The Model Home Illusion
Walk into a builder’s model home and you are likely to be met with beautifully polished hardwood floors, premium countertops, custom cabinetry and high-end lighting. The builder portrays an alluring picture of how life can be in your future home. However, what may not be known is that the model is intentionally fitted with expensive upgrades to entice buyers.
Most builders use model homes as their showpieces, outfitting them with top-tier features that do not come standard in the base price. Quartz countertops, gourmet kitchens, extended patios and designer backsplashes are commonly added to appeal to buyers’ senses. However, these features can quickly increase costs.
When purchasing a home, buyers should always ask their sales representative upfront for a list of features included in the base price and a separate list of upgrades. It’s important to know what will cost extra. Often, you can find this list as a printed document or on the builder’s website. Your best approach is to treat the model as an ideal vision for your home, but not necessarily the final product.
What Is Typically Included in the Base Price
While the standards vary by builder and region, most new construction homes come with a basic package that covers the essentials. The base model is a functional home with limited customization. It is move-in ready, but there are no special touches.
Base models typically include structural components such as the foundation, framing, roofing, drywall, as with any other type of structure. The interior features usually include basic carpeting or laminate flooring, builder-grade appliances, laminate countertops, white-painted walls, and standard tile in wet areas.
In terms of mechanical systems, a base home will come with heating and air conditioning systems, plumbing fixtures, and electrical wiring setup. Some builders may also include a basic landscaping package, typically limited to front yard sod and a few shrubs.
One industry expert, Sarah Oliver, a design consultant with Lennar Homes, notes that “most people are surprised when they realize that the ‘basic’ kitchen often includes black appliances, a laminate countertop, and no backsplash. The model’s slick kitchen is $20,000 above the base.”
Understanding Upgrades and Customizations
Upgrades present the opportunity for home customization. These can range from minor cosmetic enhancements to significant structural changes. From flooring to ceiling fans, almost every detail can be upgraded, but for a price.
Common upgrade categories include flooring materials such as swapping carpet for hardwood or luxury vinyl plank, countertops replacing laminate with granite or quartz, cabinet finishes, appliance packages, and lighting. Even changes to the floor plan, such as adding a study or converting a loft into a bedroom, may be negotiable.
One often overlooked area is wiring and electrical. Pre-wiring surround sound, data cables, or additional outlets in the garage may not be part of the standard that buyers may want to include. Buyers looking to work from home or run a high-tech household may need to factor these options into the overall price.
However, when doing so, it is essential to keep the budget at the forefront of one’s mind. Builders typically require that upgrade selections be finalized early in the process and paid for either upfront or included in the loan. Some buyers feel frustrated because they desire to duplicate the model home. Experts recommend prioritizing upgrades that are difficult or costly to change later when your budget allows.
Builder Incentives and Their Role in Upgrades
Sometimes builders offer incentives to encourage buyers to purchase during certain phases of construction or in slower-selling developments. It is an effective way for them to secure cash flow while building. These incentives can be good for the buyer in that they include free upgrades, closing cost assistance, or design center credits.
According to a 2024 report by the National Association of Home Builders, 46 percent of new home builders reported offering incentives that included upgrade allowances. However, these offers are usually tied to using the builder’s preferred lender or title company. You can always see if you can negotiate these incentives with your preferred lender. It does not hurt to ask!
Design center credits are one of the more flexible incentives. Design center credits allow for an allowance toward optional features. While $10,000 might seem like a generous credit, it can evaporate in seconds in the design center where every detail adds to the total quickly. We already noted that the kitchen upgrades for one builder are $20,000, so you would still have an additional $10,000 to finish it off.
Understanding what incentives are being offered and why, and how they affect both the purchase price, and your mortgage is critical. Buyers should ask whether the incentives apply to structural upgrades, design finishes, or both. And if they do not, always do your best to negotiate since we know that not all builders apply them the same way.
The Role of the Design Center
After signing the contract, most buyers will visit the builder’s design center and make their selections. This experience can also be overwhelming because of the plethora of options. Go in with a budget in mind and if your finances allow, some cushion for potential upgrades. Still, make sure you focus on the basics before even considering pricey features. If the builder has a virtual design center, you may want to browse online and make your decision in the comfort of your home before signing.
Design centers are filled with choices: tiles in dozens of shades and textures, various trim profiles, cabinet handles, paint samples and more. Each selection has a price tag and an implication for the final look and budget.
