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- Should I use a Buyer Agent Realtor® when building a home?
- Should I use the builder lender?
- Which buyers should NOT build a new home?
- What about building a custom home?
Should I use a Buyer Agent Realtor®
when building a home or buying a home from a builder?
Buyers always have the choice of using a Buyer Agent Realtor® or not. This includes when buyinga new home.
NOTE: All real estate commissions are paid by the sellers (including new homes). It typically costs the buyer nothing to have the services of a qualified Buyer Agent to ind their new home and negotiate the best price possible!
We have seen the same floor plan with the same amenities SELL FOR MUCH LESS when one of our affiliated Buyer Agents was involved in the transaction.
Most reputable new home builders will work with your Buyer Agent. They normally WON'T discount the price if you don't use a Buyer Agent.
The reasons why are: they don't want to hurt their relationship with Realtors® and Buyer Agents and they don't have the real estate commission figured in on EACH home they sell. They figure a commission on only about 3 homes in 10 sold.
VERY IMPORTANT: Some builders will not work with your Buyer Agent UNLESS that person accompanies you on the first visit to the builder. Going into the builder without your Buyer Agent may prevent your Buyer Agent from helping to negotiate the best price for you!!
It is just as true when buying a new home: It makes good sense to have YOUR OWN licensed, trained professional helping you with the largest and most important purchase most of us ever make!
Should I use the builder lender?
Probably not. Many times the builder will tell you that they will give you $3,000 to $5,000 in financial incentives or "FREE" upgrades if you use their lender.
Knowledgeable buyers will ask the builder how much they are OVERPAYING for their home or their mortgage so that the builder can "give them" all the free upgrades or financial incentives.
Of course, free upgrades don't cost what they are advertised as being worth. That is the retail price. Many times they don't increase the value of the property much when it is appraised.
Your Buyer Agent can often get you these same incentives and you can still choose your own lender! Remember, it's your choice.
But the most important reason for NOT using the builder lender is this: It's like playing poker with your friends, showing them all your cards, then placing your bet and expecting to win!!
It all sounds so innocent when you go into the site sales office: "Why don't you just fill out a credit application and we'll see if we can get you approved and find out what the monthly payment would be."
When the builder lender "sees all your cards", he knows what you can pay. Your Buyer Agent may be prevented from negotiating to get you the best price.
And if you "sign in" without your Buyer Agent, you may have just been prevented from using a Buyer Agent with that builder! Don't go to builders without your Buyer Agent!
Also, many consumer experts recommend having someone looking out for the buyer who is INDEPENDENT of the builder. A good Loan Officer and a good Buyer Agent are just as important when building a home (or buying a newly built home from a builder) as any other time.
Which buyers should NOT build a new home?
Buyers with many credit problems, employment instability, and/or low savings are often better off buying an existing home (even a new home which is completed, but unsold).
Buyers building have to be qualified for a home loan when they make an offer and STILL be qualified 4-7 months later when the home is completed. Buyers with challenges may have trouble qualifying for a home loan and remaining qualified for such a long period of time.
Buyers with very limited cash may not want to build. Closing costs on new homes are typically about $2,000 higher, because builders are reluctant to pay closing costs that sellers of existing homes regularly pay.
However, on spec homes (new homes completed but still unsold), builders will sometimes pay normal closing costs like sellers of existing homes.
Builders have an incentive to reduce their price and pay part of your closing costs to sell their EXISTING homes. Every day that home sits there unsold, the builder is loosing more and more money in interest costs!
ALSO--When building a home from the start, it's like taking on a part-time job without pay, until the house is finished. Some people are too busy to deal with this and would find it very frustrating.
This isn't to say that building a home is a bad idea. Buyers just have to be flexible and realize that a build job is a different. Negotiating is entirely different. But you are also getting EXACTLY what you want in a home.
What about building a custom home?
Buyers building a custom home usually have to make a large enough down payment to protect the builder if the buyer backs out later. The buyer may have to buy or already own the land outright.
Buyers building custom homes are advised to consult with their Buyer Agent about making any builder deposit with the title office, instead of the builder directly. If the builder walks off with your money or files for bankruptcy, you would have problems.
It is very important to investigate the construction quality AND the financial status of any custom builder you might select.
If you decide to build, you may want to use a flexible custom home builder and a "cost plus" contract.
Then you can buy almost everything from the sheetrock in for BELOW BUILDER PRICE at 50%-75% off retail--sometimes 50% to 75% off SALE prices--through a members-only showroom and end up with more home, at a reduced price.
SmartHomeBuyersDFW.Com Loan Officers can provide our members with a referral to such a discount showroom.
DISCLAIMER: No information on this website is intended as real estate advice. For property specific or general real estate questions, you should consult with a Texas Real Estate Commissioned (TREC) licensed real estate agent who is a member in good standing with the National Association of Realtors® (NAR).
Nothing on this website is an offer to sell nor an offer to enter into a buyer representation agreement.
Many consumer experts recommend buyers choose an agent who has specialized buyer representation training and who agrees to show buyers ALL eligible homes equally, without bias because of real estate commissions or bonuses.
Some terms used to describe these special consumer-friendly Realtors® are: "Buyer Agent", "Exclusive Buyer Agent", "Buyer Broker", or "Exclusive Buyer Broker".
 REALTOR® -- A Registered collective membership mark that identifies a real estate professional who is a member of the National Association of REALTORS® and subscribes to its strict Code of Ethics. Inquiries regarding the Code of Ethics should be directed to the board in which a REALTOR® holds membership.
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