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What is a Lot Premium?

When purchasing a new construction home, home buyers have multiple decisions to make. One of those important decisions is deciding which available lot (or home site) they would like to build their home on. When most people are given an option, they are likely to choose a lot with special features, such as more land or a beautiful view; but these premium lots typically come with a higher price tag too.

When builders initially divide up new developments into different lots, they realize that some of these home sites will be more desirable or special than others. These special features make these lots more valuable to home buyers, giving the builder a chance to charge more money for them. The extra cost is generally labeled a “lot premium” and is added to the base price of a standard lot.  Different lots within a community may have different lot premiums and some may even be standard lot with no additional premium.

Premium lots have something about them that sets them apart from the standard lots within a community. They may be larger than the other lots, but size is not the only thing developers consider. Premium lots might cost more because they have a wooded area, green belt or golf course view. Corner lots often come at a premium price, as do those in a cul-de-sac or next to a park. Be sure to ask why there is a lot premium if it’s not obvious right away. It may have less obvious benefits or a feature you did not previously consider or recognize.

Lots that have a lot premium may not offer features which appeal to all buyers. Before spending more money for a premium lot, make sure that the home site is actually worth the extra cost for you. Perhaps a lot costs more because it backs up to a scenic view, but you would rather give up the view to build on a standard lot which is closer to the community clubhouse. Or the lot is next to the park, but you would rather not have people walking and parking next to your home.

A premium location may help the home retain its value, but there’s no guarantee that you will always recoup the extra cost. The added value will depend on the needs of the potential home buyers at the time you end up selling. The benefit could potentially change as well, such as in a situation where a wooded area behind the home is cleared to build retail and you lose your premium view.

When buying a new construction home, it’s always a good idea to enlist the help of a Buyer’s Agent instead of working directly with the builder’s sales representative who represents the builder only. A real estate agent can represent you and help you navigate the building process and negotiate the price—including the price of a lot premium. The Marr Team would be happy to help as we have a LOT of expertise to offer, give us a call today!

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