How to Negotiate on a New Build Property

publication date: Sep 5, 2012
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

How to Negotiate on a New Build Property 

Developers are usually more keen to sell than an ordinary homeowner. What they want to do is get their cash out so they can pay off any loans or invest the money in more developments. The best deal you will get is:-

1.       If you are a cash buyer with no mortgage
2.       It's the end of their financial quarter, half year or end of year

There are no set rules for what is a ‘good deal'. It depends on what the developer is willing and able to sell for, and what you can afford and are willing to pay.

New build developers don't make the kind of ‘enormous profits' they are often accused of. On average, from a property they'll make about 20% and this is when they are able to charge a premium versus second hand home (or already ‘lived in' homes).

Premiums against second homes are worth looking into as these can help you negotiate a better deal from the start. For example if a developer is selling you a two bed terrace, find out the price of another two bed terrace in a similar type of location and see which is the better deal. For example if the second hand property is selling for £125,000 and the new build is charging £135,000, then you have a negotiating point from the start.

Another good method is to look at the space of the new build versus a similar property. For example, if the second hand property works out to 500 square feet and the new build is only 450 square feet, then the price per square foot for the new build is: £135,000/450 = £300 per square foot. The other property would be £125,000/500 = £250 per square foot. In this case, the developer is trying to sell you a home for 50/250 = 20% more from a space perspective as opposed to just £10,000 more. So another good way to negotiate money off would be to say you are willing to pay a bit more, but not 20% more, so 5% more would be £250 per square foot x 5% = £262.50 x 450sq foot = £118,125.

Remember developers do love an incentive such as a ‘free car' when you buy a property or they'll pay your stamp duty for you. Always check what this is worth versus a discount off the price. Paying £1,350 stamp duty is just a 1% discount, paying £5-10k less for the property is a much better deal!

Finally what can you afford? If they are offering the property for £135,000 and you can only afford £120,000 then why not let them know that's all you have and would they consider that offer?

To find out more about buying a new build and negotiating on property prices, buy our First Time Buyers Service - our unique, independent service gives an A4 ‘how to' guide, containing dos and don'ts, factsheets, checklists, handy tips and forms. Plus, access to Kate and her team, by phone and email, for essential 3-4 queries you might have during your project. 


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