How to Buy a Model Home From a Builder

Model homes serve as a builder’s showcase within new residential developments, offering prospective buyers a tangible example of available floor plans, architectural styles, and design options. They highlight craftsmanship, demonstrate potential upgrades, and help buyers envision living in a new community.

Characteristics of Model Homes

Model homes typically feature a range of premium upgrades that would otherwise be optional, additional costs in standard new construction. These often include high-end flooring like hardwood or luxury vinyl plank, upgraded kitchen and bathroom countertops such as quartz or granite, and designer fixtures throughout the home. Built-in appliances, enhanced cabinetry, and advanced smart home technologies are also common additions, showcasing the builder’s highest quality offerings.

While generally well-maintained, model homes may exhibit some signs of wear and tear due to extensive public foot traffic, such as worn carpet in high-traffic areas, minor scuff marks on walls or floors, and slight fading of paint. They are often professionally staged with furniture and decor to enhance their appeal, though these items are typically for display and not included in the sale unless specifically negotiated. Model homes usually come with fully developed and professionally designed landscaping, offering an immediate move-in ready exterior. Builders may also express interest in leasing the model home back from the buyer after the sale to continue using it as a sales office.

Evaluating a Model Home

Before committing to a purchase, conduct a thorough inspection of a model home, looking for signs of wear and tear that differentiate it from a brand-new, never-lived-in property. Examine high-traffic areas for excessive wear and ensure all systems are in proper working order. Obtain a clear, written inventory of all inclusions and exclusions. This is also critical. This list should specify exactly which upgrades, appliances, and landscaping elements are part of the sale, and explicitly state what is not included, such as staging furniture or decorative items.

A builder leaseback agreement, if applicable, requires detailed understanding. The duration of these agreements typically ranges from 12 to 24 months, though shorter periods of up to 60 days are also common. During the lease, the builder acts as the tenant, generally paying a fixed monthly rent that can help offset the buyer’s mortgage payments. The agreement should clearly outline responsibilities for utilities, routine maintenance, and any major repairs, with the builder typically covering daily upkeep.

From a tax perspective, if a leaseback is in place, the buyer will recognize rental income and may deduct associated expenses such as mortgage interest, property taxes, and depreciation, provided the property is treated as an investment. However, if the buyer intends for the home to be a primary residence immediately after the lease, the ability to claim depreciation or certain rental expenses may be limited.

Buyers should consider their lot location within the development, as proximity to main roads, amenities, or future construction could impact their living experience. Model homes are generally sold “as-is” regarding finishes and layouts, offering limited opportunities for buyer customization.

The Model Home Purchase Process

Making an offer on a model home can differ from a standard new build, as the property is sold in its “as-is” condition, often with a full suite of upgrades. Negotiation is still possible, especially regarding the final price or the inclusion of specific items. A buyer’s agent can provide valuable assistance during these negotiations, ensuring the buyer’s interests are represented.

Financing considerations are particularly important if a builder leaseback is involved. Lenders often classify properties with longer leaseback periods (over 60 days) as investment properties rather than primary residences. This reclassification can affect mortgage terms, potentially requiring a higher down payment and resulting in a different interest rate. Buyers should discuss the leaseback arrangement with their lender early in the process to understand its full impact on their loan approval.

The closing timeline for a model home with a leaseback can be extended compared to a typical home purchase, as the builder will continue to use the property as a sales office until their operations in the development conclude. While standard new construction closings often occur 30-60 days after completion, immediate occupancy for the buyer is contingent on the leaseback terms. A final walkthrough before handover is essential to confirm that all agreed-upon inclusions are present and the home’s condition aligns with expectations set at the time of purchase. Model home purchase agreements often include specific clauses or addendums detailing the leaseback terms, such as rent amounts, security deposits, and maintenance responsibilities, which buyers should thoroughly review.