It is summer in the Twin Cities in Minnesota and here, just like in most other areas of the country, it is hard to find the right house. There are so few houses on the market in the $150,00 to $300,000 price range and the ones that are for sale have multiple offers. Maybe you have submitted several offers and got beat out or you decided to not even try to compete with other buyers. Your friend tells you about new construction homes and a new world opens up…… You look online to find some builders and see that there is one not far from you. So why not stop by and take a look, there’s no harm in that, right? Not so fast, first hear me out, then decide.
Quick Table of Contents
Hire Your Own Realtor®
The first thing to do when you’re thinking about buying a new home is to hire your own Realtor®. Don’t think of stepping foot in a new home subdivision without your Realtor® or you can’t use him or her. The builder will register you as the builder’s own buyer and that’ll be it.
You won’t even know it happened!
Builder Sales Reps work for the Builder
Now you may wonder if that matters, I am glad you asked. Actually it matters a great deal. The agent that works for the builder, literally works for the builder first and foremost. That is their job, that what they are hired to do. Builder reps provide a valuable service: They can explain differences between models and floor plans and share information about financing options, upgrades and specials. But it’s important to remember that builder reps represent the builder, as they are contractually obligated to do. “Realtors® are trusted resources for real estate information and can help home buyers navigate the increasingly complex home-buying process,” said National Association of Realtors® President Gary Thomas. “The buyer agency agreement ensures the buyer that his or her Realtor® will represent the interests of the buyer alone and not the seller.”
In down markets builders may tempt buyers with a new car or a big screen high-definition TV, or promise free upgrades such as Black Galaxy granite counters installed without charge throughout the kitchen and baths. If you dig in your heels, they might even throw in a free in-ground swimming pool out back. You may wonder if it’s worth it to jump on these enticements. What about the concessions home sellers offer for resales? Many trumpet discounts, prepaid closing costs, free homeowner association dues for a year or offer prepayment of your property taxes. They do everything short of standing on their heads to coax buyers into pressing hard because the third copy is theirs. Regardless of the type of market, whether it’s a seller’s market or a buyer’s market, builders often offer upgrade incentives.
The “free” upgrades, however, almost always come with a catch and you end up paying for it one way or another.
Do you know what a Shell game is? It’s a small ball is placed under a cup. The operator then shuffles the three cups while you try to figure out which cup has the ball. It’s a slight-of-hand maneuver. You will never win this game. So, run the numbers on these free incentives and concessions before you buy. Be a smart home buyer.
So far we have talked about what some of the dangers can be for you when you don’t have your own Realtor® representing you, but what are the advantages?
One of the most important considerations for any buyer is fiduciary responsibility. When you retain the services of a Realtor®, their responsibility is to you. That means you have an expert who is looking out for your best financial interests, an expert who’s contractually obligated to protect you. A Realtor® can help you navigate the new-construction contract; help you understand how specific clauses, riders and upgrade options affect you; and make sure you know what you need to before you sign on the dotted line.
Negotiating a better deal.
Finding the right model and picking your upgrades is the fun part. Once you’re ready to sign the contract, a Realtor® can work on your behalf to negotiate the terms, from upgrade options to financing and closing costs. In addition, a Realtor® can present other options for financing or might be able to work with the builder’s lender directly to get you a better rate for your mortgage.
Shepherding your new home to closing.
Signing a contract with a builder is just the beginning. You must also line up financing, work with title companies and attend numerous inspections throughout the construction. A Realtor® can manage that process and can accompany you on inspections to ensure you’re not missing anything at each construction milestone.