Can You Negotiate at Kb Design Studio
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| Hi everyone! So my partner and I are looking into new construction through KB Homes in the McKinney Heights development. I've mentioned before that I'm interested in that area, but now we're ready to move forward. We've found a floorplan we love, and have started some preliminary discussions with KB. It seems they're not willing to come down on the base price, but they do seem to be quite flexible in throwing in upgrade credit as a buyer's incentive. After speaking to them just once they automatically offered me 8k in upgrades. We've been to their home studio and it looks like we want to do about $27k in upgrades to make the house into our dream home. My question for anyone who has recently purchased or any realtor who has recently dealt with KB, how much do they usually end up offering in upgrades, by the end of the negotiation process? I will be a cash buyer and have the funds available now, if that helps. There are several existing homes in that neighborhood for sale for significantly less than what it would cost to build new with KB, so I'm hoping we can use that information to our advantage. In fact, we found a great deal on an existing home that, even if we completely changed all flooring, paint, fixtures, etc, it would still be much cheaper than KB's base model. But I love that floorplan with KB. However, with the cash I have on hand I'm not quite able to pay full asking price for the home and ALL of the $27k in upgrades, they'd need to give me quite a bit of that upgrade money as an incentive. I'm not interested in financing any part of the home purchase. If you've recently dealt with KB, let me know how well you did! And... Thanks to everyone! |
07-03-2011, 05:01 PM 
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| Nick (or Nicka), what you seem to be encountering here is the cost to build (price per square foot) new not bearing up to what the existing homes in that neighborhood are bringing. Therefore, you can pretty much count on your new home depreciating a bunch right from the get-go. That may or may not make a difference to you, but don't discount the potential headaches of building new ... things can go wrong during construction and a lot of people who go that route say "never again" after dealing with delays, subcontractor problems, warranty hassles after closing. I have built three homes from new, and while I have learned every time and it has gotten progressively better, it's still a hassle and delays are inevitable. It still seems to be something of a buyer's market, so it's very possible that you can negotiate aggressively with the pre-existing home's owner and save even more off building a new home, and the house will be worth, effectively, just what you paid for it. This may not matter much to you if you are planning to live in this house for 30 years, but circumstances can change in a hurry for anybody, and you don't want to look at an automatic loss, particularly if you are investing cash in the home as opposed to investing that cash and taking the mortgage tax credit, especially with rates as low as they are at the moment. As far as using a realtor to purchase the new house, I'm not 100 percent sure how it works in Texas, but the only number that really matters to the builder at the end is his or her bottom line on the closing statement. Most of the bigger builders I've dealt with (not here in Texas) employ their own realtor, or have a real estate license. So, the 3 percent commission they will pay their agent may or may not be "real" money to them. However, the 3 percent commission they will have to pay your agent is, ultimately, coming off of their bottom line, and it may make them less likely to negotiate. The same is true buying an existing home. Local realtors are great resources to learn about and identify neighborhoods, and to watch out for your best interests in negotiating a deal. However, now that you've identified the house you want to buy, many real estate agencies will reduce the commission to the seller if the seller's agent also brings in the buyer, so instead of 6 percent commission coming off the seller's bottom line, it may be 4.5 percent instead. This, effectively, is 1.5 percent that might be in your favor as you are negotiating, because most people selling a house have a bottom line number in their head that they are willing to accept, and that number includes the commission they are going to have to pay. So, you may get a better deal by going through the seller's realtor, but you should definitely hire a local real estate attorney to oversee your side of the transaction. That won't be cheap, but it will be a lot less than 1.5 percent of the purchase price, I'd guess. Just food for thought for you ... from a former fellow New Yorker. Best of luck with whatever you decide to do. |
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| The reason they don't want to lower the base price is that they want to artificially keep the comp prices above what they would naturally be in that market so they can charge X for a house. Get a realtor. It doesn't cost you anything and a good one will get them to come down on that price based on comps in the area. |
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| I don't have any direct experience myself, but you should be aware that KB does have a fairly poor reputation as a builder in the Austin area. I would ask whatever realtor you pick to provide you with information about KB's reputation here. I don't want this to turn into a bash or defend KB thread, but I think it's important that you're at least aware that KB's reputation isn't great here since you've only been here a short time, whether it's merited or not, it could still affect your resale value. |
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| Isn't the rule (maybe an unwritten rule, but whatever) if you've already made contact with a builder without a realtor, you can't bring one in/they won't work with one after the fact... that you need to actually show up with a realtor on the initial contact? |
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| Quote: Originally Posted by robino2001 Isn't the rule (maybe an unwritten rule, but whatever) if you've already made contact with a builder without a realtor, you can't bring one in/they won't work with one after the fact... that you need to actually show up with a realtor on the initial contact? I told them from Day One I was working with a realtor. For now I've only gone in to look at model homes and available lots. We haven't even started the formal process yet apart from me saying, "Do you offer any buyer's incentives?" and them answering, "Yes, we can give you $8k in incentives to use toward upgrades." They never asked to meet my realtor, but I'm assuming they'd like to once I'm ready to really get started (NOW!). |
