New Construction: Why do I need a buyers agent when buying a new home?

Can I use the builders agent to buy the new construction home?

I get asked this question a lot. Yes, you can. Using the builders agent isn’t the best idea even if you are experienced with building. The builders agent represents the builder. Their job is to get the best deal for the builder. Most on site agents are great and know a lot about the home and process but questions and conflicts come up all of the time and it helps to have a representative to ask the hard questions and be the pushy one.

Will the builder pay the commission?

In the Triangle area of North Carolina, builders understand the value of real estate agents bringing clients to their new construction sites and are generally open to paying a commission. The commission rate for new construction homes is often comparable to, or slightly lower than, that of resale homes. However, it’s crucial to involve your buyer’s agent from the beginning of the process, as builders typically compensate the agent for introducing the client and facilitating the transaction.

Bring your Agent

When you visit a new construction site with your agent, they should accompany you during your initial visit to ensure proper representation and registration with the builder’s representative. In some cases, if you’ve already visited a site without your agent and registered, the builder may still be willing to pay a commission to your agent if they value their relationship and want future business. It’s essential to have your agent clarify this possibility during the initial stages of the process.

It’s important to research and select an experienced buyer’s agent with a strong background in new construction. A knowledgeable agent can guide you through the unique aspects of new construction, such as design studio options, upgrades, and warranties, and help you navigate any potential challenges that may arise during the building process.

In summary, when working with a builder in the Triangle area, it’s essential to:

1. Involve your agent from the beginning of the process.
2. Ensure your agent has experience with new construction.
3. Clarify the commission structure with your agent and the builder.

By following these guidelines, you can ensure a smooth and successful homebuying experience with the right representation and support.

 I’m going to go over some of the many aspects of the transaction that your buyers agent can help with.

The lot

There are several pitfalls here. Usually in a new home development you pick your lot from a pretty site plan. It really doesn’t tell you much . An agent who is familiar with new construction will want to see the development construction drawings. These show the areas of cut and fill, location of erosion control basins, drain pipes and stone (these can be ugly and dangerous), location of utilities (do you want a big green box in your front yard?), streetlights and landscaping. There is usually a topo map with the existing grade and the new grade after development. The flood maps have been recently been updated in our area and you need to make sure your new home won’t be in a flood plain.

Your agent should be able to look at the lot and see if there are any potential drainage issues. Water problems can be on going and affect the resale potential of the home.

Sure, you can research and find out if busy roads or power lines are planned, both the kiss of death for resale, but you may not be able to find out the inside information about what’s going on nearby that isn’t public record yet.

Choose the builder

Builder

Sometimes even a good buyers agent can’t protect you from a builder who is having financial problems. Builders are pretty good at hiding this but an agent who has been around will know the signs and may have heard from suppliers who’s not paying their bills. Your initial deposit can be huge, sometimes as much as 10% and you need to be sure sure the builder isn’t borrowing from Peter to pay Paul.

There are lots of different aspects to choosing a builder. Reputation for detail and quality is important. Also, consider lot choice, financing, deposits, design and floor plans, flexibility, and price.

Get the best deal

Fence provided by builder

A good agent will know what builders will do with price and incentives. The on site agents job is to get the best deal for the builder but a buyers agent with a good relationship with the on-site agent and other agents who have sold in the neighborhood can usually find out the real story. Builders won’t discount the price much if at all because they need to keep up the prices for appraisals in the neighborhood. They also don’t have the built up equity in the home that a resale would. The big exception to this is at the end of the year or the end of the builders fiscal year. They want the inventory off the books!

Builders will usually negotiate some incentives in addition to what if offered. A good buyers agent knows how to do this and ask for just the right amount of extras to get something without a big NO. I love driving through a neighborhood and seeing my clients homes with a builder provided fence that their neighbors don’t have.

Financing

financing

Your agent can help to guide you through the options. It’s always good to be pre-approved with a local lender. The builder may pay some closing costs if you use their preferred lender. Always compare.

