You walk into a new construction community and you are immediately overwhelmed with excitement and possibility. You explore the community and everything checks out. The house is exactly what you’ve wanted, the curb appeal is charming, and the smiling salesperson is so friendly. Then you think to yourself… Is this too good to be true? What else lies behind that perfectly staged curtain?
When you’re buying new construction from a builder, do you really need a Realtor?
1) A REALTOR IS FREE WHEN YOU BUY A NEW HOME
First, there is absolutely no cost to you whatsoever when you use a Realtor, so this is the primary advantage of using one. This is because the Realtor is paid a finder’s fee whenever the Realtor successfully introduces and matches a buyer with a new home. This finder’s fee is a commission that most builders will gladly pay because the Realtor found a buyer for one of their homes. Since there is no cost to the buyer at all, it would only make sense that you use a Realtor during the new home purchase.
2) A REALTOR WILL PROTECT YOUR INTERESTS
A buyer’s agent’s primary responsibility is to protect the buyer’s interests. Contrarily, a builder representative’s primary responsibility is to protect the builder’s interests. You can immediately start to see how these two responsibilities are diametrically opposed. There’s no way that a builder can represent you and the builder simultaneously. It’s impossible as long as they are wearing the builder’s name tag and cashing the builder’s paychecks. It’s not personal, it’s just business.
3) A REALTOR CAN TELL YOU IF YOU’RE OVERPAYING
The Realtor will do a market analysis on the home to make sure that you are not overpaying for the area. By the time that you add on all the upgrades, you could be the highest priced home in the community and that is never a benefit when you need to sell the home down the road.
Furthermore, there have been lots of foreclosures after a builder sells the last home and moves on from the community. Technically, as long as they are on site selling homes, they control the value of your home. Once they move on though, every homeowner is on their own. What has happened in the past is that the home will appraise for a certain price when you purchase it, but will appraise for a much lower price when you try to sell it. A Realtor may advise you not to buy a new construction home if you may have plans to leave within 2-5 years for this reason.
4) A REALTOR KNOWS THE AREA & CAN TELL YOU WHAT ELSE IS BEING PLANNED NEARBY
The Realtor also knows the area and can tell you if you if there are pitfalls coming down the road. The following scenarios are all too familiar:
- Is the builder also planning to build a mall across the street as part of the plan?
- Is the density of the housing to high, which has a significant impact on the demographics of the community?
- Are there Homeowner Associations (HOA) fees?
- What are the Covenants, Conditions, and Restrictions (CC&Rs’)?
- Are there special assessment taxes — to build new parks, schools, and roads — that the builder is now passing on to you. These are called “Mello-Roos” taxes and every builder is subject to them here. They will either absorb them or pass them on. Which scenario do you think happens more often?
5) A REALTOR CAN WALK YOU THROUGH THE PROCESS
The real estate agent will guide you through the processes — such as the contract, the construction, the final walkthrough, and closing. The agent will be able to help you when things go awry, and it’s construction, so they often do. Unfortunately, many of the builder sales representatives are not licensed agents, so when something goes wrong, you are literally subjected to the builder and have no one on your side to protect you, advocate for you, or advise you. Since real estate agents help people buy and sell homes every day, they can foresee and protect you from these situations even before they arise.
6) THERE ARE NO DISADVANTAGES TO USING A REALTOR
Some would argue that when the builder has to pay a commission to the Realtor, they will have less funds available to offer you incentives and upgrades. However, this is not usually the case, because most of the incentives come from the lender, not the builder.
Furthermore, in my experience, I’ve actually encountered the opposite: The builder doesn’t offer an incentive because the buyer is unrepresented. And even if this were true, who on earth would pay more money on the purchase of their home in order to get a discount? In effect, this is what you would be doing if you go at it alone, because the Realtor’s job is to make sure that you are getting the lowest possible price to begin with.
7) A REALTOR CAN TELL YOU WHAT UPGRADES ARE WORTH IT
Again, builders often entice buyers with incentives — upgraded stoves, tile, floors, cabinets, backsplash — the list is endless. However, the cost of these upgrades all depends on whether or not the builder is buying these materials in bulk and whether or not they are passing these savings on to you. Therefore, some of the upgrades are cheaper to buy from the builder and some of them are cheaper to buy on your own with a general contractor.
8) A REALTOR CAN TELL YOU WHAT UPGRADES ADD RESALE VALUE TO YOUR HOME
There are some upgrades that can be considered an investment and some that you will pay for and never recover. In general, spending money on kitchens and bathrooms will add value to your home when you sell it in the future — but adding a pool will not. Only a Realtor knows if the upgrade that you’re paying for is valuable.
9) THERE’S NO REASON TO GO UNREPRESENTED
Buying a home is usually the biggest purchase that someone will make in a lifetime, and there’s no brownie points for having a “do it yourself” attitude. I can research night and day about investing in stocks, bonds, and mutual funds — But I still use a financial advisor. Going at it alone, without the qualified opinion of a professional is a dangerous game. I would never represent myself in a lawsuit, perform surgery on myself when i’m hurt, or do my own taxes for my large corporation. Buying a new home is no different — especially when the Realtor’s services are free.