Thinking of Buying a New Construction Home from the Builder?
There are some things you should know.
Many people like the idea of purchasing a brand new home. There is the thrill of watching the construction process and choosing the upgrades you like, and something about knowing that you are the first to walk on the plush carpet, use the shiny appliances and take a bath in the jetted tub. This can be a very exciting time, but there are a number of things that you should know that will help you throughout the process. Take a look at this article before you head over to the sales office and put down a deposit on your desired lot.
First of all, although the people at the sales office may be nice, they are not looking out for your best interest as they have been hired by the builder to sell the house. Many buyers think that the process will be easier and that using the builder’s sales agent will result in getting a better deal. This is not the case, as builders generally aren’t very flexible on price and the job of their sales agent is to represent them and maximize their profits on each sale. You need representation! A real estate agent that works for you will ensure that your interests are voiced and will negotiate on your behalf. If you choose to hire your own agent, they should accompany you on your first visit to the sales office. This will let the builder’s agent know that you are represented and the sales office will register him/her as your agent. Your agent can also insulate you from high-pressure sales tactics that a builder’s agent may practice. It is best not to even casually go and take a look at the model homes without your agent. Some builders are very strict and will not allow you to hire your own agent if you have set foot in the office previously without your agent.
In addition, many buyers don’t realize that they are NOT responsible for paying a commission. Commissions are paid for by the seller or builder in this case. Builders rely on real estate agents to bring buyers to them. If buyers go to the sales office without an agent and contract directly with the builder, the builder will not credit them the cost of a commission that they would usually pay an agent. If they did, agents would cease to bring in buyers and it would eventually impact the builder’s sales. Really, there is no downside for a buyer to hire independent representation. A buyer will pay the same cost for the home whether they have hired their own agent or not.
What are some other benefits of hiring an agent?
Representation – Your agent is looking out for YOU! They will advocate on your behalf and see that your voice is heard throughout the process.
Negotiation – While you may be a great negotiator and perhaps have experience doing so, it is always recommended to have someone else negotiate for you. Even the best negotiators follow this practice as an agent will not have the same emotional attachment that may blind a buyer. The agent can look at the deal from a different perspective that not only encompasses the price, but many other factors as well. While a builder may not negotiate on price (as they may have to answer to other buyers that paid more for the same home) an agent usually knows what they will discuss. Depending on the builder and the market, you may be able to get some free upgrades, closing cost credits, extended home warranty and perhaps some back yard landscaping or a patio slab that is larger than 3 x 3. A good agent will know what can be negotiated and how to be creative to make sure you are getting the best bang for your money.
Contract – How many buyers are really that familiar with real estate contracts? Although they aren’t that complex, agents look at them every day and have an understanding of what to look for to ensure sure you are getting a fair deal. I have caught mistakes on builder contracts more than once. Sometimes it is as simple as a math mistake and other times it is terms that were written in that hadn’t been discussed or previously agreed upon. An agent knows the contracts and knows how to make sure your interests are represented. Your agent should review the contract and notify you of any concerns prior to you signing a deal for your brand new home. They will make sure you are aware of contractual deadlines and that the building process stays on track.
Builder Quality and Reputation – Agents generally know most of the builders and will be able to share the information that they have learned over the years. Not all builders build the same quality of home. Some will use inferior materials, some have problems with quality control, some use different construction methods and so on. An experienced agent will know which builders are good about doing warranty work and which aren’t. They will also have seen how the builder’s homes stand up over time. This information can be extremely important and another piece in your decision making.
Financing – Builders usually have their own, preferred financing and will usually offer incentives for closing costs or upgrades if you finance through them. A good agent will be able to help you understand their loan programs and make sure you are able to choose the best for your circumstances. If the builder’s lender doesn’t have a program that works for you, your agent should be able to point you toward other lenders that may be able to help. I have had a couple situations where the builder still allowed the incentives even though the buyer used an outside lender.
Inspections – a builder will have walk-throughs at different points in the construction process. It is important that you have your agent there as they may be able to point things out and ask applicable questions that a regular buyer may not think about. You are also allowed to have an outside inspector look at the home to see if there are any issues you need fixed prior to closing or any other smaller items that can be repaired through the warranty process. Experienced agents will have qualified inspectors that they trust to find insufficiencies and items that a buyer will want repaired or replaced.
Recommend upgrades – An agent will know the latest trends, upgrades that are good for resale and how to choose complimenting and contrasting colors. They will also know what upgrades may cost a lot but not add much value. They also understand which upgrades will be better to have done after-market that should save you money as well as giving you a superior product. Even though you most likely won’t move from your new home in the near future, an agent will look at everything from a “return on investment” standpoint. They can advise you on upgrades, lot choice, exterior elevation choices and other elements that can affect resale in a positive or negative way.
Knowledge of City plans – A good agent that focuses in a certain geographic area will know more than the builder’s sales agent about the city and about what is happening in the area. The builder’s agent usually lives outside the area and has a good knowledge of the homes, products and package choices that the builder offers, but doesn’t always know the details about schools and other upcoming developments like a hometown agent will. This information can be extremely valuable in making your decision.
Final thoughts and how to proceed – As you can see, there are many reasons and potential benefits in hiring an agent to work for and represent you. If you do decide to hire an agent, make sure that they are familiar with new construction and with the area. Have them take you through the models the first time you go to ensure that they are registered as your agent. Not only will your agent make you feel more comfortable in looking by insulating you from high pressure sales tactics, but they will also make sure you aren’t “blinded by the upgrades” and that you know what is included in the base price and what isn’t. They will take the emotion out and help you look at purchasing a home as a good business transaction that should help you increase your wealth over time.
Contact me today if you are thinking about purchasing new construction and I can guide and advise you through the process. The right agent really can make all the difference in the world!