Should I use an agent to buy a new home? 8 advantages over going direct to the builder

As the housing market continues it’s upswing, you’re probably like most people who stumbled upon a few of the increasing homebuilder signs in your area. If you decided to follow them into the model homes, it might have hit you all of a sudden:

You decide you want to purchase a brand new home..… and decorate it like the models you saw.

You start by just casually looking at the prices and later figure out that if you sold your existing home, your payment will be manageable. You end up taking 3-4 more visits to the models and with every visit, you become more convinced that you’re going to live in a model-like home in the near future.

However, somewhere among the thick folder of builder brochures and price sheets, there’s a copy of the “priority list” instructions and you become overwhelmed looking at the countless items to submit. At first, you’re a bit arrogant and think that your downpayment from the sale of your home and impeccable credit score will set you apart from the other buyers. The arrogance turns into disbelief when it seems the builder’s lender doesn’t seem interested in returning a simple phone call. The dream suddenly starts to feel even more out of reach when you discover that there are over 20 buyers ahead of you. Several of them will be paying cash.

After glancing at the price list and available lots again, the logical side of your brain wakes up. You wonder, “Are there other options to buying in this development? Should I hire a local agent? Should I just put this dream on hold?”

The experience described above represents what the majority of buyers encounter when seeking a new home. While hiring an agent will not help your chances after that experience, the better route would’ve been to consult with a knowledgable agent after your first visit to the models and review your options. (Ideally, it would’ve been best to speak to the agent before even your first visit to the models, but most don’t decide they want to buy until after their first visit. )

Why seek the help of an agent for a new home?

1. A good agent will set the correct expectations. Contrary to your first visit to the model homes where your impulsive side is tempted, the agent will let you know what price you can expect to pay and what your chances are of getting the plan/lot you desire. Don’t be fooled with “base prices” which don’t include more than 80% of the “options” you saw in the models, required landscaping, additional melo roos or tax bonds, and lot premiums.
2. The agent will know how that community stacks up against other homes for sale.  For example, if you were reviewing the prices for Standard Pacific’s Montserrat community, how do you know if the prices are better at Shea’s Coral Ridge in Blackstone? Or Shapell’s new community in Amalfi Hills 5 miles away in Yorba Linda? Additionally, when prices are appreciating, the builders can occasionally underprice their homes. For example, if you’re purchasing a home that will be completed 6 months from now, the builder can possibly underestimate the market price at the time of completion. You probably have heard stories from friends or family where their home was worth over $50,000 more before they even moved in.
3. If selling your existing home, an agent will provide an estimate of how much cash you’ll be able to apply to the new home. They’ll also be able to provide “what if” scenarios: What if you sold 3 months from now? What if you kept the home as a rental?
4. An agent will help you choose and manage your transition options are for moving from your old home into your new one. There are terms that can be included in the sale of your home to reduce your risk. You’ll be surprised how much stress can come from uncertainty when moving.
5. The builder pays the agent — not you. Since most of the prices are already determined and a priority list has been established, the builder doesn’t pass this cost on to you. Only in rare situations (i.e. – buyer’s market) do the builders occasionally factor the broker referral into their costs on “freestanding inventory”, or a home that has been completed and yet to sell. Freestanding inventory is a thing of the past in today’s market, unless the home is overpriced. Even in those rare situations, the agent’s negotiating skill will often offset this cost.
6. The agent becomes your “one stop shop” – instead of learning the market on your own by spending hours on websites, calling numerous agents a day along with builder offices, why not just ask a person who’s already familiar with everything for sale? They do this for a living. Why not take advantage of it?
7. An unbiased opinion on financing options. The builder will push hard for their lender because they’re affiliated with them. How do you know if their costs and interest rate are competitive? I’ve encountered many situations where the builder was offering $10,000 in closing costs or “design center credit” and still ended up being more expensive than an outside lender. Real Estate agents don’t make a penny from your financing, so it will be in their best interests to ensure you’re in good hands.
8. The agent will keep you informed of resale homes. While most buyers would love to purchase a brand new home, most end up purchasing a resale home when they realize the cost of landscaping, upgrades, and the “new home premium”, which is usually about 10% more than resale homes. Many buyers end up buying a home “like new”: less than 10 years old and upgraded.

I can go on and on, but you get the point. Keep in mind that while most builders will work with your agent on a “referral basis”, your benefit is often received on the front end of your purchase process.