Are Nashville Home Builders Negotiable on Price and Terms?

Nashville’s real estate market is HOT, and home builders know it.
Most of my blog topics emerge from questions raised by my own Vital Few Pareto Realty agents and by Clients, Brokers and Agents in our market. This is something I LOVE about the Nashville real estate sales community, we openly dialog about the issues of the day and seek advice from each other whether it be in person or through digital means. Many of us are connected on a closed Facebook page where we can share vendors and discuss sticky situations (without naming names or breaching client confidentiality).
As this story goes – In the past week, I have been asked by no fewer than 1/2 a dozen people how to deal with home builders in this market in which the builders seem to have the upper hand? Some builders are seeming to be getting a bit greedy and unreasonable thereby making these deals tenuous from start to finish. We REALTORS often find ourselves blindsided by these unusual demands, and while we want our clients to have that AWESOME NEW HOUSE, we also don’t want to allow the builders to take advantage of them. We REALTORS are here to “serve and protect” our clients throughout the transaction, and many of these builders are doing everything in their power to thwart our efforts.
Some of the “Out of the Box” Things we’ve encountered:
  •  Builder requirement to use THEIR Contract form instead of the “Standard Purchase and Sale Agreement” created by the Tennessee Association of REALTORS (Used by most REALTORS). Of course, the builder contracts lean heavily towards the Builder’s rights and conveniently leave out many of the customary terms (e.g. Inspections, Punch list walk-throughs, etc).
  • Unusually high Earnest Money Deposit requirements – Some “Non-Refundable” under any circumstance after binding agreement.
  • Requirement of Builder having earnest money in hand even prior to executing the contract (Builders call these “contracts” not “offers”, as they assumptively presume that there will be no negotiating necessary).
  • Exorbitant fees for change orders made after Binding agreement
  • Requirement for up front partial or full payment of up-grades over base price
  • “Policy” that REALTOR commissions will be based on the Base price of the house without the upgrades.
  • Tight control over the flow of communication. The onsite agent sometimes seem to be there to “protect the builder or construction superintendent” from the Buyer and Buyer’s Agent.
  • During construction, we’ve encountered a few builders who will refuse to entertain any offers but want their listing agents to market the properties aggressively, and they INCREASE the price of the house periodically.

At best, these practices minimize the effectiveness of the REALTOR and relegates her to the role of chauffeur and order taker. For sure, this is not a “Team” approach. It’s all about the Builder . . . . and about the Buyer (the Builder’s Customer) and the Buyer’s agent (the person who BRINGS customers/buyers to the builder?

Not so much . . .

If nothing else, I would think that reading this post would poignantly make the point to Home Buyers the importance of hiring a great REALTOR for expert representation.

We REALTORS ARE equipped to work through these challenges.

There’s more, but I think I’ve presented the flavor.
Not a day goes by when I don’t remind someone of the power of Karma . . . Especially builders who are Super Heroes in their own minds.
I wrote this to my team yesterday:
Builders will be hard to deal with in terms of price ESPECIALLY with a house that’s still under construction because A) They don’t want to establish a precedence of coming down on their price in an appreciating market. B) They seldom have to in order to sell the house. Their willingness to negotiate increases as they near completion of the house . . . especially towards the end of the year.
This is a timely question because I have had several Brokers and agents from other companies call me recently for advice about unreasonable demands by builders. I have seen this before . . . When the market gets really good for the builders, they start to hate and disrespect REALTORS and might even do what they can to undermine the REALTOR and cut us out of the deal altogether. Of course, when the market dips, they LOVE REALTORS and are all kissy kissy.
I think you are far more likely to build in upgrades at no or reduced cost into the INITIAL Purchase agreement. Sometimes this is difficult to do because the Buyer doesn’t always know about these things until later in the construction process. 
One thing I think would be appealing to a builder would be a promise of very few “change orders” later in the process . . . so . . . Negotiate changes/upgrades prior to Binding the contract.
Some builders will require large up-front cash deposits for upgrades . . . and change orders . . . and some will say that they will only pay commission on the base selling price.
A MUST for new construction is that EVERYTHING be in writing and well documented correspondence. Skyslope is great at capturing all of this if used properly – Just do as much as possible by email and forward every message to to property email address that Skyslope creates when you enter the transaction.
We, the Vital Few, real Estate Sales Professionals always have our ears to ground for all things real estate and are poised and ready to serve and protect Home Buyers and Sellers throughout Middle Tennessee.
If you’re in the mood for a move and are uncertain of where to start, connect with us now

HERE

Oh yeah! If you’re a REALTOR in Middle Tennessee in the mood for a move to a firm that’s clearly on the move (UP), check out http://WhyJoinParetoRealty.com and connect with me for a confidential consultation.

Published by Barry Owen

Strategist-CEO of Pareto Realty Real estate sales Professional Inviter-Facilitator-Practicer of Open Space Technology Opening safe space for people & organizations to self-organize around issues & opportunities BarryOwen.US Invite-Listen-Love

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