Does this story sound familiar?
You started thinking about buying a home. You didn't think you were serious enough just yet to bother with a real estate agent. You thought that a real estate agent would not work with you since you were only casually interested in buying a new home... maybe next year. So you started looking in the real estate section of the weekend newspaper and you saw all these great new properties with their teaser ads.
"No Money Down!”
“Starting in the low $300,000s”
“$10,000 in Closing Costs”
So you walked into the builder’s model home to take a peek. You were already in the neighborhood so why not? The home is stunning! Everything is new, everything is clean, everything is beautiful - and there is no clutter. There is room for everything, including your special collections! It is just waiting for you. That new home started looking pretty darn good.
The friendly site agent offered you a cup of coffee and volunteered to show you around. Before you knew it you registered with the sales person and gave them your name, phone number, and email.
What just happened?
You have documented for ever and ever that you are unrepresented. You do not have an agent working on your behalf. AND you probably didn't mean to do that! OOPS!
YOU HAVE JUST CROSSED THE THRESHHOLD OF THAT NEW CONSTRUCTION WITHOUT AN AGENT.
You don't realize what that means - so you just kept going. You kept talking. Then, the site agent said, "Of course, there is a property just like what you want - and it is available for you!"
Before you know it, you found yourself believing that you are getting a good deal. You dreamt about it. You talked to the people at work. After all, the people at work always know everything about real estate. You may even have talked to your family.
Next weekend rolls around, and you revisited that friendly agent in the shiny sales office with the other bright and shiny sales people - just to see if that new construction really was a wonderful as you thought. Suddenly you started talking price and terms and upgrades and dates.
What exactly was included in the base price? How much would it be to add in this or that? Are those chocolate chip cookies she’s taking out of my new oven?
Before you knew it, you were signing papers to put your dream property on hold. Papers you didn’t read, and if you did, you probably couldn't make heads or tales of. The sales person tolds you everything would be fine, you could cancel if you want. You wrote a check and met with their loan officer. What just happened here?
You just bought your new home and possibly a host of headaches.
WHO IS REPRESENTING YOU? NO ONE!
Okay - so you know wasn't your intent, but you still think that’s not a big deal…it’s a new property so what can go wrong?
" That agent was pleasant and so helpful.” you say.
Of course they are, they are paid to be helpful - to help you write that new home contract.
Don't forget that the site agent works for the builder. Their job is to sell the builder's product - with all the add ons.
Well let’s see what could go wrong:
What happens when the builder is more than a year late in delivery, interest rates have risen and you can’t buy this place anymore. You never checked to find out that that particular builder is ALWAYS late on delivery. The contract has penalties if you don't settle on time but no consequences for the builder's delay in performing.
Are you going to lose your deposit? More importantly- where are you going to live?
The unit you thought you bought is no longer available, and the builder tells you there was a mix up. That unit was already sold before you signed the papers, but there is another one just like it. Now you don’t have the unit with the great view- but something else. What are your options?
You didn’t get that nice fancy granite you wanted, but something else. The builder tells you its too late to change. What do you do?
The builder hands you a 500 page document that are the Condo documents or Home Owners Association Documents. You have 5 days to look them over. Where do you begin?
These are just some of the things that can happen and have happened to people buying new property.
Buying a new home can be complicated
New construction can be wonderful too, but you need to go into the contract with your eyes wide open and with someone on your side. The new home contract is different from the standard resale contract that most realtors use. It is written to protect the builder - not the buyer.
Make sure you bring along a buyer’s real estate agent – someone who works for you and is looking out for your best interest. It doesn’t matter if it is a first time homebuyer studio condo or an estate in Potomac – you still need a buyer agent to protect and represent you!
FIVE VERY IMPORTANT REASONS TO USE A BUYER AGENT
1. The Sales Person Works for the Builder
The moment you walk into the sales office for that new construction project, the sales person (who may or may not be a REALTOR) will attempt to have you “sign-in.” Once you do that, you are giving up your right to having a REALTOR represent you as part of your sales price. (See #5 below) Even if you say you have an agent - but that agent was not there to register with you - you have become an unrepresented buyer.
As that sales agent is pointing out optional upgrades and amenities, that sales person is working very hard on behalf of the builder. They are specifically trained to make the process smooth. Their goal is to sell you on the unit or lot you are interested in. They will introduce you to their loan officer and their title company.
2. You Want to Have Someone Working for You
Having someone working for you will make all the difference in the world.
You have a full-time job, how else could you afford this property? Your agent will be there for you, when you can’t. She or he will explain the contract to you. She will point out where you are exposed and when you can lose your deposit. Your realtor will be there throughout the process. Your realtor may find another new construction project that you just may like even more.
3. Your Buyer Agent Can Give You Expert Advice As You Go Along
You will have many decisions to make during the process such as the grade and quality of your kitchen cabinets, bathroom tiles, flooring. Your agent will point out upgrades that will retain their resale value and not just the most expensive material. Your agent can give you advice on things that you should have and things that are not important. And most importantly, your buyer agent will focus on things that you can afford.
4. A Good Buyer Agent Knows the Local Market
Your agent has worked with builders before. They know which ones are dependable and which projects are a good value. They can tell if that $5,000 credit the builder is giving you for closing or “free” upgrades is really the best deal for you. In most cases, that $5,000 is tacked on somewhere else along the way without you realizing it- either with higher lender fees or title insurance costs.
You want to check out the prevailing local market interest rates and fees, compare them to the builder controlled lender's offer and then analyze the true costs. Study comparable new homes in the market so you can identify fake "discounts" - the ones that just add the costs of incentive packages on to the sale price of the house. Either you have to do your homework or have a buyer agent who can do it for you.
5. You are Already Paying for the Buyer Agent Commission
The builder has already budgeted into the sales price the cost of paying a buyer’s agent. So what happens when the buyer does not have a buyer’s agent when buying the property? That builder has just made more money in the sale of your home. The builder is reluctant to discount the price of the property just because you are unrepresented because that harms his lasting relationship with local realtors - who are his bread and butter.
So, if you are already paying for it, why wouldn’t you want to hire a real estate agent to represent you? Most importantly, you need to have your agent with you BEFORE you make that first visit to a sales office. If you decide you need a buyer’s agent after you have “registered” with the builder, any buyer’s agents fees will come out of your pocket.
We at the Lise Howe Group are here to represent you and protect your interests. If you are thinking of new construction anywhere in the DC Metro Region, then you should definitely give us a call at 240-401-5577. We are licensed in DC, Maryland and Virginia and we are here to help you!