Why would anyone in their right mind buy a perfectly good new home and start remodeling the day after closing? Well, the truth is, it happens all the time. The reasons for tear outs in new homes run the gamut from the desired product not being offered to builder option prices being too high. Let’s take a look at the top three reasons tear outs in new homes occur and discuss methods to keep you from having to deal with them.
Option Prices Too High
One way that builders improve their profit margins is through the options they offer. These are changes that cost extra money over and above the standard, basic plan price. So, let’s say you stop into a new home community because you like the look of the model. As you probably know, the model home will be tricked out with all kinds of optional items that cost extra money, over and above the base house price. The base house will typically come with a few standard features and then you choose which upgrades you want to add to make the home yours.
There’s nothing wrong with charging for optional items. However, many builders mark up these optional items so the profit margins are double and sometimes triple those of the base house price. Meaning, they keep the standard home price low so they can use the low price in their advertising…which helps get customers in the door. Then they make up the difference with higher prices on the options you choose.
So what does this have to do with tear outs in new homes? Well, once you sit down and review the builder’s option list, you start to see how quickly your costs add up. And in many cases, the buyer decides they can do the work after closing for less than the builder is charging. Items like shower surrounds, flooring, refrigerators, custom paint colors…etc. can many times be purchased on your own for a significant discount after closing.
Products Not Offered
Builder’s will sometimes limit the products or features that they offer in their new homes. This can be done to simplify their business. Have you ever gone to a restaurant that had a menu with too many items on it? As a customer, it’s sometimes better to have fewer things to choose…it makes the decision easier on you. And as for the restaurant, having fewer menu items helps to limit the amount of inventory needed. From a builder’s standpoint, fewer options makes their purchasing and building process much simpler. It can also help to lower costs because the builder can single source products from a given supplier. In turn, the supplier will lower the price to keep that loyalty.
Unfortunately, fewer options available means you will sometimes want something you can’t have. Tear outs in new homes sometimes occur when the builder was unable to provide a particular product the buyer wanted.
Reluctant Builders
I can’t tell you how many times I was asked as a builder to put a laundry tub in the garage. Keep in mind, these requests were for new homes being built in cold weather climates. Technically there’s nothing wrong with installing a laundry but in a garage as long as it is either heated or the water is shut off to the garage in the winter. As a builder, I’ve always said no to this request knowing the pipes will freeze at some point. This is one example how builders will be reluctant to make changes that you might want in your new home. Luckily, this option doesn’t require major rework but other options can require major renovations.
Why Are Tear Outs in New Homes So Bad?
If you can do it cheaper after closing, why not? Here are some reasons this is a bad idea…
- Waste – Remodeling a perfectly good, brand new home is so wasteful. It is so painful to watch a hammer destroy drywall, paint, or flooring that was just installed.
- Mess – The byproduct of tear outs in new homes is the dust and mess that is inevitable.
- Warranty – That new shower tile floor you install after closing won’t be covered by the builder’s warranty if they didn’t install it.
- Mortgage – Anything you spend money on after closing comes out of your pocket. It’s always nice to add the options into the mortgage.
Avoiding Them Altogether
So how can you avoid having tear outs in your new home? One option is to build the home yourself as an owner builder and avoid the limitations we builders place on you. But if that doesn’t work for you, the next best option is to flush out the problems prior to signing a contract with a home builder. Here are the reasons for this…
- Bargaining Power – Builders are more willing to make changes when it means getting your business. Even though a particular builder doesn’t normally install skylights, they may be willing to make an exception to work with you.
- Mortgage – You will want to know how much it will cost to get the home you want to make sure it fits into your budget.
- Go or No Go – How can you compare builders if you don’t have an accurate comparison of their prices? The option pricing can be thirty to forty percent, or more, of the entire new home cost so you will want to review it carefully prior to signing a contract.
Of course there are many reasons for choosing a particular home builder. They may have the best location close to schools or transportation. Or, they may offer the best warranty in the area. So these things may steer you toward a particular company. However, don’t forget to review option pricing prior to signing a contract. This way you will at least know what you are getting yourself into. And if you just can’t get exactly what you want from a local builder, be sure to stop by our Build Your Own Home resources page to see how you can make it happen.
