Lot Premiums in New Construction: What They Pay For and What to Ask
Why some homesites cost more, how to judge a lot premium, what to check about neighboring land and drainage, and how a premium lot may affect resale.
By the iNIAZ team · Published · 2 min read
In a new community, two identical homes can carry different prices because of the land under them. The difference is the lot premium. It is worth understanding exactly what you are paying for.
Why lots carry premiums
Builders commonly charge more for homesites that are larger, back to open space or woods, sit on a cul-de-sac, have a walk-out basement, face a preferred direction, or have better views. Premiums can also reflect a lot's position near community amenities, or away from a main road.
Questions to ask about a premium lot
- What is planned next to it? Open space today may be a future phase, a road or a utility easement. Ask to see the approved community plan and any later phases.
- Who owns the land behind it? Land owned by the community association, a township or a conservancy is different from land held for future development.
- How does water drain? Look at grading on the plan, and visit after rain if you can. Walk-out lots and lots at the bottom of a slope deserve particular attention.
- Are there easements or restrictions? Utility, drainage and stormwater easements can limit fences, pools, sheds and landscaping.
- What will the setbacks allow? Some additions or decks may not fit later.
The township's planning or zoning office can usually show you the recorded plan. A survey and title review before settlement confirm easements.
Is the premium negotiable?
Sometimes. Premiums on lots that have been available a long time, or in a phase that is nearly complete, may have more flexibility than the base price. A builder may also be more willing to reduce a premium than the base price, because it does not change the advertised price of the home. Ask, but nothing is guaranteed.
Premium lots and resale
A premium lot may make the home easier to sell later, but a buyer will not necessarily pay the same premium back. Judge the lot on what it gives you while you own the home, and look at how similar homes on standard and premium lots have resold in comparable communities. We can pull those sales for you.
Compare the whole price
Lot premiums add to the price, the loan and the amount that must appraise. Compare homes on full price using our offer comparison tool, and read our guide to design center upgrades.
General information, not legal, tax or financial advice. Confirm details that matter to your situation with a qualified professional.