Five Reasons To Use A Buyer Agent When Purchasing New Construction
August 21st, 2007 Categories: Buyers
We’ve all done it, you decided you want to buy a home. You don’t know a real estate agent and don’t think you are serious enough just yet. You think that a real estate agent will pressure you. So you start looking in the real estate section of the weekend newspaper and see all these great new properties with their teaser ads.
“No Money Down!”
“Starting in the low $300,000s”
“$10,000 in Closing Costs”
So you stop by the builder’s sales office. Just to take a look. Everything is new, everything is clean, everything is pretty– AND IT CAN ALL BE YOURS. The sales person takes you on a tour. Before you know it that sales person has taken your name, address and serial number (and has you sized up). And there just happens to be a place available for you.
Before you know it, you find yourself believing that you are getting a good deal. You dream about it. You talk to the people at work; because you know, the people at work always know everything about real estate. You may even talk to your family.
Next weekend rolls around, you revisit that builder in the shiny sales office with the bright and shiny sales people. Are those chocolate chip cookies she’s taking out of my new oven? Before you know it, you are signing papers. Papers you don’t read, and if you did, you don’t know what it all means. The sales person tells you everything will be fine, you can cancel if you want. You’re writing a check and meeting with their loan officer.
You just bought your new home and more times than most, a host of headaches.
Why?
Because you went into this purchase without any representation. Alone. No expert advice.
“But the sales person was nice & helpful.” you say.
Of course they are, they work for the builder and it’s their job to sell whatever the builder is building. THEY REPRESENT THE BUILDER.
WHO IS REPRESENTING YOU? NO ONE
And you think that’s not a big deal…it’s a new property what can go wrong?
Well let’s see:
-
The builder is more than a year late in delivery, interest rates have risen and you can’t buy this place anymore. Are you going to lose your deposit? More importantly- where are you going to live?
-
The unit you think you bought is no longer available, the builder tells you there was a mix up- that unit was already sold before you signed the papers, but there is another one just like it. Now you don’t have the unit with the great view- but something else. What are your options?
-
You didn’t get that nice fancy granite you wanted, but something else. The builder tells you its too late to change. What do you do?
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The builder hands you a 500 page document that are the Condo documents or Home Owners Association Documents. You have 5 days to look them over. Where do you begin?
These are just some of the things that can happen and have happened to people buying new property.
Are you getting the picture? Buying real estate is like life: It never turns out like you expect.
I’m not saying you should never consider new construction. But when you do, make sure you bring along a buyer’s real estate agent. Someone who works for you and is looking out for your best interest.
Five Top Reasons To Use a Buyer Agent
1. You Are Represented In The Transaction
Having someone working for you will make all the difference in the world. You have a full-time job, how else could you afford this property? The agent will be there for you, when you can’t. She will explain the contract to you. She will point out where you are exposed and when you can lose your deposit. (I even waited in line for a client while he was at work. I called him to let him know when he should leave work to meet me at the sale office.) Your realtor will be there throughout the process. Your realtor may find another new construction project that you just may like even more.
2. The Sales Person Works for the Builder
The moment you walk into the sales office for that new construction project, the sales person (who may or may not be a REALTOR) will attempt to have you “sign-in.” Once you do that, you are giving up your right to having a REALTOR represent you as part of your sales price. (See #5 below) While that sales person will help you pick out upgrades and options, that sales person is still working for the builder. They are specifically trained to make the process smooth. Their goal is to sell the unit or lot you are interested in. They will introduce you to their loan officer and their title company when you can be getting a better loan from a company not affiliated with the builder.
3.
The Buyer Agent Advises You Along The Way
You will have many decisions to make during the process such as the grade and quality of your kitchen cabinets, bathroom tiles, flooring. Your agent will point out upgrades that will retain their resale value and not just the most expensive material. Things that you should have and things that are not important. And most importantly- things that you can afford. Also, your agent will explain when you get an independent home inspector.
4. The Buyer Agent Knows the Local Real Estate Market
Your agent has worked with builders before. They know which ones are dependable and which projects are a good value. They can tell if that $5,000 credit the builder is giving you for closing or “free” upgrades is really the best deal for you. In most cases, that $5,000 is tacked on somewhere else along the way without you realizing it- either with higher lender fees or title insurance costs.
5. You Are Already Paying For It
Especially in this buyer’s market, the builder has already budgeted into the sales price the cost of paying a buyer’s agent. Most buyers don’t know this. So what happens when the buyer does not have a buyer’s agent when buying the property? That builder has just made more money in the sale of your home. If you have not negotiated the price minus the amount of the agent’s fee, the builder will keep it for themselves. But they haven’t told you that. So, if you are already paying for it, why wouldn’t you want to hire a real estate agent to represent you? Most importantly, you need to have your agent with you BEFORE you make that first visit to a sales office. If you decide you need a buyer’s agent after you have “registered” with the builder, any buyer’s agents fees will come out of your pocket.
Virginia is a buyer beware state. It is up to the buyer to protect themselves in any real estate transaction. If it’s not the seller’s fault, its the buyer’s fault. Sounds simple. What it really means is that the buyer is responsible for finding anything wrong with a property. The builder doesn’t have to tell you most things unless you ASK! They also don’t have to tell you about the new interstate that’s going to built behind your property or anything else that is not related about your specific unit or lot you are buying.
Read what some other Bloggers have to say on the subject:
Elizabeth Weintrub : Brand New Homes-Buying New Construction from the Builder
Chronicles of a Tucson Home Inspector: Why oh why inspect a new construction home???
Teresa Boardman: Mortgage And Title: You Always Have a Choice.
Read also:
FAQ #3: What is a Buyer’s Agent and Why Should I Hire One?
