Don't Visit New Construction / Builders Without Representation!
As a consumer - did you know that when you sign into a new construction community by yourself - that you lose your ability to be represented at a later date on that same property (without any cash out of your pocket)? It is a dirty little secret that the builders never tell you about. Of course - they don't. If you sign in on their sign-in sheet without an agent - they get to save 3-4% (what they would have paid out to the agent's brokerage.)
When you sign in to new construction - the builder has you by the yin yang. If you visit again later - with your preferred Real Estate representative - they won't get paid if you purchase in that community. If you have a buyer agency agreement with that rep - you'll have to pay your agent out of pocket - because the builder isn't paying out.
On the other hand - lets say you had a buyer agency agreement for 3% with your agent - and the builder pays out 4%. Guess who gets the extra 1% when you sign in as being represented by that agent? You do - the buyer! That is one great advantage of having a buyer agency agreement. (The other advantage is that it spells out your agent's responsibilities to you in writing. You know if dual agency is possible or not for example.)
Builders LOVE IT when buyers come in unrepresented. That means that they can charge their normal rate for the property - plus save paying out a 3-4% commission for example. They don't discount the property by that - to the unrepresented buyer. So - as a buyer - it is lose/lose proposition.
You also lose out on:
--knowing about extra incentives that you may not have known about - that could have been offered that the agent has seen offered in the past.
-- an agent ensuring that you are getting the best possible price vs. other properties in the community, and analyzing the re-sales there and in nearby areas - to make sure you don't over-pay.
-- an agent helping you through the home inspection phase (there should be at least two inspections for new construction... one before the drywall goes up, and one at the end.)
-- an agent helping you with the many other details that will ensure you get to closing smoothly.
-- If your agent helps you "loan shop" (not many of them do unfortunately) - that is another thing you miss....saving tens of thousands over the life of the loan - and perhaps having lower lender fees.
When you sign in to new construction - the builder has you by the yin yang. If you visit again later - with your preferred Real Estate representative - they won't get paid if you purchase in that community. If you have a buyer agency agreement with that rep - you'll have to pay your agent out of pocket - because the builder isn't paying out.
On the other hand - lets say you had a buyer agency agreement for 3% with your agent - and the builder pays out 4%. Guess who gets the extra 1% when you sign in as being represented by that agent? You do - the buyer! That is one great advantage of having a buyer agency agreement. (The other advantage is that it spells out your agent's responsibilities to you in writing. You know if dual agency is possible or not for example.)
Builders LOVE IT when buyers come in unrepresented. That means that they can charge their normal rate for the property - plus save paying out a 3-4% commission for example. They don't discount the property by that - to the unrepresented buyer. So - as a buyer - it is lose/lose proposition.
You also lose out on:
--knowing about extra incentives that you may not have known about - that could have been offered that the agent has seen offered in the past.
-- an agent ensuring that you are getting the best possible price vs. other properties in the community, and analyzing the re-sales there and in nearby areas - to make sure you don't over-pay.
-- an agent helping you through the home inspection phase (there should be at least two inspections for new construction... one before the drywall goes up, and one at the end.)
-- an agent helping you with the many other details that will ensure you get to closing smoothly.
-- If your agent helps you "loan shop" (not many of them do unfortunately) - that is another thing you miss....saving tens of thousands over the life of the loan - and perhaps having lower lender fees.
Labels: agent, builder, buyer agency, buyer agent, chicago, commission, inventives, new construction, sign-in, unrepresented
posted by Rick Hauser at
11:07 AM
1 Comments:
I always am facinated by otherwise very intelligent people who make this mistake and go directly to the builder. They get about a month into the process with new construction and get frustrated, start researching the topic, and then want to know what services we provide to help them negotiate against their builder.
This is obviously too late!
Now in my homebuying classes I tell people up front to not visit a builder without a good buyer's agent with them.
They end up with a better house and without being the "bad guy" to the builder when there is a problem. The buyer's agent can be the "bad guy".
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