New build expected discounts query

Discussion in 'Finance, Property, Law' started by headgear, Apr 2, 2013.

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  1. Hi,
    Last weekend I was viewing a property in a new build estate - the asking price was 227K but I was wondering what my fellow arssers felt was a reasonable amount you can expect to knock of the asking price? - also welcome would be any top tips or tactics that people have used successfully in their own negotiations



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  2. Some of the bigger firms do a discount for the Military. Who is the builder?
  3. A very rough rule of thumb, is third land cost, third build cost, third profit and overhead. The last few houses on a phase are usually cheaper, as they are considered pure profit, and the build will want to get off site or start a new phase.

    Bargain hard, the house builders are still desperate to shift plots.
  4. Each to their own, but I don't have a very high opinion of the latest building techniques, too many corners are being cut now.

    A 60s - 70s build will still be standing when a new build has fallen down.
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  5. The_Duke

    The_Duke LE Moderator

    Do some research about what similar houses in the area have actually sold for - not been advertised for, sold for. If you can find details on the actual development, this will give you a good feeling for asking vs actual. Also consider how long they have been sitting there post build completion. If it is only a matter of weeks, the developer is not likely to take a very low offer unless he is really desperate to get out of it. The longer it is sitting there, the longer his funds have been tied up, and the more he is paying in interest on any debts. It may also be preventing him starting on the next project. All of this may make him more willing to cut his losses and accept a lower offer.

    Then think of what you would like to save on the asking price and at least double that as a start point. This is business, not a discussion amongst friends - go in hard. The worst they can do is say no. Once they look like they are reaching the end of their negotiation room on cash, start negotiation on other bits - how well finished is the garden, internals etc. They may have some room to move on improving bits of the house using their blokes already on site at cost which would cost you a fortune to pay a builder to do.
  6. Bear in mind anything the housebuilder does is VAT free. Any work done afterwards you pay VAT on.
  7. maninblack

    maninblack LE Book Reviewer

    Historically new build have sold slightly above market average so start by looking at the price of property within a mile that have the same type of features.
  8. Grumblegrunt

    Grumblegrunt LE Book Reviewer

    new houses they admit will be fcuked in 30 years. builders seem to think that's okay while making silly profits. a third doesn't sound so bad when its only 90k but house prices are silly now and the govt wants them to get worse with their daft new schemes.

    you can argue that all house prices are a third higher than they should be at least and you risk negative equity so I'd go for at least 20k off but would prefer 30 (try haggling for a 5 year house price guarantee if that's possible). it's only london and silly tv shows that's been keeping the figure and perception artificially high this past 20 years.

    I used to be regularly disgusted when I did site work and I know its got worse because mine is 8 years old.
  9. Also, a lot of houses are built by big national companies, who do cosy deals with out of area suppliers, which make it almost impossible to get spares for, or they get offered job lots of boilers, plumbing gear etc that even B&Q would be ashamed to sell.

    Then the floors made of Weetabix, held up by joists made from glued wood- shavings, rooms the size of rabbit- hutches, radiators hanging off the walls within months because they couldn't even be bothered to put woodwork in the right places for rad- brackets......
  10. As a rule of thumb, this is bollocks. Bovis 2012 operating profits was 13.5%, Persimmon 12.8%. Since 2008, this is the only year in which they made an operating profit in double figures and they both posted losses in 3 years. Gross margins on housing run in the 20-25% zone, gross margin being the difference between build cost and sale cost, before salaries, overhead, interest, tax and residual profit are allowed for. The balance between costs is nearer: land 50%, construction 40%, profit 10%.

    All this means that house builders don't have a huge amount of cash to negotiate with. A discount of 5% in sale price is about all they have to play with, unless the development is in trouble and they want to get rid. You are therefore more likely to get big wins around additional work or upgraded finishes than in cash, not least because the builders can push some of these costs onto their suppliers. That doesn't mean you shouldn't go for the cash first, but have a backup plan, know what upgrades you would like and

    With any negotiation, you need to prepare. Think through what the seller might have on the table and what they want think through what you can put on the table what you want. Somewhere in between is the sweet spot at which a deal will be reached. There is no point going in with a ridiculous position that they cannot give, because you will blow your credibility from the start and never win. Go just beyond what you think they have on the table and chip away for concessions until you get where you want to be. Every time they give, "thank and bank"; so that win is in the bag and can't be returned to.

