Many savvy car buyers have picked up a bargain buying a showroom or floor model – cars used for demos and test drives. For house hunters, the world of residential real estate offers something similar: the model home.
“Model homes are examples of homes in a subdivision, and they’re used to show the type of home in that particular area,” says Don Shurts, realtor at Keller Williams in Dayton, Ohio. The main purpose of these homes is to attract potential buyers to a new neighborhood and showcase the craftsmanship of the builder who worked on the property. However, “they often become available for purchase after a while,” Shurts notes.
“Essentially, model homes allow you to physically see, demonstrate and ‘test drive’ the home before you commit to buying it,” adds Gunner Davis, a Tampa-based realtor with Coldwell Banker Realty.
Buying a model home can have many advantages, but there are also disadvantages. Here are some things homebuyers should consider.
Why You Should Consider a Model Home
A model home can be a good choice if you are looking for a brand new home with the best amenities, at a (potentially) lower cost.
Because model homes are used to showcase all of the options and upgrades offered by developers, they often include high-end kitchen features – granite countertops, custom cabinetry – and appliances, security systems, luxury flooring and fixtures and ample storage space. Model homes can also have larger floor plans than non-model homes in the development.
In addition to being a turnkey purchase (literally), model homes can sometimes be more affordable than “regular” homes in the subdivision, or of comparable size elsewhere.
“Once the goal of the model home is achieved, developers generally want to sell the home as quickly as possible. Because of this, the deal is often quite favorable to the buyer,” says Shurts.
Plus, you might have more leeway to negotiate the price of a model home. According to Davis, “If the house has been tested by several buyers or if it has been in development for several years, you can often use it to your advantage and negotiate the price down.”
So if you’re looking for a bargain in the midst of the current housing bubble, a model home might be a better choice for your budget, especially if you live somewhere with a high cost of living.
Disadvantages of buying a model home
Although many people are attracted to the idea of living in a brand new home, there are downsides to buying a model home as well.
First, model homes are usually built near the entrance to the development. It’s quick and convenient for potential buyers who come to see a model home, maybe not so great for those who actually live there. The house may be located on or just off a busy street with traffic and excessive road noise. In addition, all the other inhabitants of the subdivision will pass in front.
Also, while they may look stunning, the craftsmanship needed to build model homes may be lacking. While these homes must comply with local building regulations, “generally developers want to complete their model homes as soon as possible so they can begin marketing and selling the development land to future owners. As a result, the process construction can be rushed and the builder can take shortcuts to meet their schedule,” says Davis.
Unfortunately, you might not notice the potential issues until you already have them. At that time, any repairs or renovations are your financial responsibility.
Finally, just like with a model car on the ground, a model home will inevitably develop wear and tear over time from the constant stream of potential buyers visiting it. (Typically, it goes on sale once most of the subdivision is filled.) And because most model homes are sold “as is,” you either have to live with the wear and tear or spend your own money on it. repairs or improvements.
Financing of the model house
When it comes to financing a model home, you have several options. In some cases, the home builder will partner with a lender and may offer you a mortgage directly. The other option is to obtain a mortgage through a lender of your choice, as if you were seeking financing for a regular home (the application process is the same; lenders do not choose homes in any way) models).
If you’re considering financing a model home, it’s worth speaking with the builder’s lender as well as a few regular lenders to see which one can give you a lower interest rate. Keep in mind that with either option, there will likely be qualifications and loan requirements, such as homeowners insurance or private mortgage insurance (PMI).
Tips for Buying a Model Home
The home buying process can be complicated and time consuming. However, it’s a good idea to take a few extra precautions when buying a model home. Here are some tips to help you navigate the process of buying a model home.
Hire your own buyer’s agent
You don’t have to make the sale on your own. Consider hiring your own real estate agent to help you negotiate the price and terms of the sale, such as buying the model home with all the furnishings included. A buyer’s agent may also hold competitions for similar homes in the area, which may determine what a fair offer would be.
Compare prices in the area
Consider working with a buyer’s agent to compare property prices in the area or similar developments. Even though model homes generally sell for less than the median or average of similar properties in the local market, it can be worth working with an expert to check the numbers and see how much of a break you’re getting – or if in fact, you get one at all.
Make sure the house has not been occupied before
Hundreds of people could have visited a model home you are thinking of buying. And in some cases, the house could have been inhabited by potential buyers testing the property. Be sure to ask if the home has ever been occupied and check for signs of damage when you visit.
Hire a building inspector
Although this is a fairly new property and built to code, it is always a good idea to have your home inspected before purchasing a model home. Remember that most model homes are sold “as is”, so if the inspector notices any major problems or structural damage, the home builder may not offer to repair them. However, if there are any issues, you can take them into account in your offer or opt out of the deal altogether.
Consider an extended warranty
One of the advantages of new homes in a subdivision is that they often include a warranty offered by the builder. However, you may not get all the benefits of the warranty on a model home. Talk to the builder and see if they can provide an extended warranty that gives you more protection if something goes wrong after you move in.
Check the reputation of the builder
It is important to research the builder’s reputation before purchasing a model home. See if the builder has worked on other developments and try to find examples of their work. In some cases, you can also find reviews from people who have purchased a home under the builder’s development. Reading reviews can give you an idea of how current homeowners feel and give you some insight into the builder’s work in general and perhaps his model homes in particular.
Last word: Should you buy a model home?
If you’re looking for a newly built home with high-end features that you can move into with minimal fuss, a model home might be a good choice. Not to mention that model homes can be a bargain, especially at a time when housing prices have risen and inventory remains tight.
On the other hand, buying a model home has multiple potential downsides. Some of the shine may have blotted out the storefront, either because corners were cut during its construction or simply because many people visited it. You may find that a model home lacks the character and charm of an older home. Admittedly, if you find the builder has a bad reputation, it might make you think twice about making the purchase.
Ultimately, like any home purchase, buying a model home is a personal decision, which should be dictated by your needs and your budget. And, perhaps, your love of sample sales.