While both are important, there are key factors that define each when people are shopping for new homes.
Interest rates. Upgrades. Neighborhoods and school districts—shoppers are expected to keep track of near-countless details during the homebuying process. One of the most important components of the process is the actual cost of a home. Yet many first-time homeowners get tripped up on base price versus the final price of a home. Find out what you need to know about this vital distinction when conducting your own home search.
What is “Base Price” in Homebuying?
The base price in each home is the cost of the property before any upgrades, additions, changes, or other adjustments are added to the floorplan, or any costs associated with the homesite itself. The base price can also be considered the starting point price for a design on a specific site.
What Impacts the Base Price of a Home?
Aside from raw materials and labor costs—which can fluctuate depending on the home’s location—there are several different factors and fixed features that are considered when determining a home’s base price. They can include:
- Interior design features (such as flooring, doors, hardware, ceiling height, carpets, and more)
- Kitchen features (such as appliances, countertops, backsplash, cabinetry, and more)
- Bathroom features (such as tubs, showers, sinks, plumbing, and more)
- Lighting, electrical, and technology features
- Exterior design features (such as lighting, stoops, patios, yards, landscaping, and more)
- Energy efficiency features (such as insulation, HVAC systems, water heaters, ducts, programmable thermostats, and more)
- Construction features (such as framing, foundation, brick and stonework, siding, shingles, and more)
- Security features (such as deadbolts, smoke detectors, and carbon monoxide detectors)
- Inspections and other quality programs (such as a home warranty and meetings with homebuilders)
In many cases, homebuilders will offer a variety of homes and floorplans to accommodate customers with various price points. These are often called “series,” though it’s easiest to think of them as a collection of floor plan designs that offer similar quality and style.
For example, Legend Homes builds homes under a Traditional series and under a Value series. The former features homes with elevated amenities on the interior and exterior included while the latter consists of a more standard package of features. As a result, homes built in different series have different base prices.
What is the Final Cost When Buying a Home?
As the phrase implies, a home’s base price really is just the starting point. Why? There are several additional factors that impact the cost of a home once builders begin construction, which can be surprising to shoppers searching for their first home.
What Impacts the Final Cost of a Home?
The final cost of a new home is calculated using its base price—which includes the features that are considered standard for the home’s plan—as well as the cost of structural options, upgrades, and lot premiums.
Here’s what homeowners should know about each:
- Structural Options: When shoppers begin negotiations for a new home, they’re given the opportunity to select different options to various components of that home. These can include everything from adding a roof to your porch or patio to installing separate tubs and showers in the primary bathroom. Ultimately, it’s best to remember these as changes that are made to the actual structure of the home.
- Additional Upgrades: Structural changes aren’t the only upgrades available to homeowners. During the homebuying process, builders will also give you the opportunity to modify features like appliances, countertop material, and upgrade certain fixtures to fit the style or look of the home.
- Lot Premiums: Another key factor that impacts the final cost of a home is the lot premium, which takes into consideration the location of the home. For example, homes that are built on a corner lot may come with a higher premium than an interior lot home. Likewise, homes constructed to overlook a pristine beach will almost certainly have a higher premium than those without.
What Else Should Shoppers Consider When Buying a New Home?
Ultimately, homebuyers should keep in mind that the base price won’t always reflect the final cost of a home. It serves as a benchmark for the builder and the homebuyer to better understand the general range or expected final cost for the home.
With that said, these details can sometimes seem murky—especially in the middle of a hectic homebuying market. The best home builders will work with customers to not only help them understand exactly how much a home costs but also to help them find the home of their dreams within their price range. This service makes all the difference during the process, from start to finish.
