Are you thinking about buying a brand new home from a builder?
Do you need to use a Realtor to buy new construction?
The answer is No.
BUT hiring a good Realtor when buying a brand new home can save you from losing money.
In this competitive buyer’s market, not having a real estate agent consistently checking on lot availability while developing relationships with the builder’s employees may slow down your chances of getting your desired location.
**If you want to use a Realtor to buy new construction, that real estate agent must be with you on your initial visit to the builder.**
If you do visit the builder without a Realtor-you cannot give the builder your information without an agent being with you on that first initial visit.
*Just an innocent fact-finding visit will eliminate your right to representation at a later date-even years later!!*
Buying a newly built home can be exciting.
If you have ever visited a builder’s model home, you know what I am talking about.
When you first step into the new home, you see how beautiful the home is decorated.
The features of the model home are top of the line, and it looks and feels great. It’s like buying a new car, remember that new car smell?
It is designed to entice you and get you to buy.
See the Article: How to Choose a Lot for a New Home
Before you know it, you have sat down with the nice salesperson and started talking about price…..BUT HOLD ON! This is one of the most important purchases of your life.
Even if it’s your 4th or 5th home or perhaps your first, there are still a few things that you should consider BEFORE walking into that model home the FIRST time.
🚒SAFETY ISSUE-Please READ🧯
I wanted to share with you an experience with a builder just this week. There is a nationwide recall on certain electrical panels in the United States. Unfortunately, there are here in Florida.
One of the largest builders in the US yesterday tried to bully my client into closing on her home knowing this electrical panel had been recalled from the manufacturer.
He told them to take care of it after closing.
This builder tried to reassure my buyers (without me present) that everything was OK and just to close on the home.
He tried everything he could to convince my buyer it was OK, such as bringing in his boss and having a licensed electrician there to show it was OK.
He tried to bully the buyer to close on a defective home knowing full well there was something wrong!
Once I heard about the situation, I reached out to the local building inspector. That person returned my email and immediately called me to explain the situation.
My buyer tried for 4 hours the previous day to get ahold of someone at the county.
This situation could not only cause a house fire (in the worst scenario). Once the insurance companies are notified of this issue, they will drop your policy.
If you have a mortgage, your loan will be called due-you have to pay off your loan NOW!
Your Form Relationships with Your Construction Manager
When you build your home, you are assigned a construction manager. You will be in contact with this person for 9-15 months. You place your confidence in them and trust that they will do a good job for you.
After all, you are paying them a lot of money to get the job done. When something happens like a recall the day before closing what are you going to do? Your construction manager has assured you that everything is fine. He even brought in a licensed electrican.
You have things scheduled to come to your home. But you have a major issue that can impact your health & safety.
But on the other hand, this licensed professional that works for a major builder has assured you that everything is OK. You have been working with this person for almost a year!
Unfortunately, this is when you need a third party to step in for you and push back!
Let me take the brunt of the disgruntled builder. Your safety is my top priority.
💰Can You Lose Money Buying a New Home Without an Agent?
Buying a brand new home without a Realtor is an option.
However, many buyers just like you in hindsight wish they would have understood that you can have an agent represent you when you build a new home, and it does not cost you any money.
What does the Realtor do, or what is the real estate agent’s role in helping during new construction?
First, you have to hire a good agent that is going to be with you during the entire process.
So, asking the right questions or finding articles, like this one can help you pick the right Realtor.
Saving buyers, like yourself money, during the building process is one of my favorite things to do.
Losing Money at the Design Center (design selections not in line with local market)
Plus, I also guide you in the design center.
If you are relocating from another area, you may not know that for instance, homes in Florida have a worse resale if you have dark kitchen cabinets, wood floors, etc.
If you are coming from an area such as California or Texas, the decor is different and if you choose the wrong designs and color selections, you will be paying for it later in your resale value!
In addition, we have relationships! We know painters, licensed contractors, cabinet companies, window treatment businesses & more. These companies have performed for our past clients and are competitive in prices.
Not to mention, they show up on time, are clean, and finish the job right the first time!
I have saved my clients thousands of dollars through my business relationships.
🔑What is the Role of a Realtor in New Construction?
Hiring a real estate agent for new construction can help alleviate the stress and guide you through the 8-12 month building process. Having your own buyer’s agent for new construction actually provides you with outside representation.
- Builder’s Employee: The nice salesperson that you meet at the builder’s model home or sales center works for the builder.
