The Downfalls of Comparing Builder Promotions
As you shop for your new home, you'll likely notice there are a plethora of builders to choose from. You've probably also noticed that a lot of these home builders offer some type of promotion or incentive.
These builder promotions (or the sometimes aggressive, upfront discounts) are an attempt to steer your business their way, obviously!
These promotions or discounts, especially in a buyer's market, may seem too good to be true. Some are, some aren't, and the onus is on you to dig deeper and find out the real deal. However, it's important to keep in mind there are also builders who don't offer promotions or discounts because they price their homes very competitively and fairly right off the bat.
In this process, you may come across one promotion that intrigues you with Builder A, but you prefer a house from Builder B. You could ask Builder B if they'll match or beat the same promotion or price from Builder A but here are some reasons why that might not work in your favour...
Standard Pricing
Let's say, for example, Builder A is offering $8,000 off the price of a home. Builder B has the house you really want for relatively the same price. Builder A may be able to offer this discount for a variety of reasons: a) their standard specifications are different and the overall cost to build is less; b) they are clearing out a specific selection of completed quick possession homes; c) their profit margins are generally set higher allowing them opportunity to discount; or d) they're taking a loss or lower profit in order to earn new business.
It could also be a combination of these reasons, they don't have to be mutually exclusive.
Builder B has already set their standard prices at a lower rate to be competitive, meaning they're unable to discount further. When looking at Builder A's promotion/discount, dig into the details of why they're able to reduce their price to ensure you're getting what you're looking for. Different builders have different standards included, so make sure to fully investigate to avoid a situation where you are not actually comparing the same things, like apples to oranges.
Deal or No Deal?
Maybe Builder A is offering a $10,000 appliance package or a free garage with their laned home options. Sounds pretty great, right? Something you may not have thought about with builder promotions is that what looks like a good deal to you is actually absorbed into the total cost of the home. So Builder A can offer a great bonus and mark up the purchase price by say $5,000, but you wouldn't know the difference. Really, they're only cutting into their profits by half of what the appliance package costs. The same thing can be said for free garage promotions.
That is why it's important to do your research. Ask about pricing on the same model without the garage. If the promotional pricing on the home turns out to be a few thousand dollars more, then you know that garage isn't really 'free'.
There have even been 'package deals' offered by some builders and the same formula is used in their pricing. Here's an example of one shiny promotion heard on the radio before:
'If you buy this home in this community before this date, you will get a FREE BMW and a trip to Mexico!'
Your 'no deal' radar should be beeping off the charts when you hear this! The reality is most of the cost in these amazing 'freebies' is likely being passed on to you in the form of a higher mortgage to cover them. But it sounds so enticing that some people will make an impulsive decision and spend more than they were initially comfortable with.
A good builder doesn't need to resort to these pricing tricks to gain your business. They will be transparent from the beginning and offer you a real incentive to build your home with them. Remember this when you are comparing similar deals between builders.
Manner of Construction
Home building is a highly competitive industry, and although all home builders must adhere to standard construction codes, not everyone builds the same way. Some home builders construct to the minimum code, keeping their building costs down so they can be very competitive price-wise. Others are more focused on building a higher quality home and will build to a standard higher than minimum code, enhancing the quality of material or using building processes of greater quality.
Some builders will use selling tactics or promotions that claim their construction process is better than other builders, but often these 'comparisons' are not always accurate or could be misinterpreted. Sometimes they will pointedly leave out certain specifications from the conversation they know their competitor does better, in the interest of 'out of sight, out of mind.'
If you don't know about it, you can't question it. And unfortunately, some claims are entirely untrue. When discussing these comparisons with the builders you're considering, ask plenty of questions about the items that are important to you, and do your own research wherever you can to conclude which builder truly meets your needs.
Upgrades Vary Between Builders
Another aspect that varies greatly from builder to builder is the standard features included in each home. Some builders include standard features that may technically be upgrades elsewhere. It's important to remember though that whether the item is standard or not you will be paying for it in the end. For example, Builder A may include a fireplace in their standard where Builder B may have it as an upgrade. When it's standard that means it's already built into the base price of the home where as an upgrade, the cost will be added to the home.
Since the features considered standard differ among builders, you'll likely want to decide what's important to you and what isn't. For example, if one builder offers quartz countertops as a standard, but another has better quality windows as a standard, you can decide which one you prefer to have included and which you might be willing to pay extra for.
It's important to keep in mind that there can be significant cost differences in standards and upgrades based on the quality and quantity of materials. For example, two builders may be offering vinyl plank flooring as a standard but this doesn't mean they are the same quality. There could be a significant price and quality difference between the entry-level or high-end vinyl plank flooring referred to as 'standard' in this example.
Promotions are a Pressure Cooker
For many builders, promotions are a way of gaining interest in their company, but also to try to have buyers make a quick decision. Promotions will always have an expiration date (when they don't, it's a different situation) and if you don't sign on the dotted line by the deadline, you lose the opportunity.
Although it's enticing to act quickly to obtain that free landscaping or appliance package, be sure you actually want what you're paying for. If the home checks off all the boxes of what you are looking for as well as has a promotion, that's fantastic! It can be too easy to fall into an emotional commitment based on the big shiny promotion, but you'll likely have buyer's remorse once you come down from that temporary high.
It's certainly okay to buy based on a promotion, but be sure to do your research and carefully consider your decision to ensure it's going to be worthwhile long-term. It's also important to make sure to look at the value of the home and promotion. If Builder A is offering a new home for $410,000 with a $5,000 Appliance Package but Builder B has almost the exact same home for $400,000 and no Appliance Package you could be better going with the lower price home without the promotions.
There's no doubt that shopping for a new home is already a complex process, but when promotions and discounts are added into the mix when comparing builders, it can quickly become confusing. Trust your instincts and ask plenty of questions to ensure the home you buy is exactly what you're looking for, and the price is right for you.
Curious to know how Broadview compares to other Winnipeg builders? Download our FREE guide on the 8 Advantages of Building With Broadview Homes, and you'll quickly see why so many people choose Broadview without hesitation.
Originally posted November 21, 2017, updated February 21, 2019.
