Negotiating Big Discounts With A Builder - The Savings They'd Rather You Not Know

By Penny Elizabeth Dutkowski, Broker

There are two major discounts to be had from a builder - REALTOR® fees and Upgrade prices.

Before you even set foot in a builder's presentation centre there are a few things you ought to know when it comes to negotiating the best discounts possible because as soon as you walk through that door your scenario is likely to go something like this.

You behold a gorgeous setting arrayed with eye-popping visuals that include a massive floor display with a 3D mock-up of the development replete with parks, trees, expansive roads. On the walls and displayed on easels are visual aids of various models, elevations and interiors so beautifully and artistically rendered you automatically envision yourself living in the picture. Around the corner is a real kitchen and bathroom both of over-sized proportions. The top of the line finishes draws you in and you're fully and finally hooked. Unbeknown to you though is that while you were staring with wide-eyed longing at the scenery, you were being watched for your reactions to everything.


Along comes the builder's sales rep and before you know it you've made a selection. You talk price and are either told there isn't much room to move or, with mild capitulation s/he agrees to your price then quickly switches to exactly what the builder wants you to negotiate over - upgrades. Don't allow this to be the path negotiations take as you would be handing over a big chunk if not all of the money they expected you would hand over. Instead...

Before you home shop, drop into a big box store like Lowe's or Rona. Select some materials you would like in your home: hardwood flooring, carpeting, counter tops, kitchen cupboards, tiles fo both wall and floor, bathroom fixtures, lighting, appliances, roofing shingles, windows, doors. Note their individual and installation costs. The latter is often identified separately.


Builders realize a sizable profit margin from upgrades. They may tell you that they get discounts which lower the costs to them and this may be so but this does not inure to your benefit which will be evident when they tell you how much of the upgrade allowance they've so graciously thrown in will go toward each. While some upgrades are best made by the builder to protect the Tarion warranty others are not so affected. Negotiate a purchase price reduction accordingly.


If you're not going to be represented by a REALTOR®, and you know which builders you will be approaching, review their web sites for this wording: "Brokers protected." This means they will pay either a set fee or a commission to a buyer's REALTOR®. If it is not there, contact them and ask if commissions are paid and how much.


Since this is a budgeted expense for the builder which they would be paying out if you are represented, it is a negotiating factor for you. Bear in mind broker fees are subject to HST.


If you are going to be represented you still need to know the amount of fee or commission and which you can get from your representative if you already have one or alternatively, the builder.


Some builders especially in slower markets or when just a few units are left will offer brokers a commission in excess of 2.5%, a bonus or both. Since 2.5% is often the amount generally offered, they may be willing to rebate some of the commission to you or better yet, negotiate a lower purchase price by reducing the fee payable by the builder.


If you will be buying a model suite, there may be no upgrade discount to realize, however, when the builder wants to continue using it as a model suite, there can be leverage in price or by lease fees paid to you based on an extended closing date.


Having armed yourself with the figures you've collected, when you approach the builder you should be able to reduce your purchase price by presenting these indisputable facts. The better your negotiating skills, the better the purchase price will be and it is the purchase price you want reduced since you will also save on land transfer tax, mortgage interest and possibly even HST.