Additional Cost and Options for New Home Purchase

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[irvinehomeowner]

My Gold Toilet Effect was in response to anyone spending $300k on new $1.xm home.

That is a lot, no argument from me.  Probably an extreme example of upgrading through the design center.  But your 5% on a $1M house is the opposite extreme.  Most ppl are somewhere in the middle.

I don't think my 5% is on the opposite extreme... but at the low end yes. 0-1% is the opposite extreme. Just for interior upgrades, qwerter and WTT were at 6-7%, Inc was at 0.8% just for design center and IC was the high at around 9%.

But, you can't really say they got ripped off if you don't know what options that buyer picked.  Over optioning?...I dunno, it's his money.  If he has the disposable income and loves his house, who are we to place any type of judgement on how somebody spends their money.

If someone is spending $300k on a $1m house... I can confidently say they got ripped off or they over optioned. A $1m house probably doesn't even cost $300k to build... and that's why it's questionable.

Think about it, builders make money on upgrades, so that $300k without the profit margin is probably more like $100-150k, outside of design center, that's probably $200k. We're not talking $10k to do flooring with Venetian vs. $14k with the builder... we're talking $100k+ (but again a ripoff to a 99%er may not be a ripoff to a 1%er). More than a few times I have seen price sheets of new homes that fell out of escrow and the builder had "discounted" the cost of the upgrades because they want to move the inventory.

So that is not a judgement, there is no emotion in my statement. It's straightforward, they either got guilded by the builder or they guilded their toilets.

Here is another way to look at it. If your price range is $1.3m, why not buy a $1.3m house that is bigger and maybe better located than throwing $300k onto a $1m house? You'll be hard pressed to recoup that if no one else is adding $300k to their home on your street.

That $300k is the difference between ungated Strada and gated Capella... between a motorcourt and a driveway... between a 4/4 and 5/5... between a 2CG and a 3CWG.

To the OP, pricedoutJay:

My advice is to find the home in the best location, with the best features that work for you that won't stretch your budget and not worry too much about upgrades you don't *need* right now. I would much rather buy a house on a corner or a culdesac with a large lot and a 3CWG with standard builder grade interior, than a house that is fully upgraded but backs a freeway or a main road and doesn't have a driveway.

I think what you're getting at is most people say I want to spend or I am qualified for $X on a house, and usually, with resale, that's the price... but with new and the design center tactics, you are looking at $X+Y so they need to concentrate on a price range of $X-Y to account for cans and fans.

Good luck Jay... and let us know how much the builder ripped optioned you for.

 

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[irvinehomeowner]

@IHO: Come on, stop cherry picking #s.  The design center only % is meaningless.  A person can spend $0 at the design center and $300k after COE with outside contractors.  You need to use the whole percentage for interiors.  Qwerty spent 7%+probably 3% total so 10% (his #s included landscaping).  I spent 9%.  IC is at 11%.  Inc spent 9%.  5% at the design center is do-able, but whats the final % including after COE stuff?

But that's what my 5% is based on... design center only... the final cost it would be for me to purchase the house... what my mortgage will be based on, what the taxes will be based on, what Redfin's sales history will be based on.

Even with your 10% average... that's further away from Gold Toilet 30% than my "extreme" 5%.  $50k to me is quite a bit (no matter what the price of the house)... and would stretch farther with outside contractors than design center. I'm still wondering what one would do to get up to $300k on a brand new home.

 

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[OCgasman]

@IHO: Come on, stop cherry picking #s.  The design center only % is meaningless.  A person can spend $0 at the design center and $300k after COE with outside contractors.  You need to use the whole percentage for interiors.  Qwerty spent 7%+probably 3% total so 10% (his #s included landscaping).  I spent 9%.  IC is at 11%.  Inc spent 9%.  5% at the design center is do-able, but whats the final % including after COE stuff?

+1.  Plus we don't know what the base price of the house is.  There is a huge range from $1M to 1.9M.  Also we don't know if he included structural upgrades in his DC calculations.  Structural upgrades can run over $50k.  But, even at the middle number of $1.5M with a $50k structural upgrade, it's still $250k in DC upgrades.  That's a lot.  But, here's the thing, everyone puts a different value on life experiences.  Maybe he feels like this is the home he wants to die in.  Maybe he doesn't go out and loves spending almost every free minute enjoying his home.  Maybe he didn't want to do anything after COE and had the means to do it through the design center.  Maybe he couldn't care less about recouping his money and just wants to enjoy his house the way he optioned it out.  What you're doing is projecting your own value system onto somebody else.  Not everyone cares about exit strategy.  Not everyone thinks the same way about a home purchase.

