Many homebuyers are open to buying a new home. If new homes are part of your marketplace, educate your buyers about why they need a savvy real estate agent representing them a dual agency relationship with the builder’s in-house sales staff.
As cordial as new-home sales staff might be, they have a fiduciary duty to the builder client.
To make sure that your clients are aware of the pitfalls in purchasing a new home, walk them through the benefits and risks during your initial buyer interview.
It’s an excellent way to illustrate your value while also helping you earn a commission if your clients elect to build.
10 ways agents can help their new-home buyer clients
In case you haven’t worked with a builder sale before, here are 10 facts of life about new construction that you and your clients need to know:
1. Have buyers immediately identify you as their agent
When you conduct your buyer interview, give your buyers several of your business cards. Explain that when they attend an open house, especially on a new-home site, they must advise the salesperson that you are their agent.
Otherwise, they will be stuck in a dual agency situation with the builder’s on-site salesperson.
2. Do the research and compare builders
Advise your buyers to do their homework before deciding on a specific builder. Take them to see older subdivisions, and show them which builders’ homes are wearing well versus those that are not.
For example, the stucco and paint on our last house still looked great after eight years. In contrast, our neighbors who used the cheaper builder had a history of roof leaks, splotchy-looking exterior paint and stucco cracks that could lead to water penetration and mold.
3. Beware of big, non-refundable deposits
Virtually all builders require a 10 percent deposit. If the buyers cancel, there is a high probability that they could lose their entire deposit.
4. Brace buyers for major sticker shock
Buyers often walk into the builder’s model and fall in love with it. Few realize that the model might have $50,000 or more in upgrades. When the buyers go to the design center, they select what they like. They spend the next two weeks picturing how beautiful their new home will be.
Then the bids come in from the builder. All those selections have added thousands of dollars to the purchase price. The buyers then have to decide whether to scale back their choice or to dig deeper into their pocketbook.
Furthermore, the buyers must pay for 50 percent of the upgrades upfront. In our case, our semi-custom build upgrades were about 15 percent of the purchase price.
This means we currently have 17.5 percent of our purchase price on deposit. Custom-home buyers typically run 30 percent to 40 percent over budget due to upgrades and changed orders.
5. Investigate what you want ahead of time
Warn your semi-custom build buyers that they might have a very limited amount of time at the design center. If at all possible, have them visit the center prior to their selection appointment.
They should also talk to anyone who has recently completed a house about what they ordered, including what worked and what didn’t work.
In our case, we only had three hours to pick out flooring, carpets, all the hardware, exterior and interior trim colors, locks, bathroom and kitchen fixtures, appliances, etc.
6. Know there’s no credit toward upgrades
If the buyers don’t like the options a semi-custom builder offers, many builders will allow the buyers to bring in an item they normally don’t install.
The cost, however, is the full retail cost of the item — and the buyer gets zero credit for what the builder would have included.
7. Inspect what you expect
I’m currently on new-home build number three. Even though our three builders have been excellent, keeping track of subcontractors and the hundreds of elements that go into new construction is demanding.
Our builders have caught most mistakes, but here are just three examples of what they missed:
- Guest bath toilet was plumbed with hot rather than cold water — ouch!
- When the electricians were installing the overhead lights, they bent the air-conditioning duct resulting in a 50 percent reduction in output in half the house. It took five years and four different HVAC contractors to correct that issue. (The same thing happened in our new house, but we caught it this time.)
- The landscapers installed the sprinkler lines before the patio extension was completed. Fortunately, we caught the mistake. Had we not, 50 percent of the sprinkler lines would have been buried beneath the concrete slab.
The challenge is that when there are mistakes in the framing, wiring or the installation of the other systems, there’s no way to see them once the dry wall goes up.
Worse yet, they can be troublesome to locate and costly to repair. Consequently, it’s imperative that your buyers either hire someone to monitor what the builder is doing or track it themselves.
It’s also smart to hire an inspection service to check the property pre-dry wall and again before the property closes.
Because most builders provide a one-year builder warranty, ordering an additional inspection 11 months after closing is money well spent.
8. Circumvent costly change orders
This is where buyers get hit hard. If they decide to add or change a feature of their home, they will pay the retail cost of the item plus the change fee (usually at least $250).
9. Avoid costly maintenance headaches
Remind buyers to consider how livable the property will be. Stainless steel sinks and appliances are fingerprint collectors.
By the way, that trendy German stove takes six to eight weeks to get replacement parts from Germany. Also, the beautiful wood deck must be re-stained every one to two years.
10. Look for impractical design features
Be sure to check where smoke detectors are located, especially if the home has high ceilings.
One builder in our subdivision stuck their smoke detectors 30 feet above the living room floor. Can you imagine how annoying it would be to have to climb a 30-foot ladder at 2 a.m. to change the battery in a chirping smoke detector?
Ultimately, it benefits both you and your clients to take a hard look at new construction. Understand the pitfalls as well as how great it feels for buyers to have a home that is designed to their specifications and for their personal lifestyle.
Also keep in mind that a one- or two-year-old resale that already has upgrades, window treatments and landscaping might be a much better deal.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles and two best-selling real estate books. Learn about her training programs at www.RealEstateCoach.com/