    One should be suspicious of developers offering discounts in the 10+% range, particularly if they are in the form of cash back deals across a whole estate or part of an estate. The developer will be registering the houses at full, pre-discount prices, which artificially inflates prices recorded on the Land Registry and leads you directly into negative equity.
  11. Bearing in mind I make my spending money from doing up houses; Bob is in principle right, as far as the big boys are concerned. They have all the corporate overheads of any big business operation one of their biggest expenses being the purchase and maintenance of land for future build.

    However, for smaller builders the old saying of "build two then get one free" still more or less holds true.....mainly in that the third profit is the wage they would have to pay people for doing all the running around, laour and admin that hey take upon them selves.

    You need to get the value/cost per sq ft from somewhere; the surveyors DTZ publish data, there is data available in some of the better libraries. Also, check the sq ft and cost of similar for sale properties in the areas you are considering......look at Rightmove, get property details from estate agents. There is no easy way, you have to do the research......and research pays off.

    I thought I knew my way around the market, then I met the two sikh brothers from Coventry, both under 30 worth about 20 million, looked liked they had just stepped off the building site. They used to scan the property pages and watch till they spotted something that had been up for months. Say for 100K, as an example, then they wold go and make a take the piss offer of around 50K, normally they'd get fucked off, but every once in a while it would work, well maybe not 50k, but 70'ish.....still an instant profit.

    Personally, I would never buy new from a builder as there is always their profit in there somewhere, a bit like driving a new car off the forecourt and it going down in value instantly. I always buy the lowest per sq ft valued house in the area I like, do it up and then sell it on.
  12. Most small builders are "salary businesses" in that they generate a wage for their owners and employees and little else. The "build two, get one free" adage actually means "build two, earn a wage on the third". Not the same as making a profit.

    There is a big difference between buying property for income (whether by development or letting) and buying a house to live in. Of course, in both cases, you need to negotiate hard to get the best deal, but there is a significant emotional element in buying to live that you have to allow for, an element that you need to eliminate when buying for profit. At the end of the day, a home is much more than a house and the family have to be happy in their home. That may come at a price.
  13. Hi,

    Some good posts here. Firstly be weary of new build property, it is expensive and poor quality, for the most part.

    Buying older properties are better because:

    1. They are better built.
    2. They are usually have larger rooms with larger gardens.
    3. You can buy property that needs improvement (a doer upper) which in the current market you can buy cheap (as not many can afford a mortgage AND money to do it up).
    4. You have more chance of creating further value through converting cellars, attics etc.

    If you really have buy new build then check the quality thoroughly. Negotiate hard for at least 10%, plus look for flooring, white goods etc.

    As a rule of Thumb the Leveller is not far away in the thirds rule. The reason the companies haven't made much money is that they are holding big land banks that it has not been cost effective for them to develop on, because of the economy. They will be making top dollar again soon.

    Final point, never, ever touch the govt schemes, key worker etc or any type of fractional ownership. Overpriced houses on conditions that will make it almost impossible to sell. A complete scam.
  14. Having just bought using the new Government Help to Buy scheme I would disagree to this if you can play it right.
    They have given a 20% equity loan that you don't need to pay back until you sell the house or in 25 years time. This is interest free for the first 5 years and then the 20% equity part goes up by 1% a year until conditions above are met. You can pay that back in 10% steps at any idea is that its knocked my mortgage down that I would be paying and I will fully pay off the 20% with savings before 5 years so i think an excellent boost.

    Halifax just paid my £2200 Stamp duty when i took the mortgage out as a first time buyer and got very good rate.....they are a great one to get mortgage quotes on anyway as don't leave a credit footprint either.

    After getting the price sorted I then haggled to get £2000 discounts off the carpets etc (so a good 25% discount).....main reason i went new buy though was shit scared of the horror stories I have heard with buying older properties especially paying out lots of valuation fees etc for Chains to fall buying new meant no chains.

    Mine is a forever house after 12 MQ's and 3 singly blocks over the last 25 years so not interested in how much i could sell for and got the original selling price down from 249K to 215K anyway so 4 beds in that area are around the 200-300K mark anyway.

    Overall Im happy with buying a new build, ive heard lots of horror stories but as of yet not hit any......WAIT OUT.
  15. Hi The_IRON good luck with your purchase. You seem to have got a reasonable price - I will be very keen to hear how it goes with the scheme. If, in time it seems I have been unduly harsh, I will review. I have just been involved in helping people trying to unpick messes caused by previous schemes too many times for me not to be skeptical.

    Again good luck hope it goes well.
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