There are a million examples of what ppl pay for that others think is a rip off or waste of money.  Some ppl prefer to travel in first class and stay at 5 star hotels.  Another person with the exact same income might think it's a waste of money and economy and 3 star is fine.  Some ppl think exotic cars are a waste of money, another person with the same income might love to track their Porsche, F-car or M4.  On the sound bar thread, there's a member putting in 9 speakers for an Atmos system.  That'll be a pretty penny with all the wiring, speakers and electronics necessary.  Is that a waste?  How about a $500 bottle of wine?  To a wine enthusiast, that's money well spent.  To the average person, an unspeakable amount of money to spend on a consumable.  Different strokes for different folks.

 

[Irvinecommuter]

@IHO: Come on, stop cherry picking #s.  The design center only % is meaningless.  A person can spend $0 at the design center and $300k after COE with outside contractors.  You need to use the whole percentage for interiors.  Qwerty spent 7%+probably 3% total so 10% (his #s included landscaping).  I spent 9%.  IC is at 11%.  Inc spent 9%.  5% at the design center is do-able, but whats the final % including after COE stuff?

But that's what my 5% is based on... design center only... the final cost it would be for me to purchase the house... what my mortgage will be based on, what the taxes will be based on, what Redfin's sales history will be based on.

Even with your 10% average... that's further away from Gold Toilet 30% than my "extreme" 5%.  $50k to me is quite a bit (no matter what the price of the house)... and would stretch farther with outside contractors than design center. I'm still wondering what one would do to get up to $300k on a brand new home.

Ok then I'm clearly like qwerty and no comprende ingles because I thought you are saying 50k total interior upgrades for new construction.  How much money one spends at the design center as a % of their total upgrade budget depends on a lot of personal factors.

Yeah..I though we're talking about all upgrades including landscaping and window dressing.    Builders don't do yards anymore but if you did include landscaping and window dressing, $300K would not be crazy (depending on the size of the yard). 

If we are talking just about "design center upgrades"...then 5-10% is about right.  Probably another 3-5% if we are adding flooring.  Another 2-5% if you want to really splurge. 

I do have to say that even the price of the home is probably the wrong measure.  It really depends on the layout of your house.  If you have more rooms (especially bathrooms), it's going to cost more.  It's going to cost more if you have more flex space.  It also depends on whether you want more cabinet space and the layout of your house.    Those things often correlate to price but sometimes they don't. 

 

[irvinehomeowner]

I do have to say that even the price of the home is probably the wrong measure.  It really depends on the layout of your house.  If you have more rooms (especially bathrooms), it's going to cost more.  It's going to cost more if you have more flex space.  It also depends on whether you want more cabinet space and the layout of your house.    Those things often correlate to price but sometimes they don't. 

I agree with this.

Some people only upgrade flooring on the first floor... or only in the kitchen and bathrooms. Or only do cans/fans in the bedrooms.

Although... with today's single great room on the first floor concept, it should cost less to upgrade... not more.

 

[Arman]

Yeah..I though we're talking about all upgrades including landscaping and window dressing.    Builders don't do yards anymore but if you did

Not entirely true. TNHC is offering pre-close landscaping option on Amelia and Trevi.

 

[irvinehomeowner]

Also, when you are pricing out what upgrades cost after COE compared to builder design center during construction, why would the design center be more not less? It cost less to put cans in a house that doesn't have drywall up yet than after it's been drywall and painted.

Same thing with cabinets, flooring, electricity etc.

I laugh when I hear terms like "upgraded insulation". Seriously, in a luxury home that someone is paying over $1m for you are only going to put in minimum or no insulation?

#PentUpBuilderAngst

 

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[Irvinecommuter]

Also, when you are pricing out what upgrades cost after COE compared to builder design center during construction, why would the design center be more not less? It cost less to put cans in a house that doesn't have drywall up yet than after it's been drywall and painted.

Same thing with cabinets, flooring, electricity etc.

I laugh when I hear terms like "upgraded insulation". Seriously, in a luxury home that someone is paying over $1m for you are only going to put in minimum or no insulation?

#PentUpBuilderAngst

Of course builders price things a premium but that doesn't necessary make them "expensive".  Cost is relative to the alternative.  Again, back to the car analogy, you can get a lot of tech upgrades after you buy your car but most people end up going with what the dealer offers (I mean floor mats don't really cost $55). 

You have factor in time as well as warranties.  Also, while putting upgrades into your mortgage is not preferable, it can better than trying to finance it via cash or credit card post-closing. 

 

[irvinehomeowner]

@IC:

The price difference makes your car analogy not so applicable. They don't build your car for you so you usually have to take what they have on hand. You keep mentioning it, but it's not the same thing.

