Should I use a Realtor when building a new home? is a question a lot of people ask when shopping with builders, and it’s actually a great question! Surprisingly, there’s not much information regarding this subject online. But here are 7 reasons why the answer to this question is a resounding “yes”. You should, in fact, always use a Realtor when building a new home.
Believe it or not, Realtor representation is 100% free to you as a home buyer. In fact, the builder pays our entire commission. So why exactly do builders pay for this? The simple answer is that about 80% of builder sales come through Realtors. Like all businesses, builders have a marketing budget, some of which is allocated to traditional advertising (TV, radio, internet, etc.) and some of which is allocated to paying Realtors. The more Realtors bring them buyers, the less they need to spend on traditional advertising. Therefore, if you are offered an advocate, at no cost, you would certainly say “yes.” And, if that advocate can be any Realtor of your choosing, you would certainly want someone with extensive experience in new construction.
The builder’s sales rep works for and is paid by the builder, not you. It is, therefore, in their best interest to sell each home for the most amount of money possible. In addition, most builder reps have sold hundreds of homes, whereas this may be the first new home you have ever purchased. When it comes to negotiating, experience matters, and unfortunately in this game, your experience doesn’t comes close to matching the builder. That’s why having a well-trained and experienced new homes Realtor is very important…and best of all, it’s free!
There are two different negotiating rounds when building a new home. And each of these rounds offers up an opportunity to either win or lose (AKA save money or spend money). You will save the most money possible having an expert Realtor on your side, and here’s why…
- Price: Most builders are not flexible on their price, for two main reasons. First, all their customers are neighbors, and compare experiences. If everyone learned they all paid different prices, the builder would have a riot on their hands. Second, all mortgage loans require an appraisal. Inconsistent pricing within a neighborhood can cause appraisal issues, and potential loan denials. But there are ways around this, and a skilled new construction Realtor knows the options. Just one example is negotiating for free upgrades, especially the finish items (i.e. light fixtures, faucets,etc.). Since these items have the highest profit margins, builders are more willing to thrown-in freebies…but you have to ask!
- Terms: This is where experience really comes in. Unlike contracts on existing homes, the builder’s attorneys write new build contracts, and they write them to the builder’s benefit. But these terms can be changed. Here is just one example: At closing, the seller always credits the buyer for the prorated real estate taxes. But on new homes, only the land taxes are recorded at the time of closing. For obvious reasons, taxes on raw land are lower than taxes on a fully-built home. So unfortunately your tax bill will be thousands of dollars above the credit you received from the builder. Therefore, I always add a clause to the contract, stipulating the builder must pay based on the estimated full taxes. This is just one of several standard changes we make to the contract that could save you thousands of dollars.
- Timing: When is the best time to build a new home? Perhaps at quarter-end, or even year-end, when builder reps are trying to hit their sales quotas. And what about for new subdivisions? Is it best to be one of the first buyers, or one of the last? The answers to these questions aren’t always straight-forward. Each builder and community is unique. But a Realtor with new home experience knows these cycles, knows if the builder is meeting their sales expectations, and knows how to use that information to negotiate the best price and terms for their clients.
This is an area where it is critical to have a Realtor who knows construction. No one has ever built a perfect house. Unlike a car or other manufactured products, homes are built outdoors, and put together by over 500 different independent contractors. There will be mistakes. But not to worry; this is completely normal.
The key is to have someone on your side who knows construction. Because mistakes happen, the building process has standard times when crews come in to correct errors. But often times, some “mistakes” are actually normal construction deviations. Yet others are overlooked, or deemed too small to fix. So how do you do you know how to identify the differences? For example, it is okay to ignore floor squeaks, as the home is settling. But after drywall is installed, all squeaks should be corrected. If they’re not, it could be a major problem that could cost thousands of dollars to correct. Think the builder is willing to cover the cost? Think again! This is just one example of the hundreds of items we watch for you. In addition to the hundreds of little details, we do three major whole house inspections:
- At the completion of framing, after windows and roofs are complete
- Pre-drywall, after all rough mechanicals are complete
- Final inspection, prior to closing.
You will sell your new home some day. While most people don’t think about resale, it’s actually a very important factor to consider when selecting the features in your new home. A common complaint I hear from homeowners is, “I could sell this home for a lot more money, had I only [fill in the blank]”. Now is the time to have that conversation. We help you evaluate your spending by showing you the value you will receive back on the resale market. Some upgrades actually yield significant resale returns, yet others do not. While the financials may not impact your final home design, you’ll at least move in with the confidence of knowing you made an informed decision.
In addition, we offer solutions for the future. For example, rough-ins are very inexpensive. Rough-in plumbing for a future bath, headers for future doors and windows, and reinforcements of future additions are relatively inexpensive when the home is being built. Try adding them later, and they will cost you thousands of dollars. I recently had a client who could not afford to add a third car garage; but, they had three pre-teen children. I knew they would eventually regret that decision. Therefore, I had the builder simply move the home over 4 feet, which provided the room necessary to add the garage in the future. The change cost nothing, but without it, a future addition would be impossible.
Miscommunication is common when buying a new home. The problem is what you see is not what you get. Model homes are decked out, full of premium upgrades, and the opportunity for misunderstandings is enormous. An experienced Realtor knows what is standard, and knows the most common areas of potential wrong assumptions. Builder reps make mistakes too, and inadvertently misquote features or prices. Having a professional and knowledgeable Realtor on your side, as an advocate and second witness, will certainly help mitigate some of these issues.
When buying a new home, always work with a Realtor experienced in the product you are buying. To find a Realtor’s experience, check out the BIA (Building Industry Association) annual MAME Awards. They provide an annual accounting of the total dollar volume of new homes sold by the highest producing Realtors.
Are you considering buying a new home? Kyle Alfriend has sold hundreds of new homes in Central Ohio, and can help you locate the ideal neighborhood, find the best builder, and create your ultimate dream home. Contact us today to get free new built representation!