Although they have to honest (hopefully) many are not licensed real estate agents and therefore are not bound by state contract law when it pertains to real estate. They are not using a standard state real estate contract.
- Experience: Chances are if you are looking in a new build community, your real estate agent has done business with this builder and knows what to look out for. Every builder has strong and weak points in their construction and processes. For instance, I know one builder who is notorious for not having the correct amount of insulation in the attic.
- Mortgage Negotiations: Most builders have a “preferred lender”. These lenders usually have a relationship with the builder’s company or are owned by an affiliate of the builder.
So, they are making $$ off that loan. Usually, there is an $ incentive to work with their preferred lender. However, sometimes their lender isn’t giving you the best deal.
Your New Construction real estate agent has relationships with lenders and can help you with negotiating a better rate.
However, your Realtor should be present from the start and perhaps even introduce you to the community you decided to invest in.
- Community Selection: What amenities are you looking for in a neighborhood? For instance, if you are not a golfer, do you want to pay for course upkeep and yearly buy-in fees?
- Location and lifestyle: This can play an important part in areas you may want to consider. A Realtor specializing in new construction also knows when new neighborhoods will be opening and pre-sales on lots. Many times, brand new communities that are taking pre-sales will save you $$.
- Explanation of Process & Deposit Requirements: Although the builder’s contract and their sales employee will explain the process, having someone guide and pace you with what is coming next alleviates the guesswork.
You Might Like the Article: What Are Buyer’s Closing Costs
- Lot Selection: Did you know that the orientation of your lot along with location can kill your resale? Agents that work with buyers hear feedback that you may never encounter.
- Structural Options & Initial Contract: Most builders will have more than 1 contract for you to sign. However, one of the most crucial is the structural contract. This is about the footprint and permitting process. Missing one of these selections can be extremely costly.
- Design Center & Pool Appointments: This is fun and stressful all at the same time. Having someone by your side that can help guide you in what selections might be cost-effective aftermarket (when you own the home) is invaluable. We also know design trends and what is NOT selling!
- Attend Meetings with You & the Construction Manager: There will be several meetings during your building process. Many of my clients are not here during construction. I attend the meetings and set up a Video Chat during those meetings so that you can be present. If you are nearby and can attend, your Realtor should be with you.
- Inspections: Checking the builder’s work is always a good idea & can save you from costly repairs years from now. Although the county will inspect the builder’s work, do not place all your $$ and investment in an over-worked government employee. I want an inspector to find everything wrong and I have just the right person to do it!
- Punch-Out Walk-Through: Prior to closing, the builder will walk the home with you. This may be your Only chance to find cosmetic items that need to be repaired by the builder before closing. Some builders do not warrant cosmetic repairs after closing. It is hard to prove who really dented or scratched a cabinet, cracked a paver, or broke a faucet. Having someone that has walked hundreds, if not thousands of homes can be a great asset!
- Vendor Recommendations: SAVE You MONEY. Once you move in you made need additional things done around the home such as changing light fixtures, painting, or installing blinds & shades. We know great electricians, movers, and other providers who offer great service and are responsible people. We have proven relationships to make your life and move easier.
If you have questions about New Construction Neighborhoods or Builders,
contact me, Sandy Williams direct at +1 (305) 962-5464
or email me at Sandy@SandyWilliams.com
📍The Process of Buying a New Construction Home
See the Article: Secrets Builders Don’t Want You to Know
Buying a new home, can seem like an easy task, right? The process of buying and building a new home isn’t always smooth.
The builder’s contracts are one-sided, meaning they are in favor of the builder.
Many of them have non-contingencies when it comes to financing if you decide not to use their financing.
That means that you could lose your total deposit if something happens to you and you can move forward with the purchase.
1. You walk into the builder’s office.
2. Choose a model.
3. Sign the contract.
4. Choose your options.
5. Sign another contract.
6. Work with the lender
7. Walk through your home before closing.
It’s easy, right? Not really.
💲How Does a Realtor Get Paid on New Construction?
A Realtor that represents you on a new build gets paid by the builder. It is in their marketing fee. Whether you hire an agent or not, the fee is there and will not be removed.
However, the agent must be with you during your initial visit.
It is fun to go and check out different builders and narrow down your final communities.
However, If you do go visit a builder’s sales center without your Realtor, don’t register or give your name and information.
They are not going to ask you to leave if you don’t tell them your name. I have had many clients not give their names upon their initial visit. Or they tell the builder, I have a Realtor, and I will not provide information until she is here with me.
