Cost to Build
Things To Know About Builder Promotions And Offers
If you’re doing research on building a new home, you’ll know that many builders offer promotions and giveaways. You may have seen offers for “free” rooms, “bonus” appliances, $x in value, and even buy now pay later arrangements.
These types of promotions can be both exciting and tempting, but the truth is, they are mostly designed to get you in the door and signing a piece of paper.
Is it too good to be true?
In most cases, yes.
Builders that offer promotions worth tens of thousands of dollars are likely recouping their profit elsewhere. If it’s not in the initial price then it may be in high costs for variations and extras you may want (or you might need them due to site conditions). It could even be on commissions from third party suppliers or finance providers that you will be forced to choose. At the end of the day, you aren’t actually saving money, rather just paying for the ‘saving’ somewhere else.
The alternative is the potential that the business is running with very low or no profit. This, of course, is unsustainable. If the business folds before they complete building your home, you may end up having to deal with significant delays and additional costs.
Why do these promotions work?
Humans love the word “free”. Science shows that even the sight of the word releases large quantities of dopamine—the happy chemical—in our brain. Offers that use the word “free” are designed to motivate you to sign a contract or put down a deposit.
Many of these promotions are also accompanied with a time or quantity limit e.g. “Hurry, only 3 available!” This tactic is called scarcity bias—as the availability of something decreases, the more desirable it comes.
It’s important to be aware of these biases when you are making decisions.
Should you say ‘yes’ to a promotion?
Building a house is such a significant investment of time and money, and it can be daunting when you start to think about the size of the commitment. It’s therefore completely understandable that new home builders are looking to save money at every available opportunity.
But really, there are better ways to be smart with your money when planning to build a new home:
- Do your research and choose a reputable builder
- Order a soil test, site survey and detailed property report so that you can have as much information as possible about your land
- Use the information from these tests and reports to secure a fixed price contract from your builder
- Work out what you want and get it priced accurately early in the process
- Receive multiple quotes and compare them
If you are interested in learning more about a promotion or offer to test it’s real value, we’d encourage you to get a full quote with no options for increased costs. This means that everything is included and there are no prime costs or provisional sums allowed. Then a comparative quote. You may find that the cost of that “free” master bedroom is hidden in an inflated price for something else.
Also, if you’re required to use a particular finance company with their offer, be sure to check out the interest rates, set up fees and insurance costs in comparison to market rates. You should also ask if the builder receives a commission on your loan.