Why use a Realtor when buying a newly built home
It is no secret that buying property in the Bay Area can be frustrating. You spend months looking through stranger's homes until you find one you like, can afford, and want to put an offer on. At that point, it is likely that you will run smack-dab into several others parties making an offer on the house, each of whom has also spent months looking for a property they like and can afford.
If, at some point, the thought of buying a home in a newly built community flits through your mind, you may be on to something. The upside of buying newly built is that you are less likely to be in competition with other buyers. If you sign a contract early enough, you are also able to choose your own lot and customize the interior of the home. The question then becomes whether you need a Realtor with you as you shop for new construction.
Terri Vellios, a 15 year real estate veteran and broker associate with Keller Williams in Campbell, has a unique perspective when it comes to new construction purchases. Years ago, Vellios worked with a developer in new home construction. She was that agent you would have met when you walked into a model home or contacted the company about building a new house. Today, she works with buyers and sellers of all kinds, but back then, Vellios was sales manager for one builder. What the experience taught her was how detailed the business of buying new construction is and how valuable a knowledgeable agent can be.
“It is standard that the contract fits the builder's agenda,” Vellios said. “They have several items built into the contract that protects them. You can try to modify the contract, but I wouldn't hold my breath, especially if their homes are selling.”
“The builders contract is approved by the Bureau of Real Estate,” said Sherri Pope, a licensed broker working with New Home Professionals in Dublin. “Many times a resale agent or buyer will want to change the verbiage of that contract, and typically that will not happen.”
In their excitement over finding a community they can picture themselves living in, Vellios says that many a buyer will sign just about anything without understanding the fine print. It is important to know that the contract you sign in a new home community is likely to be different than one you would sign to purchase a resale. For example:
• You are likely to pay much more earnest money on a new build than on a resale. This is because the builder is taking a risk when he installs the features you choose — like a particular backsplash, cabinetry, or carpeting. If you fail to carry through on your commitment to purchase the home, the builder is going to be stuck with features the next buyer may not adore as much as you did.
• The amount of time the builder allows himself to fully construct or finish the home may not jibe with your expectations. The only promises that actually count are the ones agreed to and signed off on by the builder.
• Contracts are not contingent upon appraisal. In other words, if the appraisal comes in thousands lower than the agreed upon purchase price, the builder is under no obligation to lower his price. Unless you are willing to lose your earnest deposit, you are expected to bring more cash to the closing table in order to make up the difference between the agreed upon price and the appraisal.
And these are only three of the many details included in most builder contracts. According to Vellios, the primary reason to have an agent is to protect your interest. An experienced agent will request a copy of the contract before you sign, study it, and then go over every detail before you sign on the dotted line. It may be tedious, but it can save you money and frustration.
A strong agent can also help you negotiate upgrades. Although builders almost never negotiate on the sales price, they are frequently open to negotiation on upgrades, such as countertops, cabinets, flooring, fixtures, and appliances. Whether or not your builder will discuss upgrades has a great deal to do with two things: demand for the property and the skill of your Realtor.
As someone with experience in most facets of real estate, Pope says that builder's agents are happy to see a client walk in with an agent of their own. “When we see a Realtor we think great, we have someone we can work with here that knows the client.”
Pope encourages anyone considering new construction to find an agent with experience working with builders and new builds. “You want an agent that actually understands new home protocol,” she said.
Vellios and Pope both recommend bringing your agent with you any time you visit a new home community, particularly the first time. Otherwise, it is likely the builder will not pay his or her commission. According to Pope, the commission paid to your agent has been built into the cost of doing business and going it alone is not going to put more money into your pocket.