*If you are visiting a new construction without a Realtor, you may be jeopardizing your opportunity to be represented later on! *
I recently worked with a buyer to help him find the perfect lot, floor plan, and even sold his previous house.
But, 2 years ago, when the builder had the initial Grand Opening, he and his wife wanted to check out the brand new community-they gave their info, not thinking anything about it.
The builder told us that since they were in 2 years ago, they would not honor my buyer’s request to be represented in his new build.
So, be very careful when visiting new construction without a Realtor.
In this competitive buyer’s market, not having a real estate agent consistently checking on lot availability while developing relationships with the builder’s employees may slow down your chances of getting your desired location.
I have received numerous calls from buyers just like yourself that have wished they had representation. But it was too late! Once you have signed that contract, you are on your own.
See the Article: Should I Get My New Home Inspected
Realtors sell over 70% of all new construction homes, according to the National Association of Realtors.
But, what does that mean to you, the buyer? It means that an agent has clout with the builder, especially if the agent is associated with a large, national firm.
Statistics show we will be back if that builder does a good job for you.
See the Del Webb Neighborhood Here
💰Talk to a Mortgage Lender Early
Many large, tract builders have a relationship with a lender or may even own a mortgage company. Some builders will offer you an incentive (contribute to closing costs) to use their preferred lender. However, the interest rate you are quoted and the fees may not be that competitive.
See the New Community: Indigo at Lakewood Ranch Here
The interest rate being offered by the builder’s preferred lender may cost you more money in the long run versus the compensation that the builder was willing to give you in closing costs.
Shopping around for a lender can create a competitive environment and make the builder’s lender offer you a better rate.
I recently helped a buyer with their mortgage options and was able to get my buyer a better rate, as well as more closing costs assistance because we negotiated.
If you are a strong buyer with a good credit score, you have options and more bargaining power than you think. A real estate agent has relationships with mortgage lenders that perform. Most mortgage lenders business is through referrals.
A bad lender, that overpromises and under delivers doesn’t bode well with a real estate agent. So, ask your agent and shop around.
However, beware of internet-based companies that may be working out of state. Although they are held accountable by federal guidelines, there is no relationship accountability.
📋Know the Contract the Builder is Going to Use
Too many buyers get blindsided by the 30-100 page contract the builder is going to present to you. The builder’s purchase agreements are written by the builder, for the builder. It is a one-sided contract, meaning it leans towards their best interest.
Knowing what you are up against before it is too late may save you from losing your deposit if things do not work out.
I recently had a large, experienced builder attempt to have my buyer sign an addendum that was not referenced in the original contract. That addendum, if signed by the buyer, could have cost them thousands of dollars.
The salesperson for the builder tried to tell my buyer that if the addendum was not signed, they would lose their $15,000 deposit.
Not true. But remember, that salesperson works for the new construction builder, not you.
Please, even if you do not hire an agent to help you through the building process, don’t just believe everything you are told.
Hire an attorney to review the builder’s contract if you are not seeking advice from your Realtor.
⚒How Are the New Homes Constructed?
Since we live in a Hurricane state, there are building standards that must be met. However, some builders will do the bare minimum to comply.
Comparing builders just on price point may leave you a little disappointed after that fact.
For example, not all electrical panels are created equal. Since most of us use computers or have home offices, we use power on demand, which may mean your electrical breaker is going to trip every time your printer turns on.
I am truly speaking from experience. Ask and inspect.
Find out the construction process, and the materials used, such as wood studs vs metal. In addition, what type of material is the builder using for plumbing?
Don’t take for granted that the county ordinances and building codes will be good enough for you. I was surprised that one local builder is using plastic tubing for water instead of PVC pipes.
It doesn’t mean their building practice is wrong, it is just something you should know before you sign the purchase contract.
🔎Can a Real Estate Agent Save You Money On a New Build?
All those selections! Ah yes, that wonderful showroom where you get to choose your cabinets, flooring, even the towel racks. Upgrades! Upgrades=$$. And yes, some upgrades make sense.
Your real estate agent that represents you on your new build can help you prepare for the design center meeting.
During your selection process, you will be going over everything that goes into your new home. This appointment can last up to 8 hours.
If you are not properly prepared, this meeting can be very stressful and expensive.
How to Prepare for the Design Selection Meeting
If you are not buying a builder’s spec house (move-in ready) you will be invited to attend a design center appointment. This can be a daunting task if you are not prepared.
