The Big Question in New Construction Homes
People often wonder- “Do I need a real estate agent for a new construction home?” It’s a legitimate question because if you are buying a new construction home, it’s easy to conclude- “It’s a brand new home. So there won’t be any of the big repair issues, like a worn out roof, an HVAC unit on it’s last leg, foundation problems, or termites.”
But where there won’t be concerns about needing to replace items for years to come, there are a host of other factors and worries that you need to deal with. Consider some of them here: problems with the builder (poor communication, not getting what you expected), picking floor plans and options (overwhelming), meetings and walk-throughs (properly prepared), change orders (when you switch something it can be costly), and delays (lots of factors can affect the build schedule). These are just a few examples to help you see some of the potential problems in a home build.
So, we can see that there is a lot to be concerned about when buying a new construction home. However, did you know that building on your own land with a builder is totally different from buying a new construction house from a builder, in which he owns the land? Let’s look more into this. Because, this really affects what type of help you will use, especially concerning a real estate agent.
First Things First- Who Owns the Land, You or the Builder
The biggest factor affecting the type of help you will use is determined by who owns the land. If you own the land, then you will be hiring a home builder (general contractor), and your contract is for only the construction of your house. In this type of home build, realtors are rarely used because there is no transfer of real estate ownership. Now, this doesn’t mean there isn’t help available to you. It’s just a different type of help, which we will discuss later.
On the other hand, if the builder owns the land, you will be purchasing the land and new home from them, which transacts through a sales contract. In these builds, a real estate agent may be used because real estate ownership is transferred.
What Type of Help Do You Need for Your New Construction Home?
Going back to our question- “Do I need a real estate agent for a new construction home?”, can be a little misleading, because the simple answer is “No, you don’t need one”. You can do it on your own. So, maybe it’s better to ask that question this way, “Should you use a real estate agent to buy or build a new construction home?” But I believe there is even a better way to ask it, “What is the best and right help for me when buying or building a new construction home?” Because, actually, what new construction home buyers and owner-builders want is- the best help that fits them and their circumstances, in one of the biggest, most important purchases of their life.
This question opens up our discussion to several solutions, because it all depends on what works best for you. A real estate agent may be good for you, but a home building consultant (or home building agent) may be better for you. Other options are using an attorney, reading and referencing a guide book or service, or maybe even a combination of these.
We will look at each of these and evaluate them, so that you’re equipped with the information to decide what works best for you.
Real Estate Agent in New Construction Homes
As mentioned, real estate agent, or Realtor, is only used when you’re buying a home directly from the builder. If using an agent, they will represent you in the purchase of your home. In order to represent you, the realtor and you must sign an agreement together, which will state the terms and conditions.
A realtor can help you through much of the home building process. So, they are for the buyer that wants service. And they’re for those that want someone with knowledge- about their state’s real estate laws and in writing up real estate contracts.
A problem with using a real estate agent to buy a new construction home can be finding one that is qualified to represent you through the home building process. So, unless you just want someone to help you understand the contract and make sure the closing is on schedule, you will need to do some digging and thorough screening to find a qualified real estate agent in this field.
Who Pays for a Real Estate Agent When Buying a New Construction Home
You might ask, “Who pays for the real estate agent in a new construction home?” Their fee, or commission, comes out of the purchase price for the new home. Many people believe that means the builder is paying their fee. That is somewhat true, because you aren’t bringing money to the closing table to pay the agent’s fee, but, in reality, you end up paying for it. How are you paying for the real estate agent’s fee? The builder already has your agent’s fee factored into their sale price. They know you might use an agent, so they have to plan for that cost. If they didn’t plan for that expense, they would lose thousands of dollars. And, they aren’t going to lose thousands of dollars. So they pass that cost on to you in their price.
Can You Get a Better Deal By Not Using A Real Estate Agent?
Some home buyers ask, “What if we cut out the cost of a Realtor? Can I get a better deal on my new house by not using a Realtor?” Some real estate agents say that it’s impossible to negotiate for a better deal with the builder by not using a realtor, because it’s just an automatic cost the builder applies to every home. But such an absolute statement doesn’t make sense, because each builder has their own perspective and their own free will to decide how to run their business.
Some home builders may view not having to pay a Realtor like the following scenario. Let’s say a buyer doesn’t have a real estate agent, and they offer a lower price or they ask for some free upgrades. Now, as long as that doesn’t cost the builder more than the expense of a Realtor, they may not care, because their profit is the same.
Does a Realtor’s services fit in with your goals in building a new construction home? Only you can answer that. You need to look at- the value of their service for you, what you want to take on yourself, along with, if you want to negotiate the deal.
Let’s look at another source of help to you in building a new construction home.
Real Estate Attorney or An Attorney Skilled in Home Building Contracts
A good real estate attorney can be a great asset with new construction home contracts. They can review the builder’s contracts, make changes to it, or even write up an entire contract for you.
One important point about having an attorney that specializes in new construction contracts is that they know how to protect you and they are on your team. They are not working for the builder and their interests.
Another great aspect about using an attorney in this regard is that they don’t cost a lot. Typically, you can pay them per hour for their work, with a total cost often under $1000. Compared to other costs and services to build a house, it is inexpensive, especially considering the legal expertise that will help safeguard you.
