Southeast Valley Real Estate

Buying a New Home from the Builder - Using a Buyer's Agent "the best deal in real estate."

Don't miss out on what I feel is one of "the best deals in real estate." There are three parts to the best deal in real estate.

1. Using a Realtor® buyer's agent to assist you in the search for a newly constructed home.
2. Having the buyer's agent present during home and feature selection, lot selection, negotiations and other related aspects of the transaction.
3. Having the builder pay your buyer's agent commission.

I will discuss in detail each of these parts of "the best deal in real estate". But first, let me explain why the very friendly people in the model homes are not representing you.

The very friendly people in the model homes are agents of the builder. And as such, they owe their loyalty to the builder and not you. To them you are not a client - you are just a customer. The difference between being a client and customer is significant under Arizona real estate law. The agents of the builder must do what is in the best interest of their client or employer regardless of whether it is in your best interest - that is the law of agency. Regardless the agents of the builder are still held to a standard requiring honesty and full disclosure to you the customer. But remember that they do not have an agency relationship with you - you are a customer. To paraphrase - Customer Beware!

It is hard for me to understand why many people do not see that the builder's sales people are like car salesmen. They may be friendly but they are working for their boss not you. Forgive me car salesmen but the car salesmen are trying to sell what their employer has to sell. The salesman will sell you any car on the lot that you are willing to buy even though they know it is over priced, an ugly color or worn out - that is their job. Similarly, the builder's agent will not be advising you that a particular spec home's floor plan is unpopular or that a lot close to a busy street or highway may be hard to sell in the future, should you want to later sell the home. He needs to sell all the lots (not just the good ones) and all the spec homes. He certainly will not tell you that another builder down the road has a more attractive floor plan and a better price - a buyer's agent would.

Recently, when I was assisting one of my clients, the builder's representative had suggested that there was a lot with a small lot credit (as opposed to a lot premium). I believe the credit was $1000. This lot backed to commercial property and was close to the highway. Not only did this lot have a negative impact significantly larger than the small credit being offered but would probably be one that would be hard to resell in the future. I personally would not have taken the "credit" lot even if I had been offered at a $10,000 credit. My client didn't either.

Another point to remember is that most builders' real estate agents are not Realtor® members of the National Association of Realtors®. As Realtors® we are held by our association to an even higher standard than real estate agents are by the state of Arizona - see Code of Ethics. The National Association of Realtors has additional training requirements above and beyond what is required by the state of Arizona. In addition the National Association of Realtors has a voluntary training program in buyer representation - I have completed the course.

Using a Realtor® buyer's agent to assist you in the search for a newly constructed home

Searching for a new home can be a stressful and daunting task. Let a trained buyer's representative simplify and expedite the process for you. This will not eliminate the stress but it will surely help. Buyer's agents see literally hundreds of homes during a year. He (she) is aware of where new subdivisions are, the current status of build out of existing subdivisions and the attitude of the various builders to upgrades and modification of standard plans. Once you give the Realtor® your requirements he or she can focus in on the particular subdivisions and homes that are in your price range, and have the features for which you are looking. Your buyer's agent may even know of a particular model that is exactly what you are looking for. It may be one he or she has seen while working with other clients, while doing previewing to keep him or herself up on the current inventory, or one that was previewed based upon your particular search criteria. Either way it can save you weeks or months of frustration searching on your own.

For example, if while you are visiting a subdivision with your buyer's agent, you express a dislike for something that builder is doing, your buyer's agent can use that information to assist you in finding other builders that are doing it the way you want. You and your buyer's agent can work as a team to find you what you want. You don't have to explain your needs, at each subdivision, to people you may never see again. For example, maybe you wanted what is called a split master plan. This is one where the master bedroom is not adjacent to the other bedrooms. Why not get what you want if it is possible?

You are the buyer's agent's client not just a customer. The buyer's agent wants not only to help you find the home that meets your current requirements, but the buyer's agent wants your referral of additional business as a reward for a job well done, and your future business. Remember to reward you buyer's agent by referring him to your friends and relatives.

Before you start your home search you should find a buyer's representative you want to work with and sign a Buyer's Agency Agreement (AKA Buyer's Broker Agreement). This document clarifies the agency relationship between you and your buyer's agent. Once you have signed with an agent you should always have the agent with you when visiting model homes - without exception. And, always bring a checkbook you never know when you might find that perfect home.