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| I don't want to turn this into a bashing KB thread either. I can only say that I have only had bad experiences with KB homes and with their planned neighborhoods. The higher the price point you go on a KB Home, the better they are built, but there is a reason why so many of their homes are so cheap, and it all has to do with the quality of materials and construction they use. Even if KB offered me $100K in upgrades, I would be hesitant to sign with them, mostly because I know any upgrade they offer has been marked up considerably before it even got to me. Also, I don't think the quality of the materials they use are reflected in the prices they offer. That being said, if you have found pre-existing homes similar to the one you want, at a lower price than what KB is offering for new builds, then that should be a red flag to you. I can understand the allure of a new house, but once you own the house, it's no longer new. And you have effectively bought a house for, what $20K, more than the house across the street, even though they are basically the same home. Why would you put yourself at such a disadvantage when it comes to resale. I would buy the cheaper resale and use my own cash for upgrades. Either way, if KB is still building homes in this neighborhood and they are not cost competitive with resales, then they usually only have their financing as a sales tatic to get you to buy from them. Since you are willing and able to pay in cash, you have no advantage from their financing, and therefore no reason to buy directly from them. KB is not going to negotiate with you as much as a desperate seller is. KB is NOT going to lower the price of a home to compete with what are probably foreclosures or short sales in the neighborhood. Their profit margin is so thin that they simply can't do this. If your idea is that you can get a new house by telling KB "well can you match the price of these homes on the market" then I think you are going to be disappointed. If resales are cheaper, I would buy a resale and use some of the cash you have on hand to do upgrades then. The upgrades you price out privately will be cheaper than what KB offers you, and you will have more control and choice in the quality of materials. If you are flush with cash, that seems to be the way to go. Especially if you are willing to buy the house all in cash. By the cheaper house and use the money you have left over to really get the home up to your standards. Just my advice though. YMMV. |
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| I didn't buy from KB, but I did just build a house with another builder and I asked what they were offering in incentives, they said $20K, I said I'd like $40K and they approved it and didn't seem shocked with the request. |
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| Quote: Originally Posted by nickasarbata Hi everyone! So my partner and I are looking into new construction through KB Homes in the McKinney Heights development. I've mentioned before that I'm interested in that area, but now we're ready to move forward. We've found a floorplan we love, and have started some preliminary discussions with KB. It seems they're not willing to come down on the base price, but they do seem to be quite flexible in throwing in upgrade credit as a buyer's incentive. After speaking to them just once they automatically offered me 8k in upgrades. We've been to their home studio and it looks like we want to do about $27k in upgrades to make the house into our dream home. My question for anyone who has recently purchased or any realtor who has recently dealt with KB, how much do they usually end up offering in upgrades, by the end of the negotiation process? I will be a cash buyer and have the funds available now, if that helps. There are several existing homes in that neighborhood for sale for significantly less than what it would cost to build new with KB, so I'm hoping we can use that information to our advantage. In fact, we found a great deal on an existing home that, even if we completely changed all flooring, paint, fixtures, etc, it would still be much cheaper than KB's base model. But I love that floorplan with KB. However, with the cash I have on hand I'm not quite able to pay full asking price for the home and ALL of the $27k in upgrades, they'd need to give me quite a bit of that upgrade money as an incentive. I'm not interested in financing any part of the home purchase. If you've recently dealt with KB, let me know how well you did! And... Thanks to everyone! I would go with the resale. A big red flag when the existing homes (assuming these are relatively newly built also) are selling for less than what the builder offers. Texas is not dual agency (unless agreed upon) meaning that typically there is a buyer's and seller's agent. Since it appears as if you've found a resale home that you are interested in, you may want to represent yourself and perhaps get the seller to credit (reducing the price further) since there is no buyer's agent (commission) involved. The real estate agent becomes irrelevant at the purchase as the title company will handle all the details at close. Just a couple of things that we found to be unique to this real estate market. First, a lot of sellers are used to the "California" buyer...one that sweeps in, pays list price and in cash. IMO sellers tend to be resistant to negotiating on the price (we walked away from a house where the seller refused to come to terms on repairs..."no one from California negotiates"...was his reasoning). Also, the title company provides a lawyer to look over the contract for both parties. We did not have to hire a "personal" lawyer as we did in other states. |
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| The 3% they pay your realtor comes out of their marketing budget. I disagree with the previous poster about how they might not negotiate if they have to pay the 3% commission. The 3% is nothing to them. If you are paying cash for the home, you should get all 27K in upgrades for free. Most builders will give significant upgrades for a cash purchase to avoid the headaches of financing. Also, I would try to negotiate 3.5% off the base price of the home in addition to the upgrades. That being said, be careful what upgrades you put into a KB home. It might be better to seek a higher quality builder with better standard features and pay a slightly higher price for the home. It is true that KB home is not that great of a builder. Even in Circle C where they build 400K+ homes, I would call those home subpar at best. Same subcontractors as the 200K KB homes. Dream home and KB are not two words I would place together. |
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Can You Negotiate at Kb Design Studio
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