New home buyers will make mistakes this spring unless they educate themselves on how the new construction process works. Buying a new home is completely different than buying an existing home in several major ways. Every one of the differences tips the scales to the builder and away from the buyer. It is critical for any new home buyer to ensure that they work with an agent experienced in working with new construction; failure to do so will result in headaches.
The majority of home buyers don’t understand that the site agent represents ONLY the builder. Walking into that model home, discussing options and deciding to move ahead without a buyer’s agent immediately compromises the buyer. It’s very difficult and highly unlikely that after initial contact that a buyer’s agent will be welcomed into the mix; certainly not after signing a contract.
The model home agent represents ONLY the builder. Buyers that don’t use an experienced agent to represent them are putting themselves at an additional disadvantage right out of the gate.
Failure to use an experienced buyer’s agent limits the ability of the buyer to complete thorough research. From home prices to area trends to new home sales activity in the area to new home sales activity within the selected community…no agent or an ineffective agent leaves the buyer flying blind.
New construction contracts are ridiculously skewed in favor of the builder. These are written to protect them at every level; to ensure that once that contract is signed that the builder controls the process and the funds. The site agent is responsible for getting contracts signed; once that is completed they are nothing beyond a representative for the builder. While they appear and might try to be cooperative, in the end the builder makes all decisions.
Key aspects that must be understood when it comes to new construction contracts include:
- How earnest money is considered and maintained
- The lack of a due diligence period
- Significantly shortened finance contingency period
- Lack of appraisal contingency
- Designated closing and title companies
- Rigid time lines for buyers to make selections
- Builder option to change the buyer’s selection without notice
- Very specific times lines for additional deposits
- Possible limitations regarding inspections, radon and environmental issues
Buyers wrapped up in the excitement of buying a new home will likely miss the potential impact of these things as will inexperienced agents. Unlike existing homes (which have their own potential hot spots), builders want things wrapped up tight very quickly. Time is money for builders and almost every one of them wants homes built and closed as quickly as possible.
There are ways to level the playing field just a bit. The most obvious being the first step; scrub the data, the community and the market to ensure that purchasing the new home is wise. Many builders don’t put sales into the MLS; data might not be obvious and sites like Zillow won’t have it. Stipulations can be added to the contract to address the financing period and even the appraisal. In GA, buyers have the right to select a closing and title firm, this can be stipulated. Don’t expect suggestions from the site agent; remember, they represent the builder.
The last “most important thing” right behind using an experienced buyer’s agent – get everything in writing. EVERYTHING in writing. New construction contracts grow like fungus; add design center meetings, electrical and plumbing, pre drywall walk notes…and it’s easy to see how “I thought that…” can happen. When that does happen – and it will – the builder wins. Unless EVERYTHING is in writing, buyers will lose the discussion. Email trails are the best way as are marking up contracts, designs, spec sheets…and having every party initial them. Builders use design centers that coordinate with agents that pass specs to supervisors that forward that to the site rep who hands it to Eddie the electrician who puts the switch on the wrong wall. Eddie likely didn’t realize it because he has 5 builds going on, the site rep has 10 – and you have ONE. Unless it’s clear where that switch goes, expect to pay a charge to have it moved…unless it’s in writing.
Never forget that buying a home is a business transaction. While the internet has transformed real estate, all the data in world is useless without an experienced agent to interpret, explain and apply it. Home buyers don’t pay for representation; there is no reason not to have expert guidance dedicated to your success when building a home. Since 1989 and over the year, the Hank Miller Team has worked with new home buyers to ensure a smooth build and closing process.