Purchasing upgrades on a new built home.

Hello everyone,

So I found out that when I purchase upgrades for the new home from the builder, the dollar amount of the upgrades will be added to the purchase price. However, we are going to pay for the upgrades out of pocket instead roll it in to the loan. Why would they still add the $ amount to the purchase price and I would be paying property tax for the door that I added. I understand upgrades may add value to the home, but it's never a 1:1 ratio. That's one argument I have heard. The other auguement is that since we are not paying sales tax, the IRS will collect it through property tax. This didn't happen to our last new home purchase with Cal Pac. Does anyone has any info on this?

The IRS collects income taxes, not property taxes. States and cities collect sales taxes, typically counties collect property taxes.

I'm trying to minimize the amount of builder options for exactly that reason. I don't want to pay extra 'recurring' costs on a higher purchase price. Also I've heard that the builder sometimes charges 3x actual cost. So I'll have to GC our house and pull contractors to do most of the upgrades (not that we'll have a lot of upgrades). And I'm going to wait as long as possible before putting landscaping in due to cash flow reasons.

I still haven't seen the options list and I don't know what the builder must-haves are, but I hope it won't hurt my wallet or my annual property tax payments (+ mello roos).

[quote author="cantaloop"]I'm trying to minimize the amount of builder options for exactly that reason. I don't want to pay extra 'recurring' costs on a higher purchase price. Also I've heard that the builder sometimes charges 3x actual cost. So I'll have to GC our house and pull contractors to do most of the upgrades (not that we'll have a lot of upgrades). And I'm going to wait as long as possible before putting landscaping in due to cash flow reasons.

I still haven't seen the options list and I don't know what the builder must-haves are, but I hope it won't hurt my wallet or my annual property tax payments (+ mello roos).



[/quote]

Thanks for the reply. If you could be so kind, ask the sales person to see what's their response on this topic.

[quote author="qwerty"]The IRS collects income taxes, not property taxes. States and cities collect sales taxes, typically counties collect property taxes.[/quote]

You are right. I was thinking about what the sales person said to me and didn't even think about. Thanks.

The only way around not including the upgrade/options cost in the price of the home is to do them after you close like I did with my condo. 90% of the time you'll be able to do it much cheaper, have a greater selection of materials to choose from, and do it exactly how you want it. And say you would be paying for those upgrades out of your pocket, just one more reason to do them right after you close. The downside is that you'll have to wait a little longer to move in after you close on the home.

From much experience, only put in options that you can not do, or is difficult to do after close. For example, pre-wiring for recessed lighting, a/v hookups, ceiling fans are better done through the builder. In some cases (depending on what your ultimate goal is), larger things can be more cost effective through the builder. For example, my house came with a one piece molded tub/shower (all one big plastic unit). It would have been cheaper to upgrade this tub through the builder, and costs about double ($20K) after-the fact for a myriad of reasons that I won't get into.

As appealing as it is to get everything done at once, you will save a lot of money going outside of the builder whenever possible. If they would allow, I would even do a bare-floor escrow and have all my flooring installed after COE. My friend bought new in Chino Hills, I was able to convince her to do this and she saved $18000 over the design center quote and she got better quality product.

The builder seriously does charge you 3x market price for a lot of options. I was quoted $16 sq ft for a nice hardwood flooring that I found for $6/sq ft installed. They also wanted $75/sq ft for a counter top. I found an equivalent pre-fab... $300 for a 9ft slab and $20/ft for install and cutting. You can save THOUSANDS... PLUS, you wont be paying 1% a year for the rest of your life in taxes on your upgrades. My friend bought in Villages of Col. They included all the upgrades and said "there was nothing they could do about it".

[quote author="akim997"]From much experience, only put in options that you can not do, or is difficult to do after close. For example, pre-wiring for recessed lighting, a/v hookups, ceiling fans are better done through the builder. In some cases (depending on what your ultimate goal is), larger things can be more cost effective through the builder. For example, my house came with a one piece molded tub/shower (all one big plastic unit). It would have been cheaper to upgrade this tub through the builder, and costs about double ($20K) after-the fact for a myriad of reasons that I won't get into.

As appealing as it is to get everything done at once, you will save a lot of money going outside of the builder whenever possible. If they would allow, I would even do a bare-floor escrow and have all my flooring installed after COE. My friend bought new in Chino Hills, I was able to convince her to do this and she saved $18000 over the design center quote and she got better quality product.

The builder seriously does charge you 3x market price for a lot of options. I was quoted $16 sq ft for a nice hardwood flooring that I found for $6/sq ft installed. They also wanted $75/sq ft for a counter top. I found an equivalent pre-fab... $300 for a 9ft slab and $20/ft for install and cutting. You can save THOUSANDS... PLUS, you wont be paying 1% a year for the rest of your life in taxes on your upgrades. My friend bought in Villages of Col. They included all the upgrades and said "there was nothing they could do about it".[/quote]
Great advice. I did the same exact thing with my Irvine condo. The only upgrades that I got was the built-in desk, upgraded cabinets, and upgrading to SS appliances because those things were cheaper to do through the builder than have me do them myself. I also asked the builder (William Lyon) to have bare concrete floors instead of the standard builder carpet and I found out I got an $1,800 credit on my escrow for it. The biggest margins for the builders are for painting, crown moldings & baseboards, countertops, and flooring.

This message was deleted by the original poster.

