How New Home Buyers Walk into Trouble – Part 2

Far too often a purchase is an emotional action; food to shoes to clothes to cars…and even homes. Not being fully informed before any purchase is dumb; with real estate it can be calamitous. But just like a showroom of new cars, a brand new, well appointed home can result in emotion trumping logic…and a “what did I do” reaction a few months later. This is the second part of How New Home Buyers Walk into Trouble, and it touches on additional things to consider before signing on the dotted line.

Do you understand the micro market?

Has there EVER been a time when an agent or the National Association of Realtors said it wasn’t a good time to buy or sell a home? Remember, NAR said “buy!” as the nose dive was underway.  Has there EVER been a time when that new home agent didn’t bubbliciously run to the door and pitch their house and area? Even when it sat next to a main road, high power lines, detention pond or some other external issue? So when this onslaught of love and bliss hits, what to do? Understand the pitch and focus on the data and micro market trends.

Agents talk about good experiences and they SHOUT about bad ones. An experienced buyer’s agent will keep a builder honest because builders do not want bad reputations within the agent community. Who do unrepresented buyers complain to? The builder’s agent? And they will talk to????

New or existing, all real estate is hyper local. That cannot be stressed enough nor can the importance of understanding trends over time, inventory, impact of new homes on the market and he myriad of factors that impact value and appeal. In short, while real estate is hardly splitting atoms, it does require the right assets and the ability to collect and analyze the data. In the broad Atlanta area, schools are critical to how an area is perceived. Traffic can be crippling in certain areas at certain times and issues have been noticed by both residents as well as businesses. None of this is going to be objectively provided by the site agent, she represents only the builder and she is expected to SELL homes to wide eyed buyers. Sites like Zillow are good assets but nothing beats an experienced agent with current market trends and data so that educated and measured decisions can be made.

Don’t fall in love

The heart wants what the heart wants, it’s up to the head to keep it from financial ruin. As mentioned, sales revolves around causing the buyer to act impulsively, buy now and worry later. Would anyone toss 300K into the stock market without careful consideration? Not anyone with common sense. Walking into the model home is an assault on willpower; the home will be tricked out with all the “must haves” and buyers will fall right into the builder’s trap. What starts as a 300K budget slides to 375K and before it’s realized the budget is blown.

As the hook sinks in, leverage is lost. Builders tend to be a somewhat “difficult” group and everything is about money. Every upgrade, every change order, every facet of a build has an associated cost. Despite their assertion to the contrary, the majority of builders are not custom. They make money by building homes in a methodical fashion; subtle “custom changes” but really the bones and the process is the same. Changes disrupt that continuity and buyers will pay. The more the agent sees that unbridled enthusiasm, the more likely the answer to questions will be “no”….if the hook is set then why dicker?

Also present to help buyers purchase this dream home is the “preferred lender”. What makes them preferred varies but the usual answer is that “X Lender has been affiliated with Bob the Builder for 10 years and knows the process”. The pitch continues with “And X is offering a 5K closing cost bonus if you use them”; this is perfect and the 5K is found money. Except that it’s not; it’s added to the cost of the loan because no one is giving away money. Always shop for loans, “preferred” lenders are not always the route to go and despite the love fest, you will likely save money looking elsewhere.

Is the builder reputable?

This might sound like a crazy questions but “Bob the Builder” isn’t really building your home. Modern construction is a process; site, foundation, framing, plumbing, electrical, drywall….and each component has distinct crews. Often these crews build for more than one builder – and work is open for bid so often times the better the price, the more work received. Buyers expecting “custom” craftsmanship may be disappointed, and those expecting the county inspectors to ensure all is code compliant even more so. It’s best to hire private inspectors to back up the county code inspectors.

It’s vital to treat a new home purchase as the major business decision it is. This means understanding the construction process, micromarket trends, mortgage process and remedies should things come up. It also means saying “NO” if the head doesn’t agree with the heart…

Researching the company that is building the home is as critical as researching a buyer’s agent. Things will go wrong – they always do and that’s just how it is. The key is how the builder handles it. One of the main reasons to use a buyer’s agent is to a have a hammer; when something goes wrong they get involved. Builders will respond to buyer agents because outside agents are sources of business and because outside agents talk – a lot. A builder doesn’t want a negative reputation among the agent community, it’s the kiss of death. Unrepresented buyers complain to who? The builder’s agent? How is that going to turn out?

Buyers love new homes, what’s not to love? However, diving into a new home without the proper preparation and research can end very very badly. Critical in the equation is a quality buyer’s agent; always use a buyer’s agent when buying a new home. Nothing is saved by not using one and the idea to use an agent that kicks back money is ill advised. Is that how they get business? And if they kick back mony, how invested in YOUR home will they be? There are an incredible number of moving parts with a new build, don’t let something that can be easily handled end up becoming something that does lasting damage.

The first part of How New Home Buyers Walk into Trouble touches on other things to be aware of. As always, please fee free to EMAIL HMT with any questions or concerns.

Questions? Maybe we should talk.

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