Experienced buyers recommend walking in with your spending plan before you visit the design center, so you will track and not veer away from your original intent. Be firm on your budget; identify if any upgrades are needed immediately, or if they can be done later. Also, know your builder’s price tiers. Some builders offer multiple levels for the same feature, such as level 1 through level 5 granite. Higher levels carry a higher cost, so you have to determine if a higher level aligns with not only your design goals but also your budget.
No doubt, the design center is amazing; it was made to be that way. However, do not give into the allure of the sophisticated higher tier options available to you. You can elect to take builder basics on finishes like light fixtures or mirrors, then later upgrade after closing with items from a home improvement store or wholesaler to save money.
Hidden Costs and Common Pitfalls
One of the biggest surprises for buyers of new construction is the hidden and unexpected costs. The base price seems reasonable until permits, a lot of premiums, and upgrades are factored in the final prices.
Lot premiums are extra charge for choosing certain locations within a development, such as the coveted cul-de-sacs, corner lots, or homes with a view. These premiums can range from a few extra thousand dollars to well over $50,000 in high-demand areas. While a cul de sac provides a benefit for you and your future buyer, you have to decide if it is worth the thousands of dollars potentially over your budget.
Permits, municipal fees, and even homeowner association initiation charges can add thousands to the total cost. Not all builders include these in their advertised base price, so you must do the research. Additionally, some utility hook-ups may not be part of the package, especially in rural or newly developed areas.
To avoid surprises, it is critical to ask for a complete breakdown of all costs and fees up front. A real estate agent who specializes in new construction can be instrumental in reviewing builder contracts and identifying red flags in pricing and terms. We recommend in your research that you not only do your research on the builder but choose a realtor who specializes in new construction with a track record of success for clients.
Resale Value and Long-Term Considerations
Always keep the long-term value of the entire purchase at the forefront of your mind so all upgrades yield a return on investment Features such as a three-car garage, or an upgraded kitchen tend to have better resale potential than custom tile in a powder room.
According to Zillow, kitchens and master bathrooms deliver the highest return on remodeling investments, and the same logic can apply to new builds. Energy-efficient features, such as better insulation or upgraded windows, result in reduced utility bills and resale value.
Structural upgrades are often wise investments not only for your pleasure but for a future sale. A sunroom addition or vaulted ceilings may cost more upfront but can distinguish the home from competitors in the resale market. On the other hand, highly personalized design choices might not appeal to the average buyer and might turn them away. If you do upgrade, let it be for the long-term value of the home, not just your personal preference.
Buyers should consider how long they plan to stay at the home. Certain upgrades may be worthwhile purely for enjoyment of long-term purchases. However, if you plan to move within five years, choose features and enhancements that will make the home more competitive when it is time to sell and forgo personalized design choices.
Final Thoughts Before the Contract is Signed, Sealed, and Delivered
Buying a new construction home involves a lot more than the fun decisions such as choosing a floor plan and paint color. You must understand what is standard for the home and evaluate which, if any upgrades, should be included in the initial purchase.
We recommend you take the time to tour multiple builders, compare standard packages, analyze and break down what your dream design will really cost. A savvy buyer examining the overall investment and not just the glitz and glamor will not be distracted by the shimmer of a model home and the upgrades in the design center. Instead, specific questions will be prepared to address the fine print and legalese to make sure costs are the same as the initial agreed upon price.
Even with this, keep in mind that some upgrades are beneficial beyond appearance, as they are functional and increase the resale value of your home. You must be strategic in these decisions as it can make all the difference between staying within budget or exceeding your initial spending plan.
Make sure you work with a professional, research builder reputation, and never rush your decisions, no matter how spectacular the home appears. Do not yield to the pressure from the builder, the sales rep in the design center, or even your realtor or lender. Your future home is one of the biggest investments you will make in your lifetime. Enter into this process being as prepared as possible so you can acquire the best home, upgrades or not, that meets your budget and positions you for a successful future home sale.
TLDR: Key Takeaways
- Model homes usually display high-end upgrades, not base-level features
- Standard inclusions vary but usually cover basic flooring, appliances, and systems
- Upgrades include flooring, countertops, lighting, layout changes and more
- Builders may offer incentives like design credits or closing cost deductions
- Lot premiums, permits and utility hook-ups are often not included in the base price
- Design centers offer tempting choices but can put you in the red per your budget
- Not all upgrades improve resale value; choose wisely based on long-term plans