Great insight for the folks who want to “go it on their own”. There are truly so many pitfalls that one may encounter through the building proces. I just think many people are not informed enough to know the real value a Realtor can bring to the process.
Thanks.
[…] I’m not listing the prices here- because they can changes according to demand. Contact me if you are interested. So, if you are looking for a condo and think that the Orange line condos are over-valued, come over to the south side. But don’t walk in without a buyer’s agent. Read my last post to understand why. Phase 3 units are for sale but still under construction- so you can’t see them yet. You have to buy it on faith. That’s not the way you buy real estate. Delivery is expected for Phase 3 starting in the 4th quarter this year– 2007. […]
Great topic. Our market in Raleigh is about 1/3 new construction, so we deal with this quite a bit. It’s amazing the things a builder’s agent will tell, or worse yet, not tell an unrepresented buyer. One other big benefit a buyer’s agent brings to the party is the ability to check the sales history and see if the builder has discounted his price in the past. If so, it is more likely he will do it on the transaction at hand.
Excellent topic and congrats on your mention in the “Geekestate Blog”.
As a Broker and a Builder you are right on the money in most cases. True and false, the Professional Builder most likely has a fee for a Buyer’s Agent. Most of the times with the builder’s I talk to this fee comes out of the margin. Many don’t add the agents fee to top of the price, we look at the fee as a marketing expense.
If a Builder ever wants to shoot himself in the foot with the Real-estate industry have two different prices for a home. One for the Buyer represented by an agent. And another that lowers the sales price for the non-represented buyer. Once the words out that a builder has double pricing, the area Agent’s response to this builder most likely would be, to never bring that builder a client.
The largest value I have found in the custom building side is most agents will have the clients complete a New Home Wish List. When I’m bidding non-represented buyer’s home many of times it’s all verbal of their needs. I have them complete a wish list, but the next builder most likely will take the verbal needs of the buyer and create a bid. At this point any builder can be the low bidder only to make it up in change orders. This is where the agent can save many headaches for the buyer by having them organized before the first meeting of all the builders they choose to research.
The New Home Wish List has been a personal drive to educate the buyer’s, agents and builders to get it in writing.
Eric/Bob: Thanks for another REALTOR view point. Most people think that nothing can go wrong with new construction- because it’s new. Buyer’s need to learn that things can go wrong with ANY real estate transaction- especially if they don’t understand the business.
Duane- Thanks for giving a builder’s perspective. You sound like a custom builder. I do that with my clients- I actually ask them to make 3 lists
-gotta have
-nice to have
-don’t cares.
I tell them it’s their homework to think about what they are looking for before we start looking at houses. It seems to help them talk about what’s important to them.
Local builders on larger projects played all sorts of games with the real estate agents here during the crazy years- (e.g., agents not welcome, low commissions) - but the established builders didn’t do that.
Mary,
I prefer when quoting a home to receive a “gotta have” wish list. The “nice to have” and “don’t care” seem to get hazy when pricing the home for the buyer. By producing a quote with all the possible wants can confuse and scare a buyer with an over priced home bid. Once I produce a quote from the “gotta have” list, and the price is under where the buyer thought they would be, then they can work on pricing for the “nice to have” features they may want to add.
I use an online wish list that also is a lead generator. This way the buyer and yourself each receive a copy of the wish list. You can see how mine is set up at www.marlinkbuilders.com feel free to test a wish list by entering “Test” in the buyers name and your e-mail address in the buyer’s data box.
As for the builders “playing all sorts of games during the crazy years” those days are done for the builders. I’m guessing you are not seeing these games in today’s market.
[…] I’m interested to see what happens with this project. I want nothing more for it to succeed. I think it will do wonders for the neighborhood. If you are interested in buying, give me a call, because you are going to need a buyer’s agent. […]
[…] PS – Check out this related article by fellow blogger Mary De Luca over at BeltwayRamblings.com […]
[…] you as your buyer agent. It’s most important in a pre-construction situation to have your own representation. It’s more than just picking out the color of your granite counter […]
Mary
What great insight at new condo buying in Northern Virginia– and I’m sure it is much like you describe–they really are just going to look. And “the Builder rep was so nice….” aghhhhhhhhhhhh. Yes I’ve heard it all before too. And it drives me crazy.
My biggest real estate fights/disputes have been with builders…they don’t happen often, but they are always tough, they are used to getting there way. So that would be reason 6, “Who will be there to fight for you if this thing goes bad?” That, and like your builder commented on the poor idea of dual pricing, the builder has more of a stake in keeping us Realtor’s happy than an individual buyer. Terry McDonald- your guy in Charlotte NC!
[…] you when you purchase new construction. Take a look a this great article that outlines 5 top reasons to use a buyer's agent in new construction. If you are considering purchasing a new home, make sure you contact a real estate agent that is […]
You’ve done a great job of summarizing for home buyers why they need an agent representing them when purchasing new construction. So often buyers think that they can negotiate a better deal if they don’t have an agent, but what they don’t realize is that they usually would have received the same deal even with an agent. And, an agent can save them money by helping them avoid the pitfalls that can occur for unrepresented buyers with new construction. Take a look at my latest post on building inspections and new construction…I’ve listed some of the problems I’ve found on my building inspections for brand new homes.
http://www.realestateinfostl.com/blogs/karen_goodman/archive/2007/12/04/st-louis-real-estate-new-construction-why-hiring-an-inspector-can-save-you-money.aspx
It’s odds-on for strange couplings…
Embarrassingly stitched-up and awkward with a military/sci-fi bent, he’s a metaphorical love child of The Office’s David Brent…
You bet. The last thing that you should want as a buyer is to be swept away in the pretty model home and forget that you should have an objective person represent you.