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Residential Real Estate

Buying a Home From Builder – Part 1

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Home Buyers usually ask 2 general questions when it comes to buying a new home:

1) Why do I need a Real Estate Agent if I am buying from a new home builder?
2) One builder offers more incentives to buy their house versus another builder, but the second builder has nicer homes with no incentives. Which builder should I choose?

We will discuss both of these topics in a 2 part series.

New Home Construction 2

1) Why do I need a Real Estate Agent if I am Buying from a new home builder?

A) In Colorado the Buyer Agent fees are paid by the Seller (i.e., the builder in this case). Thus it will cost you nothing to be represented by a real estate professional who is negotiating and advising you in your best interests with your transaction. A Buyer should want a Realtor helping them with a major transaction especially since their services are at no cost to the Buyer.

Builders factor in a Buyer Agent fee into the home price. You will not be able to negotiate a better price with the builder because you don’t have an Agent with you on the contract. The builder will not tell you this fact. Quite the opposite. If you have an Agent with you, the Agent will more than likely be able to negotiate a better deal for you because you are being represented by a professional who knows the true value of everything that you are buying.

For example, let’s look at upgrade options between 2 builders. I had a situation where one builder was charging $30k for a walkout basement option.  Another builder was charging $15k for the same walkout basement option. Since I was familiar with the local market and the builder charges, it was easy to negotiate a $15k discount for my client. A Buyer not represented by an Agent, more than likely, would not have known this information and would have paid the $30k charge with their purchase.

Buyer’s should consider having an adviser prior to signing a document with any major life changing event especially when purchasing something that does not exist yet.  Many times everything will be okay and many builders do a very good job of making a Buyer happy. But what if not everything goes as planned and issues arise? Who do you call or rely upon when you are alone and trying to figure it out? Another way to state this is: The builder is a professional at what they do. They build houses from dirt up, write their own contracts, state the price, terms and conditions to the Buyer, ensure your earnest money non-refundable and try to maximize their total net profits on each deal. The builder represents the builder, not the Buyer.

B) The professional Real Estate Agent visits houses on a regular basis. You do not. Your Agent should be able to point out not so obvious things that you might miss. Like, which house has the better floor plan for living. For example, is the model home absolutely gorgeous, well staged, 5 bedrooms, 4 bathrooms and you have to have it?  Perhaps you missed that it only has 2 full bathrooms and 2 half bathrooms. That might be an issue with your 4 kids, all getting ready to go to school at the same time each morning with only 1 bathroom for them to use on the upper level. Try to sell that house in 5 years.

Which is the best lot location and what is a fair price for the lot premium? Typically builders will increase lot premiums for the better lots because they have a limited supply of highly sought after lots.  If you think you are getting a good deal on the lot because there is no premium and you are the first one to “jump” on that deal, think again! You may be getting a bad lot that no one wants, especially when you are looking at a map and no actual roads have been paved. Even worse, you may be buying a lot the builder knows he won’t sell for a long time (So they throw in a free washer dryer for you).  After the house is built and when you go to sell your house in 5 years, that lot you purchased with no premium could be a major issue.

C) Your Agent can help you with the pre-closing process such as inspections. I always suggest to my clients that they have a full set of inspections done prior to the final walk through on a new build.  Does that sound strange? Think of it this way. No one has ever lived in the home. So no one knows what works or doesn’t work. If you buy from a reputable builder, they will honor their warranty. But what if they are too busy building the house next door?

Here are a few examples of inspections and issues that might arise.

Get a sewer line scope inspection – Just in case a tractor or truck drove over the front yard and crushed the line after it was installed.  
Get a complete home inspection – It might reveal code violations like electrical wiring not set properly, or roof tresses not properly braced, or second floor deck railings not properly secured, or an undersized furnace for the total square feet of the house.
Get radon test results – Some new home builders will pay for a radon mitigation unit if you show them the test results, many do not. But you should still know if your house has a radon gas issue. The house may look fantastic from the street and you will be excited, but the list of issues can be extensive with a newly built home.

You have more bargaining power with the builder to resolve issues before they receive their money.

Buying a home, whether it is new or existing inventory, can be a wonderful and exciting experience. Protect yourself so it really is a “wonderful and exciting experience” –  not a painful and disruptive event – by finding a good local Realtor who knows the area, the builders, is someone you can trust, and has your best interests at heart.

Buying a Home From a New Home Builder – Part 2

If you are looking for a local Realtor in Douglas County or want to buy a new home from a builder and would like more information, here is my contact information.

Thank you,

Jim Garcia

+1 (720) 385-4497

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About The Author
Jim Garcia

Jim Garcia is a RE/MAX Professionals Colorado Realtor® in Douglas County Colorado. When he's not involved with real estate transactions, he spends time with his family, hones his cooking skills and enjoys the unique adventures only Colorado can offer.

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