Buying a New Home? Bring Your Realtor With You
If you're like most people, when you're in the market to buy a new home you simply hop in the car, drive out to the communities that you're interested in and talk with the onsite salesperson about the homes you like. The sales person will then lead you around, showing you the homes, pointing out thing here and there and generally trying to convince you every step along the way of why their homes are so much better than everyone else's. You then go back to the office, write up a sales contract and six months later you're in your new home. This is how many people do it.
That Doesn't Make it the Best Way to Do It
What most consumers don't realize is that the salesperson sitting out in that model home doesn't represent them. They work entirely for the benefit of the builders they work for. When it comes to protecting your rights, they leave it up to you to find representation before you walk in the door. The catch is, if you visit the builder without your Realtor the builder will cut them out of the deal thus leaving you without representation, unless you can find a Realtor that will work for free. There are several key reasons you should always have a Realtor on your side when buying new construction, we'll address them one at a time.
It Doesn't Cost You a Thing
Realtors are always paid either by sellers or by builders. Their commission is included in the cost of the home. As a buyer, you are doing yourself a disservice by not having a Realtor. Since the Realtor is paid by the builder, why woudn't you want someone looking out for your needs during the buying a process. I suspect it's because some builders are telling you that if you work without a Realtor, they'll cut you a better deal on the sale of the home. The fact of the matter is those incentives are there for you to take regardless of whether or not you use a Realtor. If the sales agent can get you to buy without an agent, their commission grows. It's as simple as that. What's more, builders are more apt to discuss incentives and consider offers coming from a Realtor because if they don't, they know that the Realtors won't even bring their clients out. And you can't sell to someone who isn't there.
Understanding the Numbers
When most consumers start shopping around, they pay the most attention to two numbers. The 'estimated monthly payment' and the interest rate. Just like when buying a car, many consumers will simply say, "I'll buy if we can get our payments under XXXX". That's actually the worst thing you can say. This gives the sales agent the magic number that you will buy at and from there, they can manipulate the numbers to make a deal come together. They do this by manipulating the interest rate, the down payment, and the taxes. Let's look at an example:
Say you're buying a home at $200,000. The sales agent claims he can get you into it with $0 down and a monthly payment of $1400 / month. Now, most people would think that's a great deal. But what the sales agent is not telling you is that he's estimating the monthly payment on the taxes for the land only, not the completed structure. So the first year you're in the home, you happily go about paying your $1400 / month, and then the new year rolls around, the appraisal district comes in and sees that you bought the home for $200,000 and reassesses your home to the sales price. Your tax bill then goes from $1200 dollars a year to $7000 dollars a year, and your monthly note goes up by $480 dollars. By then, the sales agent is usually long gone and you're left wondering what happened.
A good figure to keep in your head is that your monthly note should roughly equate to 1% of the purchase price of your home. This is not a perfect equation, but should give you a rough understanding of how it calculates out. This is assuming of course that you're not making a huge down payment on the home. So if the numbers just don't add up for you, you might want to consider why. Realtors have handled thousands of new home purchases and know what to watch out for.
Understanding the Contact
If you've never bought a home before, the contracts and paperwork can be overwhelming. What's more, you'll be expected to sign it all while sitting right there in the sales office. Some of these builder contracts can be extremely lengthy, about the length of a short book. You'll want to make sure you understand what it is that you're signing, and what you're agreeing to. House Bill 3798 aims to provide more protection for new homebuyers, but it's not there yet. In the meantime, you would be wise to have a Realtor in your corner to look out for your interests.
Getting Your Best Deal
Homebuilders often have their sales price, and incentive, a mortgage incentive, and lastly the final price they will accept. It's rare that the builders have to offer up the incentives simply because consumers don't ask for them. The builders advertise their list prices, not the bottom line prices that they will accept. For example, we recently helped a family purchase a home in Firethorne. The list price of the home was $315,000 but after some prodding, we found out that the builder had a $20,000 buyer incentive for inventory homes, which this was. That brought the price down to $295,000. We researched this particular home and discovered that the home had been available for 6 months now and hadn't sold, and that the builder was ready to sell it because it was the last home in the first section. We made an offer of $279,000 and it was accepted!
Had we just accepted the $315,000 sale price, the buyers would have missed out on $36,000 of additional savings, and therefor equity! You just never know what kind of deals can be worked when you're buying a new home. It can't hurt you to have a Realtor on your side when buying a new home, but it can hurt you to NOT have one. Since the builder is paying for you to be represented, you may as well take advantage of it.