “designer options.”

Of course, being a smart new home shopper entails much more than just getting free carpeting. Here are 12 tips on how to get a good deal on a new home:

--Buy at the end of the builder’s fiscal year to get the best deal on a new home.

Publicly owned home builders (those whose stock is sold on an exchange) need to pump up sales numbers to impress Wall Street near the end of their fiscal years. Hence, many wheel and deal on closing costs, options and landscape packages in the days before the end of that month. While some builders’ fiscal years follow the calendar (Standard Pacific, for one), others end during odd times of the year (Kaufman & Broad Home Corp. is Nov. 30). Be prepared to close escrow before their fiscal year ends to get the goodies. Check with your local library to find the fiscal year-end dates of public builders.

--Make sure your new home is El Nino proof.

The torrential rains and flooding of this past winter reminded all Californians that living next to the Pacific Ocean is not always a day at the beach. For several years, many California builders ignored simple weather-proofing and are just now playing catch-up to change their designs. Some of the best precautions: Make sure the entire house has rain gutters and downspouts (not just the front) and that the drainage is piped away from the home. J. M. Peters has added this feature to all new homes, as well as better-sealed vinyl windows to keep out wind-driven “horizontal” rains. Another subtle point: Make sure French doors open inward, not out. Inward-opening doors have a seal that prevents water leakage.

--Avoid the specialized room trap.

Builders today are selling model homes with all kinds of “specialized” rooms, from home offices to exercise areas. But don’t get trapped with a specialized room that can’t be converted to another common use, like a bedroom--it’s better for resale to maintain the flexibility. For example, don’t remove the closet from a home office. Wire an exercise room for cable so a future owner could convert it to a media room.

--Don’t buy a lemon on the Info Superhighway.

Even with all the talk about the 500-channel future, many builders are still wiring new homes with cheap coaxial cable and inadequate phone wire. The result: When the vaunted information superhighway comes to your neighborhood, you’ll have to spend big money rewiring. Companies like U.S. Tec of Canadaigua, N.Y., (716) 393-9680, (800) 836-2312, sell upgraded wiring and connectors that allow your home to go digital at minimal costs.

--And speaking of computers. . . .

Make sure your kids’ rooms are designed to accommodate that new Power Macintosh you just bought.

The problem: Most secondary bedrooms in new homes are rather dinky--10 feet by 10 feet has been the standard size for many years. That hardly leaves room for a bed, dresser, desk, not to mention the computer, printer and assorted other goodies. Builders have just recognized this, recently incorporating 12-by-12 bedrooms into new models. If you have a budding Bill Gates, you may want to look closely at the size of secondary bedrooms. Another trend: more baths. Instead of three kids’ bedrooms sharing one bath, some designs incorporate baths right off each bedroom.

--Beware the “designer packages.”

Builders charge huge markups on so-called “designer packages” for plush carpeting and window coverings--sometimes as much as 25% to 50% over cost. A better bet: Shop around for the best deals on these items and see if you can beat the builder’s price. Then negotiate for a credit from the builder and hire another company to install the items. The only downside to this tip? Some builders will only give you a fraction of the designer package as a credit. Still, you may come out ahead.

--Avoid flooring overkill.

Here’s a common mistake made by Southern California new home buyers--upgrading the flooring in a new home beyond what is appropriate in that home’s price range. For example, a limestone entryway in a $300,000 home is fine. In a $100,000 starter home, it’s overkill. While that may seem obvious, many home buyers who fall prey to flooring overkill often sink money into fancy finishes that they may never recover on resale. Another money-loser: Upgrades to all-wood or tile on first floors can rarely be recouped later on resale in mid-price homes.

--Carefully consider the choice of windows.

Some Southern California builders offer wood casement windows as an upgrade, but think carefully before doing this. Wood windows require periodic painting or staining to avoid water damage--this could add hundreds if not thousands of dollars in maintenance over the life of a home. A better option: Newer vinyl-clad windows with wood-like finishes provide the aesthetic look most buyers want, without all the maintenance headaches.

Another wise idea: Check out how the builder’s windows rank in energy efficiency. A window industry trade group, the National Fenestration Rating Council, publishes a “Certified Products Directory” with energy performance ratings for more than 16,000 windows, door and skylights from more than 120 manufacturers. It costs $10 and can be ordered by calling (301) 589-6372.

--Hire a pro to check out the house.

Most home buyers assume new homes go through a rigorous municipal or county inspection process and so a private inspection is unnecessary. Wrong. Those governmental inspectors are just checking to make sure new homes meet the local housing code. This code is a minimum set of standards that builders must adhere to--inspectors aren’t checking to make sure you’re getting a quality home or if the builder has included all the promises he made in those glossy brochures.

The bottom line: It is a good investment to bring in an inspector with new home construction experience to make sure all the promises are kept.

--Nearly new homes may the best deals of all.

In many subdivisions still under construction, you may find “nearly new” homes that have been lived in for a year or two that are great deals. Why? Owners of such homes have usually invested in landscaping, window coverings, flooring upgrades, built-ins and other goodies. Yet these sellers can’t sell their homes at a premium because they’re competing with the builder’s sparkling new homes--and many sellers are more willing to haggle on price than are builders.

--Give your potential new neighborhood an “environmental scan.”

Sure the school district is good and the crime rate is low, but how does the neighborhood rate in environmental quality? Was your subdivision a garbage dump in a previous life? Or does the gas station down the street have a history of leaky tanks? In the past, finding out answers to such questions was difficult at best. But now you can buy an affordable “environmental inspection” of your neighborhood from companies such as Environmental Risk Information & Imaging Services in Herndon, Va., (800) 989-0402, (703) 834-0600. The company offers a report for $75 that scans local, state and federal environmental databases for “eco-trouble” within a one-mile radius.

--Act quickly for bargains on “standing inventory.”

Big builders employ economists, financial advisers and accountants to guess the number of homes they need to build to meet demand. Sometimes they goof. The result? Unsold homes known in the biz as “standing inventory.”

Each day a new home stands unsold is painful to builders, who must eat the interest costs on construction loans. If you look for communities with standing inventory, you could get great deals.

Alan and Denise Fields are the authors of “Your New Home: The Alert Consumer’s Guide to Buying & Building a Quality Home” (Windsor Peak Press: $11.95). The book is available in bookstores or by calling (800) 888-0385.