- Why Buyers Need a REALTOR® when Purchasing New Construction
Purchasing new construction can often times be more complicated and can even be somewhat more intimidating than buying a resale home. It is important with a new-home purchase that a buyer hire an experienced real estate agent to represent them in this process. The agent should be a local expert and have experience with new construction homes. Builder contracts and the building process is very different from what most real estate agents deal with on a daily basis, so having new construction experience is important.
As a real estate agent who specializes in the Delaware resort areas, which offers a tremendous amount of new construction, buyers ask me all the time if they can use a real estate agent when they are purchasing new construction. The answer, is not only that you can, but that you absolutely should. In general, builders’ model homes are staffed by sales people who work directly for and represent the builder. As the buyer, you also need to have a real estate agent who represents you and looks after your best interests.
Keep in mind that most builders will require that the real estate agent accompany and register the buyer on their first visit to the builder’s model home or community. Make sure you don’t just “stop by” the new home community without your REALTOR®. If you do, you could lose the opportunity to have your own representation.
- The Best Time to Buy
Most national builders are publicly traded companies. They need to meet sales goals and answer to the shareholders of that company. For that reason, there are specific times when builders tend to be more aggressive with their incentives in order to meet these sales goals. As a Delaware New Home Expert, I can help guide you on the best times to buy based on your situation and additional driving factors.
- Builder List Prices
It should come as no surprise that builders do not like to reduce their prices. If they do, it sets a precedent for future home sales. Builders are more likely to pay for closing costs or offer other incentives rather than drop their prices.
Builders are not like regular sellers. They are not emotionally attached to the property. They make decisions based on what is best for their bottom line. There is something known as the time value of money, which means that money available now is worth more than the same amount of money later.
What does that mean practically? It means that every day a builder has a home that is sitting for sale on the market, they are losing money. I like to keep track of the builders inventory homes that have been on the market for a period of time. These are the homes in which my buyers might be able to get a better deal.
Important note: Some new home buyers think that if they do not use an agent for their purchase, the builder will reduce the price of the home by the amount of the commission. For the most part, this cannot be further from the truth. Builders do not want to reduce their prices because it sets the comparison price for future home sales in that neighborhood. Builders instead add the commissions paid to a buyer’s agent into their marketing budgets of the homes. If a buyer goes to a new-home builder without a real estate agent, the builder will typically pocket that money.
- Get Everything in Writing
Getting everything in writing seems obvious, but the builder’s sales representative may say many things during the showing of a new-construction model home. If something said is important to you as the buyer, make sure to get it in writing.
The majority of larger builders will have lengthy, attorney-written, intimidating-looking purchase agreements that cover all of the pertinent details of the new-home purchase. Ensure you read through and are familiar with the purchase agreement.
Is that a typo? No, it is an acronym for “what you see is what you get.” Or, in this case, what you see may not be what you get. A builder model home is typically not a good representation of what comes standard with the home.
Often the model home is a high-end version of the standard home. It is the builder’s showcase home and a way for the builder to show off many of the beautiful upgrades they offer. The builder hopes a buyer will like these upgrades and ultimately add them to the purchase of the home. In general, these upgrades have very good profit margins for the builder. As a Delaware new home expert, I can advise my clients on options that make the most sense to purchase, and those that they might be better served purchasing on their own after settlement.
- Purchase the Builder’s Model Home
Purchasing the builder’s model home can sometimes be an excellent opportunity. Not all builders offer their homes with a sale/leaseback however many do. Remember, these homes are the showcase homes for the builder. The builders have included great upgrades and features into the model.
Technically, these model homes are new homes because no one has ever lived in them. That said, these homes have served as an office and have had hundreds if not thousands of prospective buyers walk through and view them. A downside of buying the model home is that the buyer generally does not get to pick the flooring, cabinets, appliances, etc… In many ways, it is like buying a professionally designed resale home.
These gently used model homes can sometimes a pretty good deal. An experienced REALTOR® can advise you on which opportunities might be better than others.
- Research the Builder
Not all builders are created equal. It’s important that your REALTOR® know the builders, their reputation and what they offer. To get an understanding of the builder and what they offer, visit several communities with your REALTOR® and try to speak with past buyers.
- Know the Builder’s Lender
Builder’s love it when a buyer uses their preferred lender. In most cases, they will even offer some very enticing incentives to ensure a buyer chooses the preferred lender. Even so, a buyer should not just automatically use this lender. You should always shop around and find the best loan for you, which may or may not necessarily be the best lender for the builder.
Depending on the incentives the builder is offering, and the terms that the lender is offering, using the builder’s lender might very well be an excellent option for a buyer.
- Choosing the Right REALTOR® to Represent You
With all of the information listed above hopefully it is clear to you as to why you do indeed need a real estate agent to represent you and your interests when purchasing a new construction home. With nearly 15 years in the new home industry I’m confident that you will find my knowledge, experience, and expertise to be an invaluable asset to you during the purchasing process at whichever new construction community you choose to buy your new home.