I meet with my buyers prior to their design appointment to prepare them for all those selections. During that get-together, we discuss things such as what can be done aftermarket vs paying the builder to do it.
We also discuss design trends as well as what will hamper a resale. For instance, in Florida dark cabinetry and dark flooring will kill a resale faster than anything. What you had up north or out west, maybe not be desirable here.
I look at the design center like going to the movies. The theater isn’t making too much money on the tickets, the markup is on the candy, popcorn and soda.
We can prepare a summary of values in the neighborhood and use that as a guideline for your improvements.
Sometimes your agent will play devil’s advocate too. We are that person sitting on your shoulder asking you, do you really need this?
You Might Be Interested in the New Neighborhood: Esplanade Golf & Country Club
💸Can I Over-Improve My New Home?
Yes and this ties into the appraisal and resale of your home.
Going into the builder’s showroom and making upgrade selections can put you in a position of having a home that is overpriced, should you ever decide to sell.
You may not get your money back out of your home, should you have to sell within a few years.
Knowing that the average sales price in the new construction community is crucial to the purchase of your home.
A real estate agent can provide you with sales data before you choose your selections.
Do not rely on the showroom salesperson. They get compensated by the builder for all those upgrades they sell to you.
Let’s face it, life happens and although you think you are going to live in your brand new home for years to come, things happen.
Don’t get stuck bringing money to closing or getting back less money than you put down.
Since I personally built a new home, I understand how easy it is to get so caught up in wanting everything perfect. The builder’s showroom is designed to be exciting and of course, it is human nature to want nice things.
Having a third party there who works for you can put perspective on your experience.
🔑Resale and Appraisal
Some builders will ask you to sign a form that requires you to bring the difference between your appraisal price and the purchase price should your home not appraise.
All those selections chosen by you in the showroom increased the purchase price of your home and therefore, your upgrades must appraise if you are getting a mortgage.
So, be prepared to bring extra money to closing.
Selections=Resale too! Although you may have fallen in love with the dark chocolate tile to put in your bathroom, a real estate agent can at least advise you on market resale.
Things that are permanent or expensive to replace should be evaluated on aftermarket resale.
An agent has heard countless times from buyers looking at homes say, “I really like the house, but…” We try to eliminate that BUT because that is where you lose money. Maybe you have even said that yourself, which is why you want to buy (build) a new home.
🔓Research and Select Home Insurance Company
If you are building a home with a builder in Florida, it is important to ask about insurance for your home before you sign the builder’s purchase contract.
Homeowner’s insurance policies in Florida can be expensive compared to other parts of the United States, especially the Midwest region. Because Florida is in a hurricane state and the topography is flat (low lying areas) there may be extra fees that you are not aware of.
For example, flood insurance and additional insurance riders for storm damage to pool cages and fences.
It is not uncommon in some areas of Florida to pay for at least two policies, which can equate to thousands of dollars. Also, you want to pay attention to the deductibles for hurricane damage.
These are expenses you do not want to ask about after the fact. If you are getting a mortgage, most lenders require the policies to be included in your escrow and therefore could raise your house payment by hundreds of dollars.
Asking your real estate agent about flood zones, and obtaining a few insurance quotes before you start to build could keep you from an unexpected hike in a house payment.
You may be interested in the article: Top 15 Must Know FHA Guidelines
📈Is the Builder’s Lender Giving You the Best Deal?
Realtors understand the mortgage process. Do you really want to finance that garage door opener option into your mortgage for 30 years? It will cost you 4 times the amount you could have paid for it at a local hardware store.
Let’s see the costs associated with doing that mortgage.
A Realtor has seen countless closing statements and knows generally how much fees are for processing and underwriting a mortgage, etc.
If you are getting a super-duper interest rate, believe me, you are paying for it somewhere else.
The federal government sets the interest rate. It’s like buying a 2×4 at one hardware store vs another.
They should almost be the same price, right? If one is so much cheaper than the other, believe me, they are making it up in the price of nails they are selling to you! It’s the same thing with mortgages. Rates do change daily but every company should be quoting you basically the same rate.
✅What is Punchout?
What’s a punch-out? It’s the walkthrough. New homes are made by humans and humans make mistakes. Nothing is perfect, but sometimes they can be made better.
When you buy a new home, the builder should be doing a punch-out with you. At least when you work with an agent, they will.
An agent will attend the walkthrough with you and with their trained eye, look for errors. It’s the tricks of the trade we learn.
