Home Buying 101 -- Do You Need A Realtor To Buy From a Builder?

The other day, I ran into someone I hadn’t seen in a while. She had just moved back into town, so I asked here where she was living. She looked at me sheepishly and said “I bought a house. I was going to call you but it was new construction and I didn’t think I needed to and the whole experience was awful and I really wish I’d called you first.”

A lot of people think they don’t need a real estate agent when they’re buying a new home from a builder. After all, they don’t need help finding a new house. The builders advertise all over the internet and the newspapers, and they have those nice models with the helpful salespeople who walk buyers through the whole process. What’s left for a real estate agent to do?

Plenty. First of all, those nice helpful sales people work for the builder, not for you. They’re not looking out for your best interest. They’re looking out for the employer’s best interest. If you don’t have representation, then there’s nobody in the transaction looking out for your interests.

Buying new construction from a builder is a lot different than buying an existing home from an individual seller. First of all, when you buy a home from a homeowner who is working with a real estate agent, the contract guiding the transaction must be the official Colorado Contract To Buy and Sell Real Estate. That contract was drafted by the Colorado Real Estate Commission, and is amended every year, to make sure that buyers and sellers are protected.

But not new construction. If you buy a house from a builder, you use the builder’s contract. The contract drafted by the builder’s lawyers, to protect the builder’s interests. Do you think those lawyers sit around trying to think of ways to look out for your best interests as a buyer? Don’t bet on it.

Second, you have those on-site sales people who, if you have no representation, will be instructing you and guiding you through the whole process. They’re often very nice people. I’ve worked with several of them whom I liked very much. But don’t forget who’s signing their paycheck. It’s not their job to see that your interests are protected.

How often, in this market, do you think unrepresented buyers pay too much for new construction? It’s easy for a buyer to assume that a builder knows the market, and that their homes are priced accordingly. But that’s not always the case, especially in a stale market. There are times when new homes are priced too high. When builders first set prices for a new development, there’s a little bit of guesswork involved. They don’t necessarily know that those initial prices will hold. That can be a big bummer for the first people to waltz in during the initial excitement period and pay the asking price. Because if the homes are overpriced, sales will usually peter out fairly quickly, and the builder winds up dropping the price. And that leaves the initial buyers in the position of having paid more for their homes than everyone else who moves in later. Guess what happens when it’s time to sell?

A good real estate agent will tell buyers when a new home is overpriced, and attempt to negotiate a better deal. If the builder isn’t dealing, he or she will advise the buyers to move on.

Sometimes, buyers attempt to purchase new construction without representation because they think they can get a better deal if the builder doesn’t have to pay an agent’s commission. That isn’t going to happen. Builders know that charging less to buyers without representation means charging more for buyers with representation, which amounts to penalizing buyers for having representation. That doesn’t make them look so good. It also hurts their relationships with local real estate professionals, and they really don’t want that. They need buyer’s agents to show their product to their clients. So they won’t stab us in the back by penalizing our buyers.

The cost of paying a buyer’s agent commission is built into the price of a house. The buyer is going to pay it whether or not any commission is paid. If the buyer is unrepresented, that money just goes back into the builder’s pocket.

The thing is, most builders expect Realtors to accompany clients on their first visit to a community in order to allow that agent to represent the clients. So call your Realtor before you start wandering through open houses. (Not working with a Realtor yet? Call me!) Personally, I'm happy to go wandering with my clients, even if they're not sure they're serious yet. And keep a stack of your agent's cards with you. That way if you happen to pass by a model home and just have to go in, you can hand the card to the onsite person, tell him or her upfront that you're already working with an agent, and make sure the builder will honor your relationship before you go traipsing through the model.

Pick up the phone before you start looking. Call a Realtor. You’ve got everything to gain and nothing to lose.