Home builder's promos just don't stack up

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Aug 6, 2018

Home builder's promos just don't stack up

The new home building market is more competitive than ever before.

People often ask me about builder promotions. These questions have become more and more frequent over the last 12 months. Why?

The new home building market is more competitive than ever before. With the increased competition have come lots of promotions – including some incredible and barely believable claims.

So how can you tell the difference between the overinflated ‘deal of the century’ and something that’s going to be a great value addition to your build?

Well. Let’s be clear from the start - builders do like a good “promo” in order to grab attention! But that not a new tactic. It’s a practice that’s as old as the hills and has been part of retail marketing for everything from cars to fridges since well before the “Mad Men” era redefined advertising!

My own company runs promos but we don’t over inflate the value or make unjustifiable claims. We offer the promotions we run because of our relationship with suppliers who’ll agree to upgrade fixtures and appliances to a level that’s tangible and adds real, quantifiable value.

The trick with promotions is to work out how you value the offer. To do this you need to identify what really counts and what is said just to get your attention. If there in one practice I can’t abide by in our industry, it’s the outrageous claims that are made just to get your attention, that either aren’t true or won’t add any value to the home you are building:

So let’s take a look at some:

“Free holiday to Bali?” Sounds good? Grab your attention? Wouldn’t it be great to take a relaxing holiday while your new home is built? Nice!

Not really. It’s just money spent on you that doesn’t go in to the value of the home. Your bank won’t like it, won’t lend on it and you will very rarely take up the offer. The builder will recommend that you take a cash discount instead in order to make the finance work on the deal and, presto, you are back at square one. Steer clear. These are the worst promos of all.

“We’ll pay your rent” sounds good doesn’t it? It’s a great idea and means that you can avoid the cost of a mortgage + rent while you build. That’s a big relief so let’s call!

However, reality bites when the bank does a valuation on the new contract and realizes the builder is building 20+ payments at $350 per week into the price of the home. Again, you will be told to take a cash discount off the home price and guess what? Back to square one again.

“Free $50,000 kitchen upgrade for $1,000?” OK, lets face it, you know that can’t be right so trust your gut on this one. If the home is selling for $220,000 there is no way a kitchen upgrade, yes an upgrade not a complete new kitchen, can be worth nearly a quarter of the value of the home unless the taps are made of gold.

Adding stone tops, gloss doors and a few appliances and overhead cupboards do not add $50,000 to the value of your home. The kitchen shown has simply been priced into the home already and the $50,000/$1,000 is just there for a headline and to make you think that you have jagged a bargain.

The key to navigating your way through the promotional maze is to genuinely evaluate the offer and make sure it adds value to your home.

My advice is to ignore the fluff and flashing neon lights. Look at the final price and check the quality of the homes features and fittings. There can be some brilliant upgrades from builders and their suppliers, including much better specifications on products that you normally wouldn’t get for your money.

Do make sure you run a ruler over the cost per square meter as a starter, but never forget to add in the unique features (they all cost money) and work out what you think they are worth. Do your homework.

Promotions are glamourous and exciting, but above all, I do recommend you to check out the reputation of your builder and their quality of service and trades. Overlook this and it will cost you in the long run. Remember, this is your biggest ever investment so don’t be dazzled but the bright lights of the “Promo”, you will be living in your new home for many years to come.