9 tips on buying a new construction home and why you need a realtor

4-24-15-RE-9 Tips on buying a new construction-graphicThe spring buying season is in full bloom with future homebuyers torn between the existing inventory of pre-built homes and exploring the potential of what a new construction home offers. While it is more than obvious to many as to why they hire a realtor to help them find the perfect home from the existing inventory many new construction home shoppers are never even aware that a realtor can help them negotiate a much better deal than buying with the builders agents representing them.

To help you understand the pricing structure that builders use you must understand that the actual price for a new construction home is influenced by location, land cost, square footage of home, quality of building materials, labor, market conditions and impact fees imposed on the builder.

Let’s explore the many different ways that a realtor can make for a valuable member of your new home buying experience.


Buying a new home is more complicated and intimidating

It is important to hire a local agent that is familiar with both the local market as well new construction process, in general.

Model homes are staffed by licensed real estate agents hired and paid by the builder to represent the builder.  Typically they are not realtors and not bound by a professional code of ethics to represent you as the buyer.  It is always best in a transaction of this magnitude to have an agent with a fiduciary duty and responsibility to represent your interest.

In most cases, your agent must accompany you the first time you visit a model home.  Go new home shopping on your own and your right to representation may be waived forever.


When is the best time to buy a new construction home?

Most new home builders are publically traded companies that are owned by stockholders.  These shareholders hold the company accountable to meet sales goals and projections.  As a result, the end of a quarter is a time when new home builders will offer some of the best incentives so they can meet their goals.

The winter holiday season is another great time to buy a New Construction Home since most of the country is focused on the season and not out looking for a new home.  With the looming end of year just short days away, this is a great time to aggressively negotiate some great builder incentives.


How Much Should You Pay?

You may have noticed, so far we have spoken about ‘Builder Incentives’ and not price.  The reason is the new home builder will very rarely budge on price because they don’t want to establish a precedent.  Remember, purchase price is all a matter of public record.

With the right realtor, you should be able to sweeten the pot through a number of ‘incentives’ that may include design center upgrades or closing costs – both of which can mount into the tens of thousands of dollars.

Realize that new home builders are motivated to move existing inventory because every day the home sits vacant and on the market it is costing them money.  When you find inventory that has been on the market for 45 to 60 days you can be assured that the builder is motivated to move that unit and will typically offer some phenomenal incentives.



Some buyers think that if they do not use an agent that they’ll be able to negotiate a better deal by saving the commission the New Home Builder would have to pay the agent.  Not true.  The builder either pays it to their own staff or just allocates those funds into their marketing budget.

Remember, New Home Builders do not want to reduce their price because it will set a precedence for the neighborhood and that goes for the REALTORS® commission.


Get it in writing!

Remember, the only thing that matters in a real estate transaction is what is in writing.  If a new home builder’s agent says something that is important to you while showing the home, then get it in writing.

Unlike resale real estate transactions with standardized forms each new home builder has their own proprietary contracts prepared by their team of attorneys to protect the new home builder.  Sure there are government rules and regulations they must comply with granting the buyer a minimal level of protection – just remember the forms are for the benefit of the seller and not you.  It is critically important that you take the time to read and understand what you are signing.


WYSINWYG – What you see is not what you get.

That’s right, what you’re looking at is the new home builders model home that has been both professionally staged with custom furnishing to appeal to the desired buyer and upgraded with many expensive design center upgrades.  (Be aware that some builders even use furnishings built to a 80-90 percent scale to make rooms look bigger.)

Many of the upgrades are more expensive than if you were to have the work done by local craftspeople after the close of escrow.  For example, that beautiful hardwood flooring – shop locally and save money.  That custom built in at the end of the family room can be made by a local carpenter, with better materials, for less money.  Of course, any upgrades after the close of escrow will not be financed – nor will they be taxed as part of the value of your home when it comes to the county assessor and the property taxed you’ll end up paying on the upgrades.


Buying The Builders Model Home. 

If you are fortunate to buy the builders model home, you can receive an excellent deal.  Since these model homes are the showcase for the builder they typically have many of the finest upgrades being offered in the community.  Of course, the buyer can no longer weigh in on the flooring, color of the walls, kitchen cabinets, fixtures or any other improvements. The tradeoff is minimal, since great care went into selecting the most current palate available.

Since these homes have never been lived in, or deeded to anyone, they are still considered new.  Model homes will typically sell for current market value and include the showcased upgrades.


Research The Builder. 

You would never buy a new car without having strong feelings about the manufacturer.  You’d never sign up for a cell plan with a provider without doing your research so it only makes sense that when buying a new home worth hundreds of thousands of dollars that you should research the new home builder, yet so few do.

Do your homework and visit other communities the builder built 2-5 years ago.  Talk with people who live there or have lived there.  What do they like and/or dislike about the home and community.  Look for online reviews and social media to see what real people think about the product.

Investigate major components that will be used.  Is the HVAC a no-name fresh off the boat from China or is it an established leader in the field.  Same goes for roofing material, flooring, fixtures and everything that goes into the construction of the home.  Take some time and wander around the homes currently being built – are the crews serious and meticulous or are they horse-playing around in an unorganized work space.  Trust your gut.


Who Is Your Lender?

Builders always have a ‘preferred’ lender that they’ll want you to use.  Many times they’ll offer closing cost or interest buy-down as a reason to use ‘their’ lender.

It’s important to shop for a loan and get the best loan for you, the buyer and not the new home builder.  Who knows, based on the incentives, the new home builders lender just might be the best loan for you!

So, if you’re even remotely considering buying a new construction home do yourself the favor of consulting with the realtor of your choice to ensure you are properly represented.  Remember, it’s imperative that your realtor is there the first time you look at any model homes in any tract if you want the representation you are entitled to.

Call us today at (951) 296-8887 and get the information you need to make the right decision.

For questions regarding available inventory and/or other real estate matters please contact, [email protected].  Mike Mason, Broker/Owner of MASON Real Estate Cal. BRE: 01483044, Board of Director of your Southwest Riverside County Association of Realtors® (SRCAR), Traveling State Director, California  Association of Realtors® (C.A.R.).  John Occhi is a semi-retired Temecula Realtor® who is pursuing his dreams and passions traveling the country, in an RV on the “American Wine Trail”.  Follow his RV Wine Adventures at www.TheAmericanWineTrail.com.

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