Pre-construction premium

Not so long ago builders would offer a pre-construction discount, offering to sell their house to you before it was completed for a discount from the price they intended to charge when it was done. This was usually a line of BS – if the guy was satisfied with one price in July, he’d usually be darn glad to get that same price in December – but sometimes, when the market was really zinging along, such discounts were real.

Today 264 Riverside Avenue, a building lot yet to be started on, cut its price $400,000 from $4.395 million to $3.999 which, in effect, means that a buyer would have paid a premium for the place had he agreed to the first price. Of course no one did, hence the reduction, but I find it interesting to observe – this is not the first spec house planned that has cut its price before the first bulldozer arrives. I suspect the builders know something.

My personal preference, if I were representing a buyer, is to grab a (very large) discount from a builder after he’s completed the house. That way, he’ll have already added in all the extra flourishes that he can no longer charge you for and you get them, in effect, for free. Hey buyers – you were stuck in a seller’s market for years – now’s your chance for payback. Go out and negotiate, hard.

3 Comments

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3 responses to “Pre-construction premium

  1. SizeBuyer

    The current builder bought this lot from the builder that built 27 2 Riverside Avenue I believe. 272 took forever to sell yet this builder thought he knew more…well I guess he didn’t and now he will sell that house for 25% less than what 272 sells for…we’ll see!

    And what are you going to get for 4MM on that narrow lot? A detached garage is what you will get! You better get those groceries bagged in plastic just in case it’s raining!

  2. Anonymous

    I’m always leery of pre-construction spec deals. You might negotiate a builder down to a great price and then the builder turns around and cuts corners with materials, landscaping and behind the wall stuff to boost his margins. Seems like lose lose situation. Any thoughts Chris?

    • christopherfountain

      If you know your builder, it’s okay to trust him. Otherwise, a detailed contract specifying everything down to grade of hardware will help protect you. Pain in the neck, which is why, if possible, I’d rather go with a builder I know and trust. Of course,, if you asked me about my own experience with a builder who was (still is, because I’m a forgiving guy) a friend for decades, I’d hav to admit that he departed from the contract when it suited him, forgot to do things called for and in general, did not live up to his word or his contract. In that case, I’d have been better off with a stranger because I’d have put the screws to him. So …?