Many a smart car buyer has scored a bargain by purchasing a showroom or floor model – automobiles for show and test drives. For house-hunters, the world of residential real estate offers the same thing: a model home.
“Model homes are sample homes in a subdivision, and they’re used to show the type of home that’s available in that area,” says Don Shurts, a Realtor with Keller Williams in Dayton, Ohio. The main purpose of these homes is to attract prospective home buyers to a new neighborhood and highlight the craftsmanship of the builder who worked on the property. However, “they usually become ready for purchase after a while,” Schurtz explains.
“Essentially, model homes allow you to see, show and ‘test drive’ the home in person before you commit to buying it,” adds Tampa-based Gunner Davis of Coldwell Banker Realty.
Buying a model home has many advantages, but there are also downsides. Here are some things home buyers should consider.
Why you should consider a model home
A model home can be a good choice if you are looking for a new home with great amenities at a low price (possible).
Model homes are used to showcase all the options and upgrades offered by the developer, so they often include high-end kitchen features—granite countertops, custom cabinets—and appliances, security systems, luxe flooring and light fixtures, and ample storage. Model homes may have larger floor plans than non-model homes in a development.
In addition to being a turnkey purchase (literally), model homes can sometimes be more affordable than “regular” homes in a subdivision or other homes of the same size.
“Once a model home is purpose built, developers often want to sell the home as quickly as possible. As a result, the deal is often buyer-friendly,” says Shurts.
Plus, you may have more room to negotiate the price of a model home. According to Davis, “If the home has been trial-run with more than a few buyers or has been in development for several years, you can often use that to your advantage and negotiate the price.”
So, if you’re looking for a good compromise amid the current housing bubble, a model home may be a better option for your budget, especially if you live in a high-cost area.
Disadvantages of buying a model home
Although many people are attracted to the idea of living in a new construction home, buying a model home also has its disadvantages.
First of all, model homes are usually built near the entrance to the development. It’s quick and convenient for buyers who come to tour a model home, maybe not so well for those who live in it. The house may be located on or near a busy road with traffic and excessive road noise. Also, everyone else who lives in the subdivision drives.
In addition, although they may seem rushed, the practice of building model homes can be lacking. While these homes must comply with local building codes, he says, “Typically, developers want to complete their model homes as quickly as possible so they can market and sell the development to prospective homeowners. As a result, the construction process can be rushed and the developer can cut corners to stay on their timeline,” says Davis.
Unfortunately, you may not notice potential problems until you become the owner. During that time, any repairs or renovations are your financial responsibility.
Finally, as with any luxury model car, a model home is inevitably subject to wear and tear from the constant stream of buyers visiting it from time to time. (Typically most of the room is sold after it’s full.) And since most model homes are sold “as is,” you’ll have to live with the wear and tear or shell out your own money for repairs or upgrades.
Financing the model home
When it comes to financing a model home, you have options. In some cases, the homebuilder will work with a lender and can provide you with a loan directly. Another option is to get a loan through the lender of your choice – just like you would for financing on a standard house (the application process is the same, lenders do not distinguish between model houses).
If you’re considering financing a model home, it’s worth talking to a builder’s lender and a few regular lenders to see which one offers the lowest interest rate. Keep in mind that with both options, there may be qualifications and credit requirements, such as homeowners insurance or private mortgage insurance (PMI).
Tips for buying a model home
The process of buying a home can be complicated and time-consuming. However, it is a good idea to take some extra precautions when buying a model home. Here are a few tips to help you navigate the model home buying process.
Hire your own buyer’s agent
You don’t have to close the sale yourself. Consider hiring your own real estate agent to help negotiate the price and terms of sale, such as buying the model home with any furniture. A buyer’s agent can run comps for similar homes in the area, which can determine what a fair offer would be.
Compare prices in the area
Consider working with a buyer’s agent to compare real estate prices in the area or similar developments. Even if model homes sell for less than the median or average for similar properties in the local market, it may be worth working with a professional to verify the numbers and see how much of a break you’re getting — or if you really are. , you are getting it once.
Make sure the house is not already occupied
Hundreds of people could have gone through the model home they were considering buying. And in some cases, the home may actually be occupied by potential buyers who are testing the property. Be sure to ask if the home has been occupied before and check for signs of damage during your visit.
Hire a home inspector
Even if the property is pretty new and up to code, it’s still a smart idea to do a home inspection before buying a model home. Remember that most model homes are sold “as is”, so if the inspector notices major issues or structural damage, the home builder may not offer to repair it. However, if there are problems, you can include that in your offer or opt out of the deal entirely.
Consider the extended warranty
One of the perks of new homes in development often includes a warranty provided by the developer. However, you may not get the full benefits of the warranty on a model home. Contact the builder and see if they offer an extended warranty that gives you more protection if something goes wrong after you move in.
Check the name of the developer
Before purchasing a model home, it is important to research the name of the builder. See if the builder has worked on other developments and try to find examples of their work. In some cases, you can get reviews from people who have purchased a home in a developer’s development. Reading reviews can help you understand what current homeowners are feeling and give you insight into the builder’s work in general and possibly their model homes.
The Final Word: Should You Buy a Model Home?
If you’re looking for a newly constructed home with top-of-the-line features that you can move into with minimal fuss, a model home may be a good choice. Especially when housing prices are on the rise and inventory is tight, model homes can be a good deal.
On the other hand, buying a model home has many negatives. Some of the glare may have rubbed off on the display, either because the corners were cut or because a lot of people visited it. You may find that a model home lacks the character and charm of an older home. Certainly, knowing that the developer has a bad reputation will make you think twice about going in for the purchase.
Ultimately, like any home purchase, buying a model home is a personal decision based on your needs and budget. And, perhaps, your love of sample sales.