1. Why clients and buyers need a Realtor
Purchasing new construction is usually more complicated and intimidating than buying a resale home. It is important with a new-home purchase that a buyer hires a real estate agent to represent them in this process. This agent should be a local expert and have experience with newly constructed homes. Builder contracts and the building process is different from what most real estate agents deal with on a daily basis, so having new construction experience is important.
As a real estate agent who specializes in an area with a lot of new construction, buyers ask me all the time if they can use a real estate agent when they are purchasing new construction. The answer is yes.
In general, builders’ model homes are staffed by agents who work directly for and represent the builder. A buyer also needs to have a real estate agent who represents them and looks after their best interests.
Keep in mind that most builders will require that the real estate agent accompany and register the buyer on their first visit to the builder’s model home or community. Make sure your buyers don’t just “stop by” the new-home community without you. If they do, they could lose the opportunity to have their own representation.
2. Builder list prices
Surprise — builders don’t like to reduce their prices. If they do, it sets a precedence for future home sales. Builders are more likely to pay for closing costs or offer design center incentives than to drop their prices.
Builders are not like regular sellers. They are not emotionally attached to the property. They make decisions based on what is best for their bottom line. There is something known as the time value of money, which means that money available at the now is worth more than the same amount of money later.
What does that mean practically? It means that every day a builder has a home that is sitting for sale on the market, they are losing money. Look for builder inventory homes that have been on the market for 45 days or more. These are the homes in which a buyer might be able to get a good deal.
Side note: Some new-home buyers think that if they do not use an agent for their purchase, the builder will reduce the price of the home by the amount of the commission. For the most part, this cannot be further from reality. Builders do not want to reduce their prices because it sets the comparison price for future home sales in that neighborhood. Builders instead add the commissions paid to a buyer’s agent into the marketing budgets of the homes. If a buyer goes to a new-home builder without a real estate agent, either the builder’s agent or the builder will pocket that money.
3. Know the builder’s lender
Builder’s love it when a buyer uses their preferred lender. In most cases, they will even offer some enticing incentives to ensure a buyer chooses the preferred lender. Even so, a buyer should not just automatically use this lender. They should shop around and find the best loan for them, not for the builder.
After all, we just went through with the real estate downturn, I am amazed that builders do not require buyers to use construction loans or require larger down payments. Because they do not need these items, there is a huge financial risk for builders when they build a new home. Using the preferred lender reassures the builder that the buyer is a good credit risk.
Depending on the incentives the builder is offering, using the builder’s lender might be an excellent option for a buyer.
4. The best time to buy
A lot of the national builders are publicly traded companies. They need to meet sales goals and answer to the shareholders of that company. For that reason, toward the end of a quarter, builders tend to be more aggressive with their incentives in order to meet these sales goals.
Going back to point number one, using a real estate agent will get you the best price possible! Why? because builders have realized that working with Realtors and their buyers cost them less in advertising. How, because if they have inventory coming available that they need to move/sell they send us Realtors the updated price improvement prior to releasing them to the public. So we as real estate agents get those price reductions and lower prices and can then share them with you as the consumer and negotiate even a little more off for you. The builder again has an obligation to its investors and shareholders, so if they can sell the home for more money directly to you they will, but if they can sell it faster for a little less by reaching out to real estate agents that is a win for them even more!
The December holiday season is another great time to buy. Most of the country is out shopping and traveling to see family. Very few people shop for homes this time of the year. For that reason, ’tis the season to find some great incentives to purchase a new home.
Is that a typo? No, it is an acronym for “what you see is what you get.” Or, in this case, what you see is not what you might get. A builder model home might not be a good representation of what comes standard with the home.
Often the model home is a high-end version of the standard home. It is the builder’s showcase home and a way for the builder to show off many of the stellar upgrades it can offer. The builder hopes a buyer will like these upgrades and ultimately add them to the purchase of the home. In general, these upgrades have good profit margins for the builder.
When touring the model home, find out exactly what options are standard, what options are available, and, of course, what any additional options will cost.
Each builder will have their own set of standard items that come with a house. A standard item for one builder might be an upgrade for another.
6. Purchase the builder’s model home
Purchasing the builder’s model home can be an excellent deal. Remember, these homes are the showcase homes for the builder. The builders have packed great upgrades and features into the model. Typically when the community is almost complete, the builder will put the model home up for sale. Be on the lookout for them.
Technically, these model homes are new homes because no one has ever lived in them. These homes have served as an office and have had hundreds of prospective buyers walk through and view them.
