Should I use a buyers agent for new construction and if so will the builder pay the commission?

A similar question was posted on a city data forum a couple of days ago and I thought it was a good question. What you don't know really can hurt you! 

You should use a buyers agent when buying new construction. In the Triangle Area of NC builders welcome agents who bring clients and generally pay a half % less commission than resale homes although in this slower market there are often incentives that help with the difference. It is important to have your buyers agent before visiting the property because the builder is paying for the agent to bring the customer, not because you want representation. Sometimes if you have already been to a site and registered without an agent  the builder will go ahead and pay a commission to your after the fact buyers agent because they value the agents relationship and want future business. I would have your agent ask about this because the builder rep will just tell you no. 

You do need to research your agent. You don't want someone who brings you to the site and then just shows up at closing to pick up a check.

Now for the reasons you really need representation. There are so many I'm not sure where to start. I could write a book about this but here are a few reasons to start.

The lot-

There are several pitfalls here. Usually in a new home development you pick your lot from a pretty site plan. It really doesn't tell you much . An agent who is familiar with new construction will want to see the development construction drawings. These show the areas of cut and fill, location of erosion control basins, drain pipes and stone (these can be ugly and dangerous), location of utilities (do you want a big green box in your front yard?), streetlights and landscaping. There is usually a topo map with the existing grade and the new grade after development. The flood maps have been recently been updated in our area and you need to make sure your new home won't be in a flood plain.

Your agent should be able to look at the lot and see if there are any potential drainage issues. Water problems can be on going and affect the resale potential of the home.

Sure, you can research and find out if busy roads or power lines are planned, both the kiss of death for resale, but you may not be able to find out the inside information about what's going on nearby that isn't public record yet. 

The builder-

Sometimes even a good buyers agent can't protect you from a builder who is having financial problems. Builders are pretty good at hiding this but an agent who has been around will know the signs and may have heard from suppliers who's not paying their bills. Your initial deposit can be huge, sometimes as much as 10% and you need to be sure sure the builder isn't borrowing from Peter to pay Paul.

Get the best deal-

A good agent will know what builders will do with price and incentives. The on site agents job is to get the best deal for the builder but a buyers agent with a good relationship with the on-site agent and other agents who have sold in the neighborhood can usually find out the real story.

Financing-

There can be lots of options here for a pre-sale. Some builders want you to contract to purchase the lot from them then you go get the construction loan. Usually in this case you are responsible for the interest on the loan.

Others will want a large deposit with a contract, then they get the lot released from the bank and get the construction loan.

A production builder usually wants a deposit of 5% or so with a portion of upgrades pre paid and then the remainder at closing.

The plan-

I recently visited a site with a client. The on site agent showed us plans and  pricing for a home that hadn't been started yet. She offered to show us the same plan that was finished but sold. My client loved it. Looking around I noticed that the family room and kitchen looked  larger the floor plan we had seen in the office. The agent insisted that it was exactly the same.  I went back to the office, had her get the construction drawings of both houses and showed her the difference. My clients had not noticed this and if they hadn't had an agent they may have contracted for a different home than they expected. A good new construction buyers agent can read the plan and help you visualize what the final product will be.

  Options-

Your agent will know what options have the most perceived value for resale and will know what you can expect to pay for upgrades based on the builders standards. Your agent should help you with the selections.

 The contract-

 Builders contracts protect the builder not you. In my experience they won't change anything in the contract but you need to know hat you are agreeing to.It's usually a good idea to consult an attorney to go over the contract with you.

Construction-

Your agent should keep a close watch on the house during construction and inform you of anything that doesn't look right. Your agent should be a good sounding board and help you realize what it important and what isn't.

Inspections-

Just because the home is new doesn't mean you shouldn't have a private inspector.Your agent will know who is really good with new construction and should give you several names.

Closing-There are lots of details and your agent should make this worry free.

Then there are the unexpected things that always happen that your agent will know how to handle.