Buying a new construction home is exciting and stressful, all at the same time. New home builders are of course in business to make money. Once you sign a contract, a new home builder is not likely to do anything for you that will cost him money.
The trick is to make sure the entire process is designed, up front, to give you what you want from your new construction home.
Over 35% of my clients have purchased a new construction home this year. That’s pretty consistent with our market which is currently about 39% new home construction listings. Many of my clients understand how important it is that they be represented by a buyer’s agent regardless of the type of home they are buying. Occasionally, however, I run into a prospective client who asks the question: “Why would I need someone to represent me when I am buying a new home?” That’s a fair question. Here’s my take on the advantages of having an agent working for you when purchasing a new home.
#1 – The On-Site Agent Works For The New Home Builder
Remember who benefits from pleasing who. The nice on-site agent in the model home works for the builder, so naturally they will be working to protect their employer and look out for their best interests.
Real estate transactions are complicated and it is just a good practice to have someone who is with you every step of the way making sure you are aware of all the conditions and potential risks of the large purchase you are about to make.
#2 – The Builder’s Contract Favors The Builder
This is a really big one. New home builders typically do not use the standard NC Offer to Purchase and Contract. This standard Realtor contract was created jointly by the NC Association of Realtors and the NC Bar Association and includes lots of NC real estate law in a way that protects buyers and sellers from harm.
The builder, on the other hand, usually has their own contract created by their own lawyers. Who do you think this contract favors? You need someone who can at least explain the risks involved with the builder contract and possibly negotiate with the builder to add some additional protection for you. A good buyer’s agent will do this for his clients.
#3 – Knowing The Sales History Can Get You A Lower Price
It is very important to know what the new home builder has been doing with regards to discounting and what he is faced with regarding market conditions. If you are coming from a market in another part of the country where deep discounts are common due to market conditions, that may or may not be the situation here in the Raleigh real estate market. In either case, you are in a better position to get the new construction home of your dreams if you know exactly which set of conditions apply.
A good buyer’s agent can do several things to help you here. First, many builders put their sales in MLS. A good buyer’s agent will look at this and the tax records to try to get an idea of the discounts that have been given to other buyers.
The other thing a good buyer’s agent should do is to apply current market conditions to any offer you choose to make. If new construction home inventory is building and sales are flat or slowing, that is a good sign the builder may be willing to negotiate. On the other hand, if the builder has inventory, but it is selling very close to completion dates and has not been discounting, you could loose the home you really want by haggling over a few thousand dollars.
This is actually rather complicated to figure out. There is wisdom in knowing when to negotiate and when to offer full price. There is a time for both. It is practically impossible for an unrepresented buyer to interpret on their own the sometimes subtle market signs that could signal potential savings.
#4 – New Homes Sometimes Need The Most Repairs
This is going to sound a bit strange to some of you, but my experience is that many times new construction homes need more repairs than a resale home. This is typically due to miscommunication with subcontractors.
I have seen things like propane gas water heaters installed on a natural gas system, a huge fire hazard. Tub drains that leak when filled and then emptied by the home inspector. This one would not be noticed in normal usage unless you crawl under the house right after taking a shower or bath. The result over time could be thousands of dollars in damage to the floor system.
The new home builder, and their agents, certainly will not recommend that you have a home inspection. Most builder contracts do not even mention a home inspection and provide no language to determine what, if anything, to do about items discovered in the inspection process that need repair.
Also, I do not ever recall a builder’s contract giving the buyer the right to have a radon test done and promising to mitigate this deadly gas if high levels are found. Radon is the leading cause of lung cancer among non-smokers. A simple test can tell if the home you are about to buy puts you at risk.
In North Carolina the only valid real estate contracts are the ones that are in writing. If you wish to have a contract that gives you adequate protection in case something goes wrong, choose a good buyer’s agent who can help you navigate your way to a fair, written contract that gives the builder what they want and gives you what you want.
PS – Check out this related article by fellow blogger Mary De Luca over at BeltwayRamblings.com
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Hey Bob…I HEARTILY agree that a buyer should utilize a buyers agent when purchasing new construction from a builder. I have been involved in many transactions where my client did not have a Buyers agent. Nine times out of ten, these clients had not negotiated their best deal NOR did they know how to handle the repair issues with the builder. The onsite agents were not always customer service oriented once they knew the client was under contract. As you mentioned, the contracts were VERY one sided towards the builder. A buyers agent can advise their clients of their rights under the contract and make sure it is not so one sided when all is said and done. I KNOW that they could have arrived at a more advantageous price AND concessions with the assistance of a quality buyers agent.
How flexible is the agent’s schedule? After a long period of inactivity, I called my agent one morning and she showed me a few houses that afternoon. That makes a world of difference when a hot house is just listed and the sellers are moving fast.
Hi Charlotte exclusive buyer agent – I take it from your lengthy name that you are actually an agent. Did you hire a Realtor to help you buy a home? Believe it or not, I actually know a few agents who have done exactly that.
Regarding your question about the flexibility of the agent’s schedule, any good buyer agent worth his/her salt should be proactively contacting a client who is ready to purchase as homes come on the market and taking the lead to make sure any good matches don’t get away.
With our current excess of inventory, this isn’t as much of a problem in the Raleigh real estate market as it was, say a few years ago. But even with the slow market we have right now, the best priced home in the best location and condition can sell quickly.