The one downside of buying the model home is that buyer generally does not get to pick the floor coverings, the color of the paint on the walls, the kitchen cabinets, appliances or any fixtures. In many ways, it is like buying a professionally designed resale home.
These gently used model homes are typically a pretty good deal. These homes tend to sell for market value and have showcased upgrades.
7. Get everything in writing
Getting everything in writing seems obvious, but the builder’s agent says during a showing of a new-construction home. If something said is important to the buyer, get it in writing.
The majority of larger builders will have lengthy, attorney-written, intimidating-looking purchase agreements that cover all the pertinent details of the new-home purchase. Ensure you read through and are familiar with the purchase agreement
8. Research the builder
Not all builders are created equal. Do your homework, and get to know the builders, their reputation and what they offer. To get an understanding of the builder and what they offer, visit other communities the builder has built-in, try to speak with past buyers and look for online reviews.
9. Builder Home Warranties
Most home builders have their warranties divided into structural, mechanical, electrical and cosmetic. The warranties for most of these are fairly basic. The time frame for coverage is spelled out in what is covered and for how long.
However, cosmetic warranties are somewhat a gray area and that is where most buyers get taken advantage of during the building process.
In a large, popular neighborhood a builder can have over 30+ homes going in various phases of construction. Each home is assigned to a construction field manager. That person is responsible for organizing and overseeing all the sub-contractors responsible for building the home. Unfortunately, when the builder is busy, these managers are spread thin and still have to make the production timelines the builder has set.
What happens when your staff is overworked and subs are hard to get? Quality can be compromised. This is where your lack of knowledge can hurt you if you are not prepared and armed with persistence and patience.
Most builders will do a walkthrough with you prior to closing. This is usually done about a week before closing. At this time, it is possible that your home is not totally put together, especially if the builder is busy. Do NOT accept this as your final walkthrough.
Because the builder has timelines to meet, the construction managers are pushed to adhere to that schedule. Stand your ground. If you have a Realtor, this is another place where we earn our money. Your Realtor should be the person that pushes back and fights for your home to be completed and cosmetic work finished.
You, like most buyers, have other things on your mind, such as moving and perhaps completing mortgage requirements. Even if this is a happy time. It is a stressful time for most buyers.
The last thing you need is to be fighting with your builder on your home’s completion. But, if you do not do this, your cosmetic issues will be pushed back on the builder’s “after closing” warranty department.
10. Home Inspections
I am always shocked to hear people spending a few thousand to millions of dollars or more on a brand new home and never thought to check the builder’s work. There are several phases where you have the opportunity to bring an independent inspector (pre-drywall and finished product) to check on your brand new home. Home inspectors can truly save you thousands of dollars and time.
Neither the builder’s salesperson nor the construction superintendent will suggest a home inspection. However, they will allow them. If your real estate agent attends the initial meeting with you, your agent will want to mention the intent for inspections. This at least gives the builder a heads up that you will be overseeing their work.
What type of inspector should you choose? Your agent can recommend companies that other clients have used and had great results. In Florida, home inspectors have to be licensed, however, they are not all created equal.
If you are going it alone in your new home, you want to choose an inspector that has new construction experience and can read building plans. A good inspector will ask for a copy of your plans, especially for the pre-drywall inspection.
Whether you decided to use a realtor like me or not to help you with your new construction home purchase just know that it does not cost you any extra to use us and could save you thousands of dollars as well as many headaches along the way. I have been selling residential and new construction homes here in SWFL for over 18 years. I offer to you my knowledge of the process and procedures and insight to the builders and communities around the area at no cost to you. I look forward to hopefully helping you with a new construction purchase in the future, but if not please implement and think about the information above to help you in your new construction home purchase.
Considering Buying New Construction Home or Selling a Home?
If you are looking to buy or sell a home in Cape Coral, Fort Myers or Estero, I encourage you to work with a real estate professional or consultant who has the experience and knowledge to provide an accurate market comparison so you can set the Price Right. Contact us today to learn more about the current market and if selling how your home or condo stacks up against the competition and how we can position your property to sell quickly and for a fair price. Learn more about selling your home
If you’re looking for a focused and goal-oriented Realtor® in Southwest Florida who will help you achieve your Real Estate needs, please reach out to me directly. Additionally, if you are looking at buying or selling a home or condo, vacation home/condo, waterfront home/condo or to build your own dream home, call or text me at 239-770-6880 or email me at Jon@southwestfldreamhomes.com
About Jonathan Blaze, PA
The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Jonathan Blaze, MVP Realty or Southwest FL Dream Homes Team does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Jonathan Blaze, MVP Realty or Southwest FL Dream Homes Team will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.