Building A New Home In San Antonio? Consider this…
A Question I Hear A Lot
Being a Realtor® in San Antonio, I spend a lot of time looking at new homes and getting to know the different builders and neighborhoods. I enjoy this work immensely, but more often than not, I hear the same question from buyers looking to build a new home: do I need a Realtor® to buy a newly built home? Whether it’s in casual conversation with friends about real estate or speaking to San Antonio buyers or answering questions on Trulia Voices; it seems many buyers aren’t sure if they should hire an agent or go straight to the builder.
In many people’s minds, the benefits of not hiring an agent when building a new home is that there will be significant savings on not having any commissions included in the price of the home. In other people’s minds, the sales representatives at the new home communities are just like having an agent – they do the paperwork and make sure everything works out right. Let’s take a look at these two schools of thought.
No commission equals a better price.
If you don’t hire an agent to help in building a new home, you won’t have to pay the commissions in the price of the new home. Seems sensible enough. Although the seller typically pays the buyer’s agent’s commission, if you’re not using a buyer’s agent, logic would suggest you can just scrap that piece of the price of the home. Unfortunately, the logic doesn’t work that way. The builder has calculated a certain price for the new home and has included commissions in that price. If they were to discount all of their homes that were sold without a buyer’s agent to account for the lack of a commission, they would essentially be bringing the price of their neighborhood down. When a buyer came along with a Realtor® representing them, it would be possible to argue that the price is several thousand dollars out of line with other recent sales. It doesn’t make sense for the builder to do this and in the long run would affect their profitability.
Builders are a profit driven machine and have carefully calculated their profit margins on each and every home they build. Even when they offer higher commissions and cash incentives to both agents and buyers, they still have a target number in mind at which they will be profitable. If they’re not going to discount the price of your new home because you’re not working with an agent, guess where that extra money goes? That’s right – the builder’s profit. Does it make sense for a buyer to go into a new home purchase unrepresented in order to increase the builder’s profit? I think I can guess your answer.
The sales representative will take care of me.
I’ve met a ton of builder sales representatives. I’ve never met one I thought was shady or slimy, although I’m sure there are some out there. No, this isn’t about the reps pulling a fast one on you, but about simple representation. If you’re looking to build a new home, who’s going to look after you during the process if you’re not represented by a Realtor®? The sales rep gets their paycheck straight from the builder. Let’s look at an example for argument’s sake. Your dream home is coming along just fine and you’ve been thrilled with the process. As the builder begins to install the fireplace that you couldn’t wait to have, you realize they’ve installed it level with the floor – you swore on the original plans it was a raised hearth and you are correct in remembering it that way. The builder has just paid the contractor to install the fireplace and now you want it fixed. If they fix the fireplace, it’s going to cost them time and money. Do you think the builder will just shrug and start tearing down the mistake? Of course not, they’re going to try and preserve their profitability and try to come up with the solution that costs them the least. This actually happened to a client of mine. The solution? The builder offered them a few upgraded light fixtures. Lucky for my clients, we were on top of the situation and held the builder to the original plans. We wound up with both the light fixtures and a corrected fireplace.
The sales representatives represent the builder. It’s similar to buying a home with the listing agent which is a form of dual agency called intermediary in Texas. During the process of building a new home there are a lot of things happening, from inspections to financing to selecting the finishing touches…wouldn’t it make sense to have someone on your side during the process?
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Comments
The buyer needs to be honest with their agent about what they qualify for to purchase a house. In a tight market like we are in, a good buyer’s agent will not show them properties that are much above their stated price range. Of course a buyer is going to like a house they can’t afford, but once they see it they will be disappointed in the houses in their own price range. Tell your agent what you would like to spend, but if a really special property came on the market what price you could go up to.
Buyers looking to build or buy a new home would be crazy not to use a Realtor. The builders rep represents the builder not you. They are hired by the builder to get the home sold. As nice as the rep may seem, they are not representing you. A Realtor can represent you. And that’s why you need the RErockstar if you’re buying in the San Antonio area.
Good post.
Since the Realtor represents his/her client in purchasing a property, buyers could get more professional know-how, insider information, and protection by investing in them.
This is a difficult topic, but one that requires due diligence if you are considering building your home. Obtaining advice and recommendations for a builder is mandatory. As is insurance and evidence of his work being of a standard that ensures the minimum quality that you expect from a registered builder.
I am not American, however would you need to hire an agent if the builder was a large organization? Or is it a given in the US to hire an agent regardless of the type of real estate?
new communities – The problem lies in the fact that many people think the sales rep represents their best interests…but they are not required to do so (and work for the builder).
Richard – Inspections are crucial when buying or building a new home. Many people have been stung years later for skipping this step.
Mathieu – You aren’t required to hire an agent, but it is advisable (as I mentioned in your other comment). I think it’s even more important when dealing with a builder, as the sales reps work for the builder and because of that, do not have the buyer’s best interests in mind. In the US, the seller (the builder in this case) typically pays the commission as well, so a buyer’s representation usually does not cost them a dime.
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