Buying New Construction Home - What’s the best way?
Some thoughts on purchasing a new construction home from a national builder/developer.
I am always looking to share industry knowledge which may benefit you and your family.
Question: When a buyer is interested to purchase a new home from a builder will they get a better deal with an agent or no agent?
When planning to purchase a home from a new home builder many people think they will get a better deal without bringing an outside agent to represent them.
People often think being unrepresented means the in-house agent, who works for the builder, won’t have to split the commission being paid by the developer, this is just not true...this is not typically how the in-house agreements are structured.
In fact, more often than not, a buyer of a new home in a development will get a better deal when bringing an outside agent to represent them on the purchase.
You see, if a buyer walks into a new home development on their own the in-house sales associate and the builder see that person as “one” transaction, no special treatment.
If a buyer walks into a new home development with an outside agent the in-house sales associate and the builder see this as potentially “multiple” transactions, special treatment.
In fact, builders and their sales associates have incentives to give good deals to buyers and their agents in the area who might bring them future business causing more sales!
The sales team will usually want to give a better deal to a person with an outside agent, because they know if they make that outside agent look good they will be more likely to bring back more clients in the future, more sales.
The in-house builder agent also knows a successful sale by an outside agent usually means that agent will go and share their experience with the other agents in their office and their company, making more outside sales agents aware of the project, and in turn cause more future sales. Builders tend to care most about more sales.
You may not be aware, sales associates from builders often visit local real estate brokerages looking to present their developments and coming soon inventory at any meeting or gathering of agents they can get permission to attend, they want outside agents to bring buyers.
I understand the best strategies to use with new home builders!
Often people’s first thought is how do I get the sales price for less...this is not usually the ideal approach to get the best deal with a new home developer, they are not selling just “one” home, they are selling many multiple homes and therefore are considering a much bigger picture.
In actuality the number one strategy to use when purchasing from a new home builder is to consider all the ways to benefit the buyer without involving the lowering of the purchase price.
Builders usually prefer to give incentives that are not reflected in the sales price. Examples of such incentives: Seller to pay all of buyer’s loan related closing costs, provide discounted or free upgrades to the home, give incentive to use in-house financing.
Builders are better at giving up money in these areas than on the sales price because the higher sales price will help them get better prices on the other future sales in the development.
In order to get the builder a high sales price on paper, but still get my client the best possible value I typically shoot to structure an offer something like this:
Full price offer or sometimes even over list price, Seller to Pay 3% towards buyer’s closing costs ($7 to $12k), Seller to include upgraded flooring and upgraded kitchen countertops ($10k to $15k or more), Builders in-house lender to share back end rebate to buy down interest rate for buyer (30 years of savings), Seller to pay 1 year of HOA dues for buyer in advance ($1k to $4k).
The above represents a $30,000 to $50,000 benefit to you the buyer, and builder gets the sale price they want on paper. There are so many creative ways to structure a purchase, this is just one.
The big picture in this scenario, there is value in accepting the offer for the seller, they are able to use the higher sales price to get even more $ for the other units in the development, and value has also been created in the deal for the buyer with a much lower outlay of cash to purchase, and still getting the home you want with the options you desire.
Bottom line! Always remember I live, breathe, and sleep real estate and always will.
Tom Lichtenberg - 916-801-1963 - Keller Williams Realty - TomSells.net
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