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What Does the Base Price Include in a New Construction Home?

Dena Kouremetis
A veteran of the homebuilding industry, Dena Kouremetis is the foremost real estate columnist specializing in new home issues, trends, products and designs. Her columns appear in the New York Post as well as other newspapers throughout the U.S.

To some homebuyers, it seems like a marketing ploy, but homebuilders have historically debated it in earnest. Which is better? A house that has a high level of included features at a higher price, or a basic (perhaps larger) house at a lower price that gives the homebuyer the choice to add whatever extra features they want or can afford?

One of the nation's largest homebuilders touts the theory that most new homebuyers want a lot of attractive amenities "spec'd" (included) in the house. Perhaps the home would include things like room-finished garages, category 5 phone lines, TV wiring in secondary bedrooms, garage door openers, overhead lights in all rooms, and levels of appliances and fixtures that may be considered upgrades with other builders. These items are undoubtedly added to the sales price, but with a giant homebuilder buying these fixtures and products in bulk, the homebuyer will probably not be paying the usual design center-inflated price for the individual cost of the items labeled extras. They may, however, be limited as to how many other options are available beyond these 'upgraded-standard' levels.

Another giant homebuilder specializes in promoting the concept that buyers want more square footage for their money no matter how Spartan-like that square footage is presented within the base price of the home. Homebuyers can add amenities to the house to the levels they see as important and affordable. The basic house offered by them may be generous in size when compared to its competitors, with plusses like roomy closets and ample counter space in the kitchen.

The builder’s research purportedly tells them that most homebuyers would prefer to pay less for the basic house and add the personalized luxuries at the time of purchase or as they see possible in their future. It would be an architectural or decorating upgrade, for instance, to add high volume ceilings to the formal areas of the home. A family room fireplace, a side-access security door to the garage, and a sheet rocked garage and door opener may be considered extra. And any cable TV or telephone outlet, aside from the two included in the base price, would be the buyer’s choice to add. Thousands of add-ons are offered to homebuyers through their sales offices and/or the company design center so that homebuyers can enhance the basic house to their heart’s content.

So which is the better concept? Marketing campaigns for selling homes, just as in any other industry, are geared to getting your attention first and foremost, and then daring you to compare the concept and product to its competitors. When deciding which scenario is best for you, you may want to consider doing some of your own homework.

If you are in a particular price range for a new home, say $150,000 to $180,000, try to perform a per-square-foot analysis, putting the same factors for two or three homebuilders on a level playing field. For instance, one builder's base price may be $152,000 for an 1800 square foot home. List all the basics the house comes with, and then add on a list of items you know you'll want. Include the builder's pricing for each extra (you may have to press hard for the builder to give you option pricing, but they'll usually give in once they know you're serious about considering their homes). Totaling your figures may reveal that, with extras, the house now would be priced at $168,000. Take that figure and divide it by the home's square footage, and you'll arrive at the price per square foot.

It’s wise to try to find out from the builder at what level most homebuyers in their new home neighborhood are typically upgrading their homes. If they say that most stay around the $5,000 - $8,000 level of upgraded amenities, and your figures reveal that it would take $16,000 to get the house to the level of amenities that would suit you, chances are that you would be over-improving a new house for the neighborhood it is about to become a part of. This may affect your ability to recoup the cost of your improvements when the time comes to refinance, glean equity from, or eventually sell the home. By the same token, if your figures are low, and most people in the neighborhood traditionally upgrade to higher levels, it may be that you are taking a fairly safe bet.

You may also want to consider that, although you may choose to add some of the fancier amenities to your home, many of your next-door neighbors may have taken the basic, unadorned version. Whether or not you realized you were doing your neighbors a favor, those homebuyers around you who bought the stripped-down version may heartily appreciate what you have done to your new house in the long run, since the eventual appraised value of their homes may be complemented by it.

Don't forget the other important factors when selecting a new home, whether it is the fully decked out version, or the basic dwelling to (hopefully) be adorned later on. The location of the community and of the house itself within the neighborhood, as well as size of the home site, the 'look' of the neighborhood and its future streetscape (neighborhood rules can govern this aspect) are all considerations in future value. Is the “approach” attractive to the new home community? What do you drive by to get there? Are the neighborhood schools considered top-notch even if they are not particularly important to you? Your eventual re-sale value will be affected by all of these considerations.

Other factors, such as brick or stucco exteriors and tile roofs as opposed to wood siding and composition roofing, can be given more value because of their higher inherent values in construction and built-in durability. Gate-guarded or meticulously master-planned communities and neighborhoods may be considered more valuable, along with the codes and restrictions that accompany the concept, due to the greater likelihood of values remaining constant or appreciating there.

Pounded into the buying public on a regular basis is the fact that a home is usually the largest investment they are likely to make. And while they will oftentimes shop ‘till they drop to compare purchases like cars or furniture, even the most astute homebuyers may permit emotions or affable, convincing new home sales people to sway their agenda.

Although you will want expert input from on-site sales people, whether you purchase a house from a builder who touts the “basic chassis with add-ons” concept or the no-brainer “nothing is extra” idea is your decision alone. Taking the time to do your own research as to which agenda gives you more value for your dollar will go a long way in helping you to make a prudent decision.