Should You Hire a Buyer’s Agent in your new home construction?

by Mike Yeo on July 18, 2011

In the greater Frisco TX area markets, many home buyers are starting to be open to the idea of new home building/ construction again. The economy/ job economy seems to look “more stable” to many people in the North Texas area, so they are open to spending good money on new home construction. The prices in the area have also been inching up slowly and new home building seems to start to make sense again.

For about 2 1/2 to 3 years, many new home builders slowed down their community developments significantly because it became very difficult to compete with foreclosures and short sales in the area. To make matters worse, Sellers also priced their properties around the same range as foreclosures and short sales.

If you compared apples to apples in new home construction, the exact same house in the same community – one sold by a seller and another sold brand new by a home builder, there typically is a $15K – $25K “premium” for new home construction. Comparison is true for prices $350K and below.

There is a PREMIUM of being able to select your carpet, wall color and kitchen cabinets. There is a PREMIUM knowing that no one ever lived in the house before. There is a PREMIUM to be able to make small changes to the existing floorplans sold by home builders.

“Can you enter a new home contract with the home builder without a Realtor(R)?” Sure you can. But the more important question is, “Should you enter a New home contract without a Realtor(R) with a New Home Builder?”

I may sound bias in my proposition. However, knowing what a Realtor(R) could bring to the table versus having personal experience without one when I first purchase my first home (before I became one) – I could tell the difference in the experience and expectation of the process.

Read some tips offered by my previous client (A.R.). She had originally contracted to build a new home in Frisco without a Realtor(R). During the process, her instincts told her that they are not headed the right track because of the negative experiences with the builder. She sought to find answers and eventually found my blog. She contacted me on Saturday afternoon and I guided her what she needed to do. Long story short, her new home was never built and she later used me as her Buyer’s agent to purchase another property where she currently resides.

Hence, she started her writing with, “If I had to start from Square One”…

If I had to start negotiating a new construction contract all over again, what would I do different?

1. Hire a buyer’s agent!!!  – It is true you may be able to negotiate some buyer’s agent commission off the listing price if you do not use an agent. But having gone through the process, don’t even think about it! How much ever you pride yourself on your negotiation skills, you can never talk their language.

2. Read the standard specification properly and make sure you understand what exactly comes with the house for the listed price. If you are not sure about the lighting fixtures, paint colors etc, insist on a tour of their design center. “lots of paint options” listed in the brochure may turn out to be a variation of 5 white; Dover white, moderate white, Antique white, etc. Choosing a custom colors may cost you upward from $2,000.

3. While touring the design center, make note of what is standard and what is an upgrade. Request pricing (exact $$ amount). Do not settle for verbal quotes for all the upgrades you are interested in.

4. Weigh in the price of the upgrades along with the listing price and then research comps in the neighborhood to find your magic number for the house.
5. Write out your offer; the contract may be tailored to cover the builder in all stages… so look out for yourself. Ask for a longer option period – time frame in which you could back out of the contract with no questions asked and a full refund of your earnest money – at least 10 days; builders only give you 2 days to start with – definitely not enough to talk to friends and family, get cold feet and then warm back up to the deed!

6. Get a written commitment on the closing date – as its a new construction builders are reluctant to commit on a date  – so at least get a commitment on the month – failing which you are freed from the contract without any liability to you and a full refund of your money.

7. From then on, always keep a paper trail. If you discuss something in person or over the phone, follow up with an email citing all the info gathered in that conversation. You could say something like “Following our conversation earlier today, I’d like to confirm the following…. yada yada yada..”

8. If crucial information is shared on voicemail, always find a way to record it on some permanent storage.

These points of action may cry “paranoid” to some but been where I have and seen what I have, it is very practical to me. Closing up, watch out for these small upgrades that all eventually add up to a huge sum

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Contact:


Loreena Yeo
Frisco TX Realtor® / Broker of 3:16 team REALTY
(214) 783-2210
loreena@loreenayeo.com

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Copyright © 2010 by Loreena Yeo (3:16 team REALTY).
Originally Posted on New Home Construction Advice – Should You Contract Without a Realtor(R)?

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