New Construction

4 Things to Keep in Mind When Looking at a New Construction


#1… It is in Your best interest to read this page BEFORE walking into to see a model home.

If you walk in to see a model home without a realtor, you are giving up your right to have a realtor represent your interests should you decide to purchase a home from them. The builder will not allow you to be represented by a realtor.  (More details on this below.) Such people are sometimes called unRepresented Buyers. 

Important things to understand:

1. The agent at the model home works for the builder and their interests. Not the buyers. There is no dual agency.

2. Some builders incentivise their agents based on upgrades and profitability on the sale. (e.g. less discounts)

3. All builders are not the same and quality is important. 

4. Some upgrades are worth it, some aren’t.

5. Some builders have relationships with a specific realtor or team and will encourage you to use them to sell your home so you can buy one of their new homes. Do not be fooled or deceived. These realtors value their relationship with the builder more than they do with you. It’s simple economics. 

6. It costs the buyer nothing to use a realtor to represent them.  When buyers don’t use realtors, the extra money set aside is more profit to the builder or to the agent in the model home. 

7. There are a lot of questions that can and need to be asked that only experienced realtors generally know to ask. Most home buyers and new agents have never been through the process and can get easily overwhelmed.

#2. Do home buyers need a realtor when buying a new home from a home builder?

When it comes to purchasing new construction, there is a common misconception among buyers that the process is pretty straightforward: walk into the builder’s office, pick a lot and design, and sign on the dotted line. What many potential buyers don’t consider is that the friendly and helpful salesperson working for the builder at a new-home site is representing the builder—and is there only to look after the builder’s best interests. As a real estate agent, it’s your job to know that buyers who are not represented by their agent are taking a big risk with what is probably their biggest investment.

Some new-home buyers also believe that if they do not use a buyer’s agent for purchasing a new home, the builder will reduce the home price by the amount of the commission that would have been paid. This is simply not true. Builders don’t want to lower prices because that will have an impact on future home sales in that neighborhood. Furthermore, builders expect to pay commissions to buyers’ agents, so they figure that cost into their marketing budgets. Buyers who opt out of working with their agent are not saving themselves any money. The commission that was not paid will go straight to the builder’s salesperson, or the builder will keep it as profit.

Agents are generally more aware of other potential issues: If a builder is having financial problems, an agent is far more likely to recognize the telltale signs or to have heard from suppliers that the builder isn’t paying their bills. An initial deposit on construction can be as much as 10 percent of the purchase price, so there is a lot of money at stake.

Buying a brand new home is a complex process. As a buyer’s agent, it is our job to help make sure that details of the sale are not overlooked. We will make sure that upgrades and custom features happen as they were agreed upon. We will be there for periodic walk-throughs of the new home, both during construction and at closing. There a are myriad of items with a new build that can be easily forgotten. As long as you ensure the correct documentation is in place, there should be no problem getting the builder to correct mistakes.

#3 How does the Buyer’s real estate agent get paid?

When you sign it, the person there will ask if you are working with a realtor. If you say no and don’t write an agent’s name down, the builder will not pay the commission of your realtor. Ask them, they’ll confirm it. There aren’t a lot of realtors that will represent a client nor take the legal responsibility of representing a buyer without being compensated.  So if buyers do want an agent to represent them, then the buyer would be responsible for paying their realtor’s compensation.  

From the beginning of the project, builders have already budgeted paying a commission to a buyers agent. If the unknowing buyer (aka…unrepresented buyer) does not have a realtor protecting them, the the builder either keeps the extra money or pays a portion of it to their model home agent.

#4 Would you use a realtor to help you purchase an existing home?

If you answered yes, then ask yourself why? It’s because a realtor represents your interests, walks you the process and (should) make the process enjoyable.

Just as a Sellers agent represents the seller, Builder agents represents the builders. So unrepresented buyers beware. 

Reach out to Aaron if you would like more information on the new home buying process.  If you have a house to sell before moving into a new home, he will also talk about that process as well.