After market upgrades will void all warranties of items attached to them or items domino-ed in a series.

Here are some examples:

Granite counter top will affect the cabinet supports directly below due to weight. Cracks, doors and moisture penetration will not be covered .

Floor tiles and wood flooring will void all toilet warranties because the toilets were repositioned over the new floor materials.

Moisture condensation between new flooring and concrete slab will not be covered.

Foundation cracks will also not be covered due to improper after market flooring installation.

After market light fixture will also void the electrical circuitry feeding the after market installations.

The list is long so buyers beware of the risk. Just suck it up and
let the builders rip you off.

Thanks everyone. I was all set to go with after market until BK chime in. J/K <!-- s --><!-- s -->

I am glad I am saving one sheep from a long painful death.

well i think granite countertops come standard so that's not an issue.

leaking toilets? just make sure the floor install installs a new ring seal and you should be fine. toilet warranties... i don't see anything happening to the toilet worth spending that much extra cash on the flooring through the builder.

mositure condensation - if you have carpet... moisture can get through to the ground even with the thickest of pads. if you are installing wood, then you want to use a high grade pad (or watever that black stuff is i rolled out all over the floor) because you want to reduce the noise factor anyways. I've seen countless houses redone without problems.

To assume all foundation cracks are due to "improper" installation is ridiculous.

When you buy a new car do you also pay the $2000 for the low-jack the finance guy sells you? How about the $3000 for the extended warranty? Then the $1200 for the tire insurance? All of a sudden you've tacked on 15% to the price of your new car. Save the money and you will have a buffer to pay things out of pocket on an as needed basis. If anything catastrophic happens, that's what your HOA policy is for. If you need to fight the builder on something, you will have money to hire a good lawyer.

My old boss had an issue with his home over in Northwood (off Meadowood). Basically his entire downstairs flooded. Builder tried to get out of it, but in the end they covered everything AND he got nice new flooring installed throughout....

I've tried to do the bare flooring thing in the past but I heard a builder say that they cannot close escrow unless the flooring is "finished". Is that still true?

[quote author="irvinehomeowner"]I've tried to do the bare flooring thing in the past but I heard a builder say that they cannot close escrow unless the flooring is "finished". Is that still true?[/quote]
I think it depends on the builder and maybe the lender. I was able to do it with William Lyon and BofA but that was in the bubble days. They did tell me that I had to have the builder's baseboards because I also asked to not have them installed since I was going to upgrade them to 5"+ ones.

[quote author="irvinehomeowner"]I've tried to do the bare flooring thing in the past but I heard a builder say that they cannot close escrow unless the flooring is "finished". Is that still true?[/quote]

I have heard that before. However, it is depending on the builder and the lender. Builder has to be willing to do and the lender will have to be ok with bare floor at COE.

[quote author="akim997"]well i think granite countertops come standard so that's not an issue.

leaking toilets? just make sure the floor install installs a new ring seal and you should be fine. toilet warranties... i don't see anything happening to the toilet worth spending that much extra cash on the flooring through the builder.

mositure condensation - if you have carpet... moisture can get through to the ground even with the thickest of pads. if you are installing wood, then you want to use a high grade pad (or watever that black stuff is i rolled out all over the floor) because you want to reduce the noise factor anyways. I've seen countless houses redone without problems.

To assume all foundation cracks are due to "improper" installation is ridiculous.

When you buy a new car do you also pay the $2000 for the low-jack the finance guy sells you? How about the $3000 for the extended warranty? Then the $1200 for the tire insurance? All of a sudden you've tacked on 15% to the price of your new car. Save the money and you will have a buffer to pay things out of pocket on an as needed basis. If anything catastrophic happens, that's what your HOA policy is for. If you need to fight the builder on something, you will have money to hire a good lawyer.

My old boss had an issue with his home over in Northwood (off Meadowood). Basically his entire downstairs flooded. Builder tried to get out of it, but in the end they covered everything AND he got nice new flooring installed throughout....[/quote]

Here is the risk. After market flooring will void the toilet warranty and no big deal. Just make sure to use a new wax ring when reinstalling the toilet over the after market flooring.

However during the construction drywall guys dump a load of drywall mud down the toilet and is causing a back up. The flooding on the second floor damaged all the wood flooring, the legs of the master bedroom furniture, water trapped in the floor joists, behind baseboard and gradually the mold grew and migrated upward behind the drywall.

This is a true story BTW. The builder was glad that the buyer installed his own flooring!

Here is another wisdom: When you choose to eat out then let not be stingy with tips.

Easy Solution: Have the builder install flooring in the bathrooms, but do your after market flooring in other living areas. If the concern is the toilets leaking, just spend a little with the builder on the bathrooms only.

[quote author="ajw522"]Easy Solution: Have the builder install flooring in the bathrooms, but do your after market flooring in other living areas. If the concern is the toilets leaking, just spend a little with the builder on the bathrooms only.[/quote]

That works as long you can accept a quilt patch of different materials.

[quote author="graceomalley"]
[quote author="ajw522"]Easy Solution: Have the builder install flooring in the bathrooms, but do your after market flooring in other living areas. If the concern is the toilets leaking, just spend a little with the builder on the bathrooms only.[/quote]

That works as long you can accept a quilt patch of different materials. [/quote]

That's fine with me. Put tile in the bathrooms, and put wood flooring in the other areas of the home. Problem solved.