@WTT:

I think what bothers me is how the new sales process has changed. Now they sell homes 6 months in advance to give them more time to pad their profits with upgrades they can sell during framing (yet you can't have a 3rd party inspect said framing).

Back in the day, upgrades like the ones people are listing did not exist but now that the builder can do them, they are thinking of new ones like "upgraded insulation" and "electrical upgrades". When we went to the design center, it was just cabinets, flooring and counters... now they upsell you on whatever they can make money on. Soon we will see stuff like "Super Reinforced Slab".

 

[Irvinecommuter]

@IC:

The price difference makes your car analogy not so applicable. They don't build your car for you so you usually have to take what they have on hand. You keep mentioning it, but it's not the same thing.

@WTT:

I think what bothers me is how the new sales process has changed. Now they sell homes 6 months in advance to give them more time to pad their profits with upgrades they can sell during framing (yet you can't have a 3rd party inspect said framing).

Back in the day, upgrades like the ones people are listing did not exist but now that the builder can do them, they are thinking of new ones like "upgraded insulation" and "electrical upgrades". When we went to the design center, it was just cabinets, flooring and counters... now they upsell you on whatever they can make money on. Soon we will see stuff like "Super Reinforced Slab".

You can call around to get the right package (or no package).  Most people are just fine with what is offered.  And the more expensive the car, the more customizable you can make it.

I also don't get your second point.  Most builders actually have significantly fewer upgrade options than before and there is no requirement that you do any upgrades.  I mean, it's actually an annoying process that you can completely ignore if you wanted to.  Most of the things you talk about are relatively minor...the big ticket items are still countertops, bathroom tiles, ranges, etc. 

Also, the build ahead issue is really about no carrying costs.  Builders used to build homes without a buyer because they believe the homes will get bought.  Now, they basically hold back until they're "sold".

 

[OCgasman]

@IC:

The price difference makes your car analogy not so applicable. They don't build your car for you so you usually have to take what they have on hand. You keep mentioning it, but it's not the same thing.

You can call around to get the right package (or no package).  Most people are just fine with what is offered.  And the more expensive the car, the more customizable you can make it.

You can order a car spec'ed out exactly how you want it.  I did that for my last 2 BMWs.  Took 4 months to get the car, but I was very specific in the interior/exterior color and options I wanted and there was no Beamer around that matched it.  Irvinecommuter is correct about the more expensive the car, the more options.  Porsches have so many options that I gave up trying to make heads or tails of them.

@IHO
I totally get what you're saying about new construction.  The builders are in it to maximize their profits, just like any other business.  But, as long as there's buyers, it's the system we have currently.  Does it suck...yes.  Are houses overpriced in Irvine...yeah, but it's cuz all of us on this board love living here.  Great schools, great safety, convenient, all around great place to raise a family.  I think WTT said it best, new construction is what it is and as long as you go in with your eyes wide open and budget for inevitable upgrades either through the DC or after COE, there should be no surprises.  Btw, you do seem especially angry at builders, not your usual moderate self.

 

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[irvinehomeowner]

I also don't get your second point.  Most builders actually have significantly fewer upgrade options than before and there is no requirement that you do any upgrades.

You may need to recheck your data here. I assume you weren't buying new in the 80s-90s and back then, the house was already framed, drywalled and sometimes even the cabinets were in... the only choices you had then were counters and floors. This was even as recent as the 2000s.

Now, since they sell so far ahead of build, you can choose many more types of upgrades (not just color of tile, carpet and counters). This has opened the opportunity for them to upsell.

Sure, you don't have to buy them, but they sure make them sound like you need them (now you can use your car analogy).

Also, the build ahead issue is really about no carrying costs.  Builders used to build homes without a buyer because they believe the homes will get bought.  Now, they basically hold back until they're "sold".

Actually, by doing it this way, they could be increasing their carrying costs. The builder's major expense is land cost, and by increasing the time it takes from signing to closing, they hold the land longer. What they are really doing is minimizing risk... but I think they are trying to make up for the extra time they are paying for the land with "upgrades".

Both you and WTT say it's the same stuff but that's partially true... the option to can and fan wasn't as widely available (esp prior to framing) before. Even if you can ignore them, it seems like most opt for some of the non "big ticket" upgrades.

I'm still not on board with car buying being the same as home buying... but again, as 99%er, I don't deal with exotic luxury vehicles.

#WhenDidIBecomeTheBear

 

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[irvinehomeowner]

I'm not against new home construction... I'm just not down with new home builder tactics.

And if the new home smell and the FCB bank accounts weren''t so powerful, the consumer could actually have some say in what type of products they get.

Dang... I feel like BK from the IHB days.