Incidentally, a number of people have a mistaken impression that they will get a better deal from the builder if they deal directly with the builder without using a real estate agent. Some builder agents have even been known to foster this miss understanding. But, this is highly unlikely - consider the following. First, most builders display the current base price of their models on signs and literature at the model home office. What do you think that they are going to say, if you say, how much are you going to give me off the price since I don't have a real estate agent? Instead of giving you a lower price the builder's agents are more likely to think this is an inexperience buyer that doesn't even know enough to use a buyer's agent. And, the sales office agent may be thinking that is just more commission for me. Second incentives such as including pools or appliances is also indicated on marketing literature. In Arizona a real estate agent can not legally offer an incentive to one individual while not making it available to another. Third, the builders want real estate agents, buyer's agents, Realtors , bringing clients to their subdivisions. Builders market the buyer's agents keeping them abreast of what models and spec homes are available. They go to great lengths to assure agents that they will pay the commissions and that they do not have different prices for represented and non-represented customers. In my opinion, it is more likely that a buyer will buy an over priced house, bad lot or buy features which are not really in their best interest when they are not represented.

Having the buyer's agent present during home and feature selection and other related aspects of the transaction

Once you have a buyer's representative, use them. The buyer's representative can help advise you on features that you may want to add to your house. For example, depending on your budget you may want to add the optional cover to the back porch and include it in the financing but go with the budget priced flooring. The flooring is easier to change down the road. Building on a back porch cover, at a later date, will not only require a building permit but will be more expensive and difficult.

With regard to upgrades, not too long ago people were advising to pay for additional wiring packages for future possible use with their computers and sound systems, but technology has got to the point that it might be wiser to save the money and use it for a wireless system. Some builders are still touting the wiring packages. If you want wiring done, it is best to have the builder do it during construction. Of course we agents only provide advice - you the client make the ultimate decision.

Incidentally, typically the builder makes a commission payment to the buyer's agent based upon the home's base price or base price less incentives. It might be an advantage to the builder's agent to have you load up on upgrades but there is no advantage to the buyer's representative. Because of the agency relationship between a buyer's agent and his or her client, the buyer, his or her interest is only in you getting what you want.

Another area where the buyer agent can give you an assist is in obtaining a lender or mortgage broker to give one pre-approval or approval. You should get the pre-approval before searching for homes. Now this brings up an interesting question. Isn't it true that most builders have their "builder lenders" that they provide large incentives for utilizing? Yes, for example a builder may advertise that if one uses their lender a pool allowance will be provided. Or it might be an appliance package that would be included if the builder lender were utilized. Regardless, these incentives are designed to make it very unattractive to use another lender. But, an advantage of already having pre-approval is that the builder knows that you are a serious potential buyer. More importantly, the pre-approval will give you a budget or target price to utilize when looking for a home. Why waste your time looking at homes outside your price range and getting yourself frustrated. And, if homes are in short supply it might be just the edge to get you the home. Sometimes it even provides a little leverage on the builder's lender if one is right on the line. Of course, depending on circumstances one still might want to use their own independent lender or broker - for example because of a locked in low interest rate. Recently, I had a client that received a credit line/rate commitment from a lender as part of a relocation package. Individual circumstances vary.

One thing you should not do is have several builders start running your credit/credit score (multiple credit inquires) - because this in itself can damage your credit. It is best to have one non-builder lender or mortgage broker pre-approve you and then wait until you have decided upon a home to get a final approval - see Credit Scores.

Another advantage to having you own lender or mortgage broker provide you with a pre-approval is that if circumstances change and a resale home becomes of interest you will be ready to make an offer.

Having the builder pay your buyer's agent commission

Now a subject dear to my heart as a Realtor® buyer's agent is the payment of my client's commission to me by the builder. In order to take advantage of this it is important to follow all the rules.

• First, sign a Buyer's Agent Agreement (AKA Buyer's Broker Agreement) with your agent, Realtor®.
• Second, always have your agent, Realtor® with you when you visit any properties. NEVER go visiting properties without your agent.
• Third, you and your agent must register with each builder's subdivision during your first visit. The exact procedures vary by builder but some builders require one to reregister ever 30 days if the home search goes on for more than 30 days.

If the agent and his client follow the builder's rules then most builders will pay the agent commission. One word of caution is that if the client violates the rules he or she can be still held responsible for payment of the commission even if the builder will not.

Please contact me so I can assist you in your search for a new home.