If you’re looking for a new home, you’re using many factors to narrow your search. Chief among them is usually the home’s price.
In the last several years, home prices across the country were on the rise, but in early 2019, the rate of price increase has slowed. However, in the metro Charleston market, prices have been increasing, in part due to a limited number of homes on the market, as well as increases in labor and construction prices.
The Charleston Trident Association of Realtors announced
that 1,561 homes were sold in the region in March 2019 at a median price of $275,000. Home prices are 4.4 percent higher than they were at the same time in 2018. While this reflects an increase year over year, the rate of increase is two percent slower than in 2018 and 3.7 percent less increase than in 2017. CTAR President Edward Oswald said
, “Inventory is still historically low and prices continue to climb, which deepens the affordability divide in our region.”
We have written about other aspects of new home prices including the best time to buy
and negotiating prices on new homes. Read our article about negotiating prices on new homes.
In this article we address some common questions that new home buyers are likely to have, and which impact your understanding of how a home is priced.
What is a base price?
Your base price is the normal price for a particular home plan on a lot and includes all the builder-chosen features and fixtures.
New home consultant Chase Reeves who works for Kolter Homes, LLC
at The Ponds in Summerville said that the easiest way to describe base price is to think of it as a “starting price.” “Your base price includes all the home’s standard features without any premiums for the lot or structural upgrades.”
Every builder has standard features which are a component of their new home build. They will have an info sheet which discloses what those features are per home plan and the ones which are universal to the homes they build in the community where you are looking. In this regard, new home pricing is a lot like new automobile pricing — some things are standard, and some are add-ons or upgrades.
Lot premiums are “upcharges applied by the builder to select lots because of their location, size, views or what backs up to them,” says Reeves. If you don’t want to choose a lot that comes with a premium, be sure to ask the builder’s representative to show you which lots don’t carry one.
What is an allowance?
Your builder has calculated a home’s sale price based on using materials that cost a predetermined amount to purchase and install.
Semi-custom or custom homes have allowances
— essentially a budget line item — also thought of as a “not to exceed” number, built into the price of the new home. As the home buyer, you will be tasked with choosing your preferred finishes and fittings not to exceed the specified, allowed purchase price and materials type.
If a builder is constructing a custom home for you, they tell you what the allowance is and may send you to a local lighting center, for example, to select your light fixtures. If your home is a semi-custom build, your builder may have a selections center where you can choose your flooring, countertops, light fixtures, cabinets, and other items collectively called fixtures and fittings from a curated array.
Most production builders have already determined which packages of lights, or cabinets, or floors are to be installed in their homes. You select from an established range of colors and finishes within a category (flooring, lighting, appliances, cabinets, plumbing fixtures, etc.). Some production builders offer you more latitude by allowing you to select (for an increase in price) higher priced fixtures and fittings which work with their home designs and floor plans.
Is an incentive an allowance?
According to Reeves, sometimes people confuse allowances and incentives. Builders frequently offer incentives also called promotions
to persuade you to choose them. For example, Centex at the Sanctuary Cove at Cane Bay has offered “50% off options up to $10,000.” Based on how it is structured by your builder, you are provided a discount or bonus to use in the selection of options on your new home build. This is different from an allowance per category of fixture of finishes, however it is easy to see that they may be thought of similarly.
How do options and upgrades affect the price?
As with shopping for automobiles, homes can be optioned up. Options may include structural modifications per plan such as sunrooms, or bonus rooms above the garage, or upgraded flooring or premium quality appliances. Structural options will be called out on the floor plan provided by your builder. Upgrades to fixtures and finishes will be disclosed during your selections or design center visit. Be sure you ask your new home consultant how paying for these upgrades is to be managed. You may have to write a check for these at the time of selection, or they may be added to your home price allowing you to have them included in the mortgage.
Your builder might allow you to get credits for purchasing appliances or fixtures and supplying them during the home building process or installing them after closing. For example, if you purchase your refrigerator or washer and dryer to install after closing your builder will credit back to you (before closing) the price for the builder-grade appliance which was calculated into the home’s base price. Some builders might even allow you to purchase plumbing fixtures for them to install during construction. Because every builder has specific policies, you will want to be absolutely clear on your chosen builder’s policies on credits.
During the process of purchasing your new home, be sure you understand every aspect of the home’s final price. Don’t be shy about asking for explanations in writing from your new home consultant or Realtor.
Realtors specializing in new construction homes
have singular experience and provide additional support and insights to clarify your contract, construction and closing process, making them easier to comprehend and navigate.
New Homes Guide Charleston also provided resources for your education
. And the bonus is that they are free!
Don’t be scared to discuss price and all the aspects of how your new home’s price is determined. A reputable and trustworthy builder welcomes all questions and is there to support you every step of the way in building a home that fits you and your family.
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