Why Buyer's Need a Realtor When Shopping for a New Construction Home

By
Real Estate Agent with The Jones Team

We've all heard it before.  " Why do I need a Realtor to help me buy a home from a builder?"  The common misconception is that the salesperson in the builder's office is going to treat you right, and in some cases this is right on the money.  All to often however we see consumers being sucked in by a trick that is becoming common in our industry.

When shopping for a new construction home the buyer must keep in mind that the salesperson works for, and in the interest of, the builder.  Many times a buyer will go in with a pretty good idea of what they can afford only to be up-sold by a savvy salesperson.  Here's the scenario:

A buyer comes in looking for a home on a budget of $1200 per month.  The buyer has a general idea of what size home they can get, say a 3 bedroom house with 1800 square feet, but the salesperson shows them how they can get them a 4 bedroom home with 2400 square feet with that budget.  The buyer is assured that this includes the escrow of taxes and insurance.  Sounds great!

Unfortunately the builder's salesperson did not explain that the current taxes are assessed on unimproved property!  At the end of the year the buyer's mortgage company will pay the taxes on improvements.  Here in Katy Texas that can mean an extra $300 - $400 per month on a mortgage payment.  The buyer is contacted after the taxes are payed and is asked to make up the difference.  For example, if taxes were $4200 ( not uncommon here )  then the buyer must add an additional $350 to their mortgage payment to make up the difference.  AND since taxes are assessed at the end of the year the mortgage company will require an additional amount of $350 - $400 per month to pay next years taxes.  In all the house payment goes up from $1200 to almost $2000 per month.  Foreclosure here we come!

This is just one example of why a buyer needs a Realtor when shopping for a new construction home.  Having a qualified Realtor watching out for you is the way to go!

 

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Rainmaker
224,127
Laurie Mindnich
Centennial, CO
Stacy- with all due respect, you present an inaccurate generalization.  Most sites now have computers that calculate all payments, eliminating the kind of "misinformation" that you suggest.  If you have run into this scenario, I can't imagine that it was intentional- if it was, inform the builder, and the salesperson will likely be invited to discuss the situation.  Also keep in mind that the salesperson for a builder is no different than a listing agent to whom you bring your buyer.  While there is certainly an allegiance to the builder, there is also the desire to see people get a good deal, and to see the buyer satisfied.  Going in with the knowledge that you might be dealing with an onsite person that has ethics and knowledge will make the experience better for everyone!  Thanks for the post-
Jun 26, 2007 09:43 AM #1
Rainer
10,571
Stacy and Jackie Jones
The Jones Team - Katy, TX
Houston/Katy Realtors
Thanks for the comment Laurie.  Unfortunately we see this happen all the time here.  At one point I was receiving 4-5 calls per week from folks who needed to get out of this very situation.  Check out the foreclosue rates in this area ( zip 77449 ).  It really is a sad situation.  Of course, there are lots of salespeople in builder offices that would not want to lead someone into this situation.  The builders here see plenty of turnover, and to my knowledge, there is no formal training on this issue for their salespeople.
Jun 26, 2007 09:54 AM #2
Rainmaker
224,127
Laurie Mindnich
Centennial, CO

Stacy- I feel for you, and I mean it.  Builders are responsible for deflating values only to the extent that their inventory impacts the area.  If you're in an area with newer homes, you have a problem right now- no doubt about it.  Just be aware that the clients that you are referring to may NOT have been coerced or fooled- sometimes people are just dense.  They don't mention a Realtor until after the contract is signed;  they are on their own agenda, and become enamoured of a home- the excitement dulls the hearing, etc.  With respect to the taxes, didn't the buyer get financing?  Surely the lender didn't estimate by calling the onsite salesperson.  I'll guess that they signed an addendum somewhere along the line, accepting the rate,terms, etc.  A client's feeling that taxes weren't disclosed may not be the answer to the current woes- inventory, and the ability to reduce it beyond what the resale the consumer can reduce to, is a big problem, I think.  Once the inventory is sold, it will rebalance.    

Jun 26, 2007 01:29 PM #3
Rainer
10,571
Stacy and Jackie Jones
The Jones Team - Katy, TX
Houston/Katy Realtors

Thank you again for your comment and your kind words.  It's great to hear from someone with a different perspective.  We are in an area that has experienced remarkable growth over the past 5 years.  The problems we have seen seem to come from the buyers that don't have representation at all.  I'm sure you are correct that quite often the excitement of the purchase can dull the senses.  We'll just keep on working to educate the public so they can realize their dreams. 

Jun 26, 2007 03:27 PM #4
Rainmaker
224,127
Laurie Mindnich
Centennial, CO
That's it, I think, Stacy- having a real estate agent present with a new home purchase IS very important- and remember, a REPUTABLE builder doesn't pay the onsite person more if the customer comes in without an agent.  It doesn't matter to the onsite person (financially).  So, why would people come in without one?  By mistake, most times, because they were just "driving by"...very frustrating, to have it brought up after the fact, knowing that an agent has invested the time and effort, only to have the customer forget, for a week, to mention it.  Hopefully, your area is making every effort to establish, up front, if the customer is represented by an agent!  Both sides need to educate, don't you think?
Jun 26, 2007 09:10 PM #5
Rainer
10,571
Stacy and Jackie Jones
The Jones Team - Katy, TX
Houston/Katy Realtors
Absolutely!  That is really the only way we'll be able to turn this situation around.
Jun 27, 2007 04:41 AM #6
Rainer
65,972
Evan Little
Surterre Properties - Santa Ana, CA
Eco, Live/Work, Sales and Management

Excellent point.  Helping your buyer select a track which boarders more expensive homes opposed to a track that sits across the street from apartments.  Selecting upgrades and styles that will improve their value and appeal to the masses.  Not putting too much into the home and avoiding regression from their neighbors.

Important fundamentals that most home buyers are unaware of or may loss sight of in all the excitement of purchasing a new home.

Jun 27, 2007 06:27 AM #7
Rainer
10,571
Stacy and Jackie Jones
The Jones Team - Katy, TX
Houston/Katy Realtors
Evan - Great points.  There are so many aspects of the purchase that can cloud their judgement.
Jun 28, 2007 08:31 AM #8
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Rainer
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Stacy and Jackie Jones

Houston/Katy Realtors
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