Buying a Model Home: How It Works and What You Need to Know

Finding a home that fits both your dreams and your budget can be a challenge. Are you looking to buy a home that’s never been lived in or that’s been fully modernized? There are ways to do so without breaking the bank on a newly constructed home or major renovations. And if you’re asking “What is a model home?” you’ve come to the right place.

Model homes can be a great option if you’re interested in saving money and still getting some upgrades you’re looking for in your new home. But like any type of house, a model home has its pros and cons, and the process for buying one is a bit unique.

What is a model home?

A model home is a show property, similar to a showroom. It displays a builder’s work to prospective buyers desiring to live in a particular subdivision or development. This type of house can come in a number of popular styles and is specifically designed to appeal to a buyer’s interests.

Model homes often contain many popular wish list items, like larger and more open floor plans, granite countertops, high-quality appliances and luxurious flooring.

The primary purpose of a model home is to sell similar properties in a builder’s development. But sometimes model homes can also be made available for interested buyers to purchase.

How does buying a model home differ from buying traditional housing?

Making an offer on and buying a model home is fairly similar to the traditional real estate process. However, keep in mind the following distinctions for model homes.

They’re often cheaper than new construction homes

Model homes are meant to be a reflection of what other properties will look like in a given development. But they’re often several years older than the homes being built in the surrounding area. As a result, model homes might not look quite as pristine or have high-functioning home systems (like plumbing or HVAC).

So, interested buyers may have a better chance at getting a discount in their negotiations. As a result, buying a model home can end up being a much more affordable option than purchasing a newly built one.

You can buy a model home with furniture included

It’s not unheard of to buy a more traditional house that’s move-in ready. But it tends to be more common practice with model homes. If the model home comes with furniture or decor you like, ask your builder to include the furniture in your purchase agreement.

This could save you a good deal of money. That’s because you won’t need to worry about buying new pieces to furnish your home or hiring movers to transport older furniture.

The builder might offer lending services

If you’re looking to apply for a mortgage, you might find the builder of the model home you’re eyeing has existing partnerships with mortgage lenders. They may even own their own lending company.

It’s important to proceed with caution if this is the case. It’s possible that any lending decisions could benefit the builder’s best interests rather than yours. You run the risk of ending up with worse or more unfair loan terms than you would have if you’d gone through a separate third-party lender.

Before making any decisions, thoroughly research which types of mortgage loan options would best serve your needs. You might also consider talking to a Home Loan Expert or a financial advisor for additional insight.

Should you buy a model home? The pros and cons

Purchasing a model home can have a number of benefits. In addition to their relative affordability, model homes tend to have modern amenities and state-of-the-art appliances. These upgrades would otherwise cost buyers a sizable chunk of change.

However, be aware of a few important drawbacks as well. First, there’s a chance the construction team who built the house took shortcuts to show the property as quickly as possible.

Some builders also use their model homes as a testing ground for new home design layouts they’ve created. So, it’s possible that some mistakes might have been made during the construction of the property. These construction errors could affect your ability to fully enjoy living in the home.

When deciding if a model home is a good investment for you, consider the following overview of the pros and cons.

Four tips for finding and buying a model home

If you decide that buying a model home is the best choice, you should take the following steps to increase your chances of becoming a homeowner.

1. Check out comparable sales

Buyers are often able to purchase model homes at a discount after negotiating with the builder. But as a buyer, you should still make sure you aren’t being taken advantage of. You must be sure the initial asking price has been determined fairly.

Most model homes don’t get listed on a multiple listing service (MLS). But your real estate agent can still pull comparable sales in your area – also called a comparative market analysis (CMA) – to make sure the builder is offering you reasonable pricing.

2. Have the property inspected

Before agreeing to purchase a model home, it’s wise to order a home inspection. This is especially true if you’re concerned the property’s been hastily built and might have some hidden issues.

Let’s say a professional inspects the home and discovers structural damage or a pest infestation. Work those fixes into your home buying negotiations or walk away from the transaction more easily.

3. Ask if the property has been previously used

Even if the model home you’re interested in hasn’t been lived in yet, there’s a chance it might still show signs of wear and tear. This is likely due to extensive foot traffic or previous use as a showroom or sales office.

Talk with your home builder to make sure any areas used for nonresidential purposes will be reverted to their original state before you buy the home. Then, see if you can use any visible imperfections around the home to get an even better discount.

4. Ask for an extended warranty

A model home may have been in use for tours for years before getting listed on the market. So, it’s possible you won’t benefit from the full duration of the home warranty as you would purchasing a new build.

If this is the case, talk to the builder. See if you can get an extended warranty or if the warranty terms can be adjusted to reflect the purchase date rather than the construction completion date. This will ensure you’re protected against certain unforeseen issues with the property for the length of time you deserve.

FAQs about buying a model home

Still serious about buying a model home? Make sure you’ve asked all the important questions. Here are some frequently asked questions about buying model homes.

1. What’s another name for a model house?

Model houses are also referred to as show homes or display homes.

2. How much does it cost to buy a model home?

Like any home you buy, the cost of a model home will depend on the size and location, among other factors. However, your real estate agent or REALTOR^® – a licensed real estate agent – may be able to negotiate a lower price because of its previous use. To find out how much a model home might cost, research the prices of similar properties in the community. Or you can reach out to the builder directly.

3. Are model homes cheaper than new construction homes?

Yes, model homes are typically cheaper than new construction homes since they’re not technically new builds and have gone through some wear and tear.

4. When do model homes go on sale?

Often, model homes are some of the last properties sold in the developments they’re meant to showcase. After the majority of the newly constructed homes in your desired area are off the market, builders will put their model properties up for sale.

The bottom line: What is a model home?

If you’re looking to buy a modern, upscale home that hasn’t had previous residents, a model house can be a cost-effective option. You may want to negotiate with the builder on price and make sure any issues with the property are fixed or covered by a discount during the home sale.

A model home could end up being the ideal pathway to finding a cheaper place to live that checks all of your boxes on your “must-have” list.