New Home Buyers: What You Don’t Know Can Cost You

So you're thinking about moving and you're considering buying a brand new home directly from the builder. You go out one weekend and visit a few builder's sales offices and tour their model homes. 

While at the model home, the salesperson asks you to register. They may say something like "fill out this card for a chance to win _____" or, "Fill out this card in order to get information about future sales specials and promotions" or they may ask you a few questions about your situation and for your contact information. 

Seems harmless enough, right?

Wrong.

On the registration card is a spot where you put in your agent's contact information (name, brokerage, phone number). You should be filling out that spot on the registration card or if, the salesperson is filling out a card for you based on your answers to their questions, they should ask you if you're using an agent and fill out that part of the card as well. Funny thing is that they hardly ever ask, "Are you working with an agent?"…

Why is this point/question so important? 

If you don't register your agent and/or they're not with you on your first visit to the builder's sales office/community, the builder will not honor your agent, nor any agent you try to bring into the mix at any point in the future. That means that you are on your own with no one to look out for your interests.

In addition, the builder has already priced in up to 3 percent in commission to pay for the buyer's agent/broker. If you have an agent representing you, the builder doesn't lose any money. But if you don't have an agent, the builder actually makes money because they take that commission amount and just put it back into their profit margin.

And in case you're wondering…

• No, they won't refund you the commission amount if you don't have an agent
• No, they won't lower the price more or give you more options for free if you don't have an agent

Here are some more reasons why builders love it when you don't have an agent…

1. The builder's sales rep doesn't have to worry about someone who knows what they're doing looking out for the buyer and getting in their way
2. Many builders give their salespeople bonuses if there's no agent involved so the salesperson is making more money
3. The builder makes more money because they don't have to pay commission to an agent/broker

Why do you need an agent anyway?

Perhaps you've bought a new construction home in the past or do contracts for a living. But, no offense, you've got nothing on a builder's sales rep/manager who's been doing this full time for years and knows the ins and outs of their contract and how to get the most out of a new home buyer while putting the most into their own pockets. They use their experience against your inexperience to increase the profits of the builder and their own paychecks – just check out what happened to this new home buyer who went at it alone.

Perhaps the salesperson tells you that they'll get you a better price if you don't have an agent  in an effort to cut out your agent… (this is where you go back up a few paragraphs and re-read numbers 1 thru 3). If you still think it's worth not having your own agent, negotiate the price down as far as you can and then ask them to slash an additional 3 percent off of that price – see what happens.

In reality, you may not know that you could get a better price and the builders know that. But a good and experienced Buyer's Agent knows what others have recently paid and what added incentives are available that may not have been available to the general public (builders have "insider mailing lists" plus knowing the sale staff well helps).

In addition, agents often talk amongst themselves about what deals they've been able to recently negotiate even though the settlement date and the "sold" information won't be made public until the home is delivered 3, 6, sometimes 9 months from now (if at all).

Remember, builders are in business to make money. Since the salesperson typically receives a bonus for writing a Purchase Agreement that doesn't include an agent, they are inherently trying to find ways to cut them out. And the builder loves adding 2 to 3 percent to their bottom line. Who wouldn't?

So be careful and hire an experienced Buyer's Agent to guide you and represent you throughout the entire new home search and buying process. If you'd like to chat with me about my new home purchase and negotiation experience as a Realtor here in the area, feel free to email or call me any time.

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