Buying a Brand New Home?
10 Reasons to Hire a Real Estate Agent
If you are looking to purchase a newly-built home or have a builder break ground on new construction, there are several reasons you should hire a real estate agent. Make no mistake, the builder’s agent is looking out for the builder’s best interests. You should hire an agent who is dedicated to your best interests throughout the transaction. Here are 10 things to consider when buying new construction.
- Contribution: Like most sellers, builders will pay a buyer’s agent commission (usually 2.8 to 3%). They want buyers badly and understand the value of real estate agents. Your agent can contribute a portion of the commission (say 10%) to your closing costs, saving you money and bringing you real cash value. $500,000 home price x 2.8% commission x 10% contribution = $1,400 towards closing!
- Negotiation: Builders don’t like to discount the price of the home, but they will entice buyers by offering upgrades or helping with some closing costs. Negotiation starts the minute you walk into the home, showroom or model home. Negotiation continues through inspection and even up until you take possession. The builder’s agent is a professional negotiator working on the builder’s behalf. You should also have representation to ensure you get the best value, every step of the way.
- Consider Alternatives: Work with an agent to understand current market conditions, what other builders are offering, and pricing on the local market in general. Even if you have your heart set on one lot and model, you should never tell the builder’s agent that. Keep your options open and keep up on market conditions. This puts you in a better negotiating position.
- Shop for Lenders: You can use the builder’s lender but just like looking at other homes, you should also shop around for other mortgage solutions. Ask your agent to find out if there are any special offers, discounts, promotions, or contractual differences if you agree to use the builder’s preferred lender. Also, see what other lenders have to offer.
- Review All Terms and Contracts: Builders typically have their own attorneys who draw up the purchase agreements for them. Just as the builder’s agent is working for them, the attorneys are also working towards the builder’s best interests. Your agent will review the agreements and details with you. Beyond just the purchase price, there may be other items to consider such as key milestone dates, guarantees, warranties, HOA, etc.
- Upgrades: Ask your agent to get a list of the standard features, available upgrades, and the associated costs. The model homes are typically a mix of standard finishes and fixtures, along with a handful of upgrades designed to make the models most attractive. You should know what is available and at what additional cost. Also, the pricing may change while you’re not looking.
- Research the Builder: Your agent is always visiting developments, reading reviews, talking to homeowners, and generally keeping an eye on the market. Most builders will have both positive and negative reviews but if there is a trend, you may want to address it in the purchase agreement. For instance, if a builder is consistently three months late with completion, consider what protections can be built into the agreement.
- Inspection: This may seem like overkill on new construction, but you should always hire an independent inspector to confirm everything is up to code. Ask your agent to research and explain the inspection process, your rights, and whether you have the ability to terminate the agreement based on the inspection results. This is a key milestone in any home purchase and a critical point of negotiation.
- Get it in Writing: What guarantee do you have that the home will be completed on time? What is covered in the warranty and what is not? What finishes are you expecting and what is the cost of any upgrades? What are they key milestones where decisions need to be made, and payments deposited? What are the repercussions if either side fails to meet their commitments? Ask your agent to get all agreements in advance and review them with you. Don’t sign until you understand each aspect of the transaction.
- Consider the Future: Homeowners want to see their home values appreciate over time, and also want full enjoyment of the home. If you buy a home with a mountain view, will you still have that mountain view in 10 years? Is the HOA well-funded? Any reviews on the management company? What developments are planned for local schools, infrastructure, traffic abatement, public transit, etc? These are all questions that can affect your lifestyle and the future value of the home.
Most builders will take pride in their work and will fix any issues. However, their agents will work to sell the homes at top dollar, their attorneys will work to protect the interests of the builder, and their inspectors may overlook certain deficiencies that should be corrected. Instead of relying on the agents, employees and contractors of the builder, you should have a professional real estate agent looking out for you. That way you can enjoy a portion of the sales commission being applied to your closing costs. And you can also rest assured that you are getting what you pay for, according to all the terms and conditions agreed upon. A trusted and effective real estate agent will add substantial value when buying a new home.