For instance, I always take my shoes off to walk on the carpet along the outside walls of all the rooms.
Why? because that is where you will find the drywall remnants that were not swept up. That debris will eventually show through and your flooring will wear in those spots. Home inspections on a new home? I would.
🏠Buying a New Home
Buying a brand new home can be rewarding, after all, you are the first person to live in it. The inside of your home is what you choose and everything is brand new for you to enjoy.
A Realtor should make sure that your experience is positive and your investment is protected. We are your partner and advocate throughout your entire building process.
However, you have to bring us to the beginning. We must go with you on your first visit to that model home or register your name with the builder, otherwise, you may be on your own.
If you have questions about New Construction Neighborhoods or Builders, contact me, Sandy Williams direct at +1 (305) 962-5464
or email me at Sandy@SandyWilliams.com
✴️Frequently Asked Questions
If you go to the builder’s sales center and register, which is writing down your name, and contact information, you may have just signed away your option to have a Realtor representation.
Unfortunately, most builders do not directly tell you this that filling out that form negates your opportunity even years later.
To solve this problem: If you do visit a builder’s sales center=don’t give them your information.
Yes, you can! Choose a real estate agent that is experienced in selling new construction in the area that you are interested in. They will be able to research home prices in that area so you do not overspend.
Almost all production builders have a marketing budget that includes paying Realtors a commission.
More than likely, the builder will not reduce the price of the home should you not hire a Realtor.
This is important and you need to interview the real estate agent. A good Realtor should be there with you during the entire process.
I am there during your lot selection (super important), I can advise you on the mortgage process (and if you are getting a good deal on rates) and during both home inspections.
The Realtor that you hire works for you. They should be looking out for your best interest.
That means when the builder pushes back, cuts corners, etc., your agent should be using their clout to have them perform.
The salesperson that you meet in the builder’s sales center or showroom works for the builder. If you decide to not have a real estate agent help you, then you have zero representation on your side.
If you are looking in South Florida, there are better times to buy a newly built home. Both would involve buying a builder’s spec home.
1. Buy a new construction home offseason. In South Florida offseason for real estate in June-August. If a builder is sitting on inventory homes, they become a little more motivated to sell them (think hurricane season + vacant home). There are fewer buyers this time of year. So, it becomes more of a buyer’s market.
2. The second best time to buy a new construction home is close to the end of the builder’s fiscal year. Large tract builders have stockholders and they want to report great earnings, right? I have saved my buyers thousands of dollars in price reductions by negotiating during the end of the company’s fiscal year.
Having a Realtor represent you on a new build can save you money, be the go-between you and the builder, and save you money.
Since the builder pays the commission, whether you have a buyer’s agent for new construction or not, the builder will not kick you back the money.
Remember 💡 the salespeople WORK for the builder-Not You.
1. We Keep You from Over-Improving. For Instance, I have relationships with contractors, window covering companies, mortgage companies, painters, etc. Shopping for services & comparing prices can keep you from losing $$.
2. If there are issues with your builder during construction, we work for you. We push back! We are your advocate. Builders know that we will be bringing additional buyers to them if they do a good job. There is power in numbers!
3. After You Close: A good real estate agent doesn’t leave you after the closing. For example, looking at your tax pro-ration allocation after closing can save you hundreds $$ 💰.
I recently found in 1 community, that the title company did not pro-rate property taxes correctly.
The error was in the builder’s favor. Some of my clients were able to get hundreds of dollars back-after closing!
I have been in real estate sales for over 24 years. I am originally from the Midwest and have lived in beautiful Florida for over a decade. My career sales are over 2,300 homes sold. There aren’t too many obstacles I haven’t encountered throughout my work history. I provide you with honest advice backed by years of experience and understand that a real estate purchase or sale is your top priority.
Nationally recognized. Licensed FL Real Estate Instructor. Contact me at Sandy@SandyWilliams.com or call 941-564-9491
Thanks Duncan for your comment. After navigating the new construction process, I have never had a buyer regret having their own representation.
Thanks for the reply!
Hi Lisa, feel free to reach out to me if you have any questions. I can connect you with one of my trained associates in that area.
I have already put a small amount of earnest money on a new build from LGI homes in Cape Coral Florida. Since I am just now reading this article and did not get a realtor previously, would it still be to my advantage to have a realtor at my walk through and closing.
I think we spoke on the phone. If you have gone this far into the process, it is too late to have a Realtor. I would hire a home inspector to do an inspection prior to closing on your home.