Tips to buying a builder's model home

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Published Date 5/15/2019

They are majestic, lit up for all to see. A homebuilder's model homes are its prize examples for the public to walk through, touch, dream about and in which to picture their own "what ifs." Expertly decorated with a core of, perhaps, four colors throughout the home for continuity, they contain just about every bell and whistle offered by the builder's design center and many you can't even have unless you hired your own decorator. The builder's "optional" features are built in as well - that loft overlooking the family room; the cabinetry making up a window seat in the breakfast nook, or rustic covered beams in the living areas.

You can almost hear the "ooohs" and "aahs" of people seeing them for the first time. Kids have bounced on the beds. Their parents have explored inside cabinets and peered into the ovens. And it's notable how there is not a single blind or curtain obscuring a window so that the maximum amount of light can enter. In the back yard, the builder has shown how you can take dirt and turn it into an oasis with pools, fountains, trees, shrubs and outdoor kitchens.

But model homes are more than a dream. People buy them and live in them. And while they are not resale homes where Thanksgiving dinners have taken place, they are used nonetheless. So how do you negotiate to buy one, how long must you wait and how is this different from buying one of the builder's "production" homes with the same floor plan?

It first must be noted that builders have a tremendous financial "carry" on their model homes. Once completed, they represent house payments, just as they would to any other homeowner. So the faster the sales person who sits in the converted model home garage sells the homes there, the better. If a builder decides to sell its model homes soon after their completion, buyers are usually asked to agree to a "triple-net" rent-back (payment, taxes, and insurance) made by the builder. But it also means you may be waiting for months or even years before you can occupy. In other words, you've just become the landlord of a place hundreds of feet will continue to trudge through. You are usually reassured, however, that because it must continue to represent the best of what the builder offers, it will be refreshed, maintained and kept secure, with an elaborate security system in place in the meantime.

Usually the builder will set a price on the model home that is significantly higher than it sells the rest of the homes like it on the building site, but not so high that it can't be appraised properly. The builder did, after all, spend a boatload of money on it to begin with. But here is where a potential buyer doesn't realize their luck. If you added up every upgrade and decorative item the builder has installed (including the lavish backyard), you would pay much more if you added all of it to a production version of the same home. This is why it's a good idea to have a Realtor represent you in a transaction of this kind. But be warned — if you don't have the Realtor with you the very first time you visit and have them "register" being your representative, the builder is under no obligation to pay your agent a commission for referring you. The Realtor can research how much many of these upgrades would cost out of pocket on another home and also help you set an offer price, research the shopping, schools, and local transit as well.

If you are buying the model home whose garage is converted into a sales office, fear not. The builder is usually obligated by the city it in which it is located to make it match the other homes on the outside, including adding a driveway, taking down trap fences and converting landscape and hardscape so that the homes no longer connect with one another.

It should be noted that the furniture you see in model homes is specially selected for each floor plan. Sofas are conveniently the perfect size and color. Occasional chairs are strategically placed to show off the space and draw the eye to focal points or windows. Secondary bedrooms often contain twin beds so that they seem roomier. And the accessories and fake photos you see all over the house are there to appeal to the demographic the builder is trying to attract. Often they are "case goods" available only to decorators. But if you are in love with a particular item in the model, there is no reason for your agent not to ask that it be included. (By the way, if there is a pool, you will have to buy your own equipment for it.)

TheBalance.com's Elizabeth Weintraub, in her article How to Buy a Model Home from a Builder, says "Buying a model home is a little like buying a car that's been used solely for test drives. Everybody knows that the dealer will generally discount the price on such a car with very low miles." She goes on to say how your Realtor can check to see how many deeds were mailed to the property address. "How many were mailed elsewhere? This can indicate that some of the homes might be owned by investors. Investors are typically the first to bail when the market suddenly dips, and part of the reason you're buying in a new subdivision is to be surrounded by other buyers like yourself, not tenants."

Buying a model home is a different kind of purchase. But once you move in, there is basically nothing left to do except add window coverings, since the builder has done just about everything they could to make the place livable and attractive. You'll also be the envy of your neighbors who bought the production homes around you and are still sodding their backyards and painting accent walls.

Source: TBWS

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