There can be lots of financing options for a pre-sale. Some builders want you to contract to purchase the lot from them then you go get the construction loan. Usually in this case you are responsible for the interest on the loan.

Others will want a large deposit with a contract, then they get the lot released from the bank and get the construction loan.

A production builder usually wants a deposit of 5% or so with a portion of upgrades pre paid and then the remainder at closing.

Closing costs

Many builders will offer to give you several thousand dollars toward closing costs if you use their lender. It’s really an advantage to them to have a lender who they are certain will be able to close the loan. If the builder owns their own mortgage company it may also be a good deal. If the builder has preferred lenders you should shop around because the lender will sometimes recoup the closing cost incentive by charging you a full 1% loan origination fee or give you a slightly higher rate.

I have found that sometimes if the builder has an in house lender and you are able to have another lender beat their deal they will still give you the closing cost incentive. This won’t likely  happen if the builder doesn’t own the mortgage company.

The plan-

I recently visited a site with a client. The on site agent showed us plans and pricing for a home that hadn’t been started yet. She offered to show us the same plan that was finished but sold. My client loved it. Looking around I noticed that the family room and kitchen looked larger the floor plan we had seen in the office. The agent insisted that it was exactly the same. I went back to the office, had her get the construction drawings of both houses and showed her the difference. My clients had not noticed this and if they hadn’t had an agent they may have contracted for a different home than they expected. A good new construction buyers agent can read the plans and help you visualize what the final product will be.

Options- structural and design center

kitchen with options

Your agent will know what options have the most perceived value for resale and will know what you can expect to pay for upgrades based on the builders standards. Your agent should help you with the selections.

The contract

Builders do not use the standard offer to purchase used for resale homes in NC.  contracts protect the builder not you. In my experience they won’t change anything in the contract but you need to know what you are agreeing to. It’s usually a good idea to consult an attorney to go over the contract with you so you understand what you are signing.

Construction

construction framing

Your agent should keep a close watch on the house during construction and inform you of anything that doesn’t look right. Your agent should be a good sounding board and help you realize what it important and what isn’t.

Inspections

Just because the home is new doesn’t mean you shouldn’t have a private inspector. Your agent will know who is really good with new construction and should give you several names. A new home has a one year builder warranty by statute so theoretically you don’t need to have the home inspection until close to the end of the year. I like to go ahead and get it done and have any repairs made before closing. Most of the builders in our area are good with follow up but once you give them the check at closing you have lost your leverage.

closing

I hope you have a good lender who has followed up throughout the process and doesn’t come up with any last-minute issues. A good lender will have the loan package to the attorney a couple of days ahead of time so everyone is comfortable the loan will close. There are lots of details and your agent, lender and attorney should work together to make this process worry free.

The closing! Worth the wait!!

Summary

When buying new construction, having a knowledgeable buyer’s agent is crucial for a successful experience. Agents can help with:
1. Lot selection: Assessing construction drawings, identifying drainage issues, and ensuring suitability.
2. Builder choice: Selecting reputable builders and understanding their reputation for detail and quality.
3. Negotiations: Understanding builder incentives and negotiating extras.
4. *Financing and closing costs: Guiding you through financing options and closing cost incentives.
5. Plans and options:Helping you understand plans, identifying discrepancies, and selecting options with the most value.
6.Contracts: Navigating builder contracts and recommending attorneys.
7. Construction and inspections: Monitoring construction, scheduling inspections, and ensuring repairs are made.
8. Closing:Coordinating a smooth and worry-free closing process.
A skilled agent can help you make informed decisions and avoid potential pitfalls during the new construction home buying process.

Here is a link to my post about Settlement and Closing in the Triangle.

I hope this post helps you realize why it is important to have a buyers agent when buying new construction. To learn more about building a new home check out my Guide to building a new construction home.

By Marianne Howell Wright

updated 9/2017