Home Building Consultant
A home building consultant may be a source of help that you are unfamiliar with. And that’s because it’s a very unique field of expertise.
A home building consultant specializes in the home building process. They work well for buyers and owner-builders wanting a high level of service and expertise in the home building process. Actually, a better term for some of these consultants would have be a home building agent, because they not only do consulting but perform tasks for the client as well.
What does a home building consultant do?
They look out for your interest, and they can do as little or as much as you want. A home building consultant assists and guides you through the home build.
They can assist you with meetings and walk-throughs with the builder. They can answer questions or concerns. But, most importantly, a home building agent finds and qualifies possible team members. This process involves a rigorous screening process. Team members may include a builder, an architect, interior designer, lender, real estate agent, inspector and attorney. These team members are the keys to a good build, so finding qualified ones is vital to your build.
The best part about a home building consultant is that you get, not only them as a great asset on your team, but you get your entire home build team with their help.
Do you need a home building consultant? Can’t you do it yourself?
Sure you can, if that suits you better. (I will show you below.) But let’s further consider just one aspect of the home building process we just touched on- the role of finding a qualified team. This job is the most difficult, yet it’s also the most important part of the home building process.
Here’s why it’s so difficult. You have to- 1. find your potential team members; 2. know what to ask them; 3. conduct interviews with each of them, multiple times; and then, 4. evaluate if they qualify or not for your home build. That’s a lot for someone to take on, when you may not be familiar with home building. Also, it’s intimidating when it’s the biggest, most important purchase of your life, because you can’t afford to get it wrong.
So, the qualifying of your potential team members is the home building consultant’s most critical role. Because, if you have a great team, they can deliver a great home build to you.
Now let’s say you are more of a true do it yourselfer, and you just want some guidance and resources. Great! If that’s what you really want, let’s talk about the final source of help in building a new construction home.
The New Home Building Guide
New home buyers and owner-builders that use home building guides can fall into a few different groups. First, a home building guide is for someone who loves to be well informed about the home building process. Second, It is for those who want a lot of control and involvement in their build. Third, it can be for those who are really looking to save money or to get the biggest bang for their dollar. Fourth, it can be for someone that just likes to do it themselves. Or, fourth, it might be for someone that fits into a combination of these categories.
What is a Home Building Guide?
A home building guide is pretty much what it sounds like. It’s a reference that guides you through your home build. Guides can come in different forms. They can be books, checklists, videos, audio, and electronic.
A home building guide is an excellent source to get educated on the subject. You can learn virtually everything on new home construction. And, in home building, there is so much to learn. Think about everything involved in the home build process- financing, finding and screening for your team, picking countless options, negotiating, contracts, working through problems, communicating, maintaining a good working relationship with the builder, and that’s just a few of the many items .
What Makes a Good Home Building Guide?
So, when there’s so much to learn, it becomes too much. But you don’t necessarily have to learn everything that happens in a home build. If you want to learn it all, be my guest. But you don’t have to. You just need to learn what will get you through your home build effectively. And a good home building guide will do that for you.
Here’s another problem with some guides. Think for a moment about the different sources you learned from in the past. A lot of these probably educated you, but didn’t give you the tools you needed. You either had to- make your own tools, or try to remember everything you learned and apply it. That’s just not very useful or practical. Useful and practical tools simplify your life, and they help you easily apply what you learned. When looking for a home building guide, find one that does more than just educating. Look for one that has tools, such as forms, checklists, and questionnaires. These are tools that you can take with you and use directly in real life.
Your Ultimate Guide to The Home Building Process
So, which guide will give you the essential information, along with tools needed?- Your Ultimate Guide to The Home Building Process. This guide is in creation mode and will fill a huge void in this space. It will be a laser focused and practical home building guide. The guide will have modules that help you through your home build, in the most effective way possible. It is designed, not to overwhelm you but, instead, to teach you what is necessary and to give practical tools that you can easily take and use.
This new construction home guide will be released in increments, after each module has been created. To help you with the most important, critical parts of the home build, the modules will be released starting with the highest level of importance and usefulness.
The First Module- How to Find, Interview, and Vet a Home Builder.
Why is this module our first priority? Because the builder is the life blood to a build. Almost everything in your home build is affected by the builder. They need to be a great communicator, organizer, and problem solver, along with being trustworthy and honest. So, if you pick the right one, your build can be successful. And, if you pick the wrong one, your build could be a nightmare. Just ask someone that has been through it.
The How to Find, Interview, and Vet a Home Builder module will- show you where to look for potential builders; give you truth seeking questions to screen potential builders, along with an explanation of each screening question or the goal of it; teach you how to evaluate the builder based on all the data gathered; and, finally, help you use choose the right builder for you.
The first module in this new home building guide will arm you with what you need to find a good builder. And, in turn, giving you confidence in your ability to pick the right builder.
The first module is scheduled for release in July 2021.
Should You Use a Real Estate Agent to Buy or Build Your New Home?
In the end, the type of help you choose should be based on your goals for buying or building a new construction home. So, first, determine those goals, such as to save money, get service, get advice on contracts, and so on? From there, take those goals and determine how you can achieve them with the different types of help available to you.