Buyer Beware When Working Directly With a Builder, Part 1



The following information is based on an interview with Garrett Kenny, CEO of Century 21 Feltrim Real Estate in Central Florida. More information can be found on their website at http://c21feltrim.com/

You walk in to a gorgeously staged model home presented by a builder and you are immediately overcome with the feeling of “Wow- I could live here”. Not only does it have the newness going for it but the furniture and décor items are all staged to perfection.

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There are many reasons to choose to utilize a realtor’s (aka buyers agent) services when purchasing a new construction home, although the list is endless here are just some of the highlights:
-You get an unbiased view and approach to better help you make an informed decision.
-A realtor knows the market, he or she can provide you with market comparables.
-A realtor can help you negotiate the contract to potentially get a better deal.
-When a buyer deals directly with the builder they are more afraid to negotiate 1) price and 2) upgrades.
-A buyer’s agent can potentially inform you about issues in construction, they know what questions to ask and realize that you don’t always get what you see.
-A builder won’t discount just because a buyer doesn’t have an agent representing them, the builder is in it to make every buck the he can.
-An agent is with you every step of the way from contract, construction, walkthrough and closing.
-A buyer may not understand all of the ins and outs of real estate contracts and real estate law as well as inspections and other related items.
-Builders have contracts so it is important be as knowledgeable as possible and also get a different viewpoint that is backed by experience in dealing with builders.

If you are dealing directly with a ‘site agent’, a person that sits at a model home on behalf of the builder/developer, then you must stop and think about whom this person is really working for. They are working for the builder/developer and they receive a commission based on the sale so it is important for them to sell you on the home each and every way they can. They might not be forthcoming and say that there is a re-sale home in the same general neighborhood and right down the street for less money that may fit better with your budget and what you are looking for in terms of features.

“Let us use the analogy of the new car dealerships. You go to one dealership to test drive a Mercedes, but you never look down the street for comparable (or lesser priced) vehicles made by other manufacturers” states Kenny. A seller’s agent works for the seller (not the buyer), this is the same in a builder and real estate agent relationship. The sellers agent is their to make a sale, not direct you to a comparable home down the street that they may not receive commission on.

Sure everything is new and with ‘new’ comes all of the warranties to make you feel secure over the next few years of living in the home. But just remember you can get a home warranty on an existing resale home as well. Granted a resale home may be a few years older and has been lived in by someone else before you.

The common misconception that most buyers of new construction have is that by using a realtor it is more expensive. When in fact the seller pays the commission (both sides in fact), so the buyer is able to get fair and unbiased representation when using their own realtor without having any money out of pocket.

Real estate is a large investment, and perhaps the biggest one that you will make in your lifetime. If you are in the market to purchase a new home, consider contacting a realtor to represent you as a buyer’s representation is free and a realtor can provide you with fair and equal representation rather than dealing directly with the builder. Sure the builder would like to cut out the middle-man and save the commission, but without the middle-man there might not be a sale. When dealing with new construction a buyers agent is utilized 80 percent of the time. Your dream home, new or resale, can be realized and potentially at a better price when you have a licensed real estate agent to represent and protect your interests on the purchase. Don’t fall into the trap of a builder getting you to pay top dollar!

Megan Rutherford is a Realty Biz News Contributing Writer