Why use a Realtor when buying a new home?
Michael Guthrie, Broker/CEO
Roy Wheeler Realty Company
If you are following the real estate market in Charlottesville and the Central Virginia area, you know that 1 in 5 sales over the last year have been one newly constructed. There is no doubt hat many in the process of buying a new home are asking themselves, “Why do I need a realtor?” This seems a natural question for those interested in buying a new home, while wanting to save all they can. After all, you can talk with the home builder or their agent and quickly be the owner of a brand new home- and you can do it all without having to pay a realtor. But what you may not realize is that the money you are saving by skipping out on the realtor isn’t really being saved at all. In fact, those who don’t use a realtor are costing themselves more in the long-run. Why is that?
Whenever you try to save yourself that 3% commission rate, you aren’t cutting the cost of your home at all, because the realtor’s sales commission is already built into the base price of the home. Furthermore, the seller’s agent will not be representing you as the buyer. His job is to get the best possible deal for the builder. They will also work to have you use their lender and closing agent. That can be to your advantage but using a Realtor will give you someone to make sure what they are offering in incentive is actually beneficial to you. In almost every case, The builder/seller will not give you a discount because you aren’t represented by an agent. By going into the transaction unrepresented, the builder will pocket the savings or pay a higher commission to their sales representative.
Hopefully the myth that you’ll be coming out ahead by skipping an agent has been debunked. Now let’s point out all of the benefits that come with being represented in your transaction.
For starters, your agent is a licensed professional, meaning he or she has a wealth of knowledge and resources unavailable to the average home buyer. By hiring a realtor, you also save yourself the time and energy of doing quite a bit of legwork. Many buyers justify not using an agent because they figure they can do this legwork themselves and save some money. Seeing as we just debunked the agent-less money-saving myth, why not save yourself the trouble and let a professional do the legwork? Real estate agents are also your personal advocates. During the process they represent your interests and wants to get you the best deal possible- after all, their jobs and reputation depend on it! In some cases, an experienced agent can even negotiate with the seller’s non-negotiable prices to get you a better deal.
So instead of asking yourself, “Why should I use an agent?” the real question is, “Why wouldn’t you hire an agent?” At no cost to you, hiring an agent will save you time today and money tomorrow.
New Construction Financing Basics
For many people buying a newly constructed or to be built home, the process is quite similar to buying an existing home. A great majority of the new construction loans are done with the builder selling a home and lot package. The builder carries the cost of construction until closing. You get a loan commitment on your loan and wait until the home is completed. The sale price of this package is then treated the same as if the home was actually existing already. Your downpayment is based upon this sale price. The appraisal is done with specs and plans and what the property will be in its finished state. Of course, the appraisal will be subject to a final inspection to confirm that the property was completed in substantial conformity to those specs and plans before closing.
A concern with new construction is what to do about the rate. They’re really low right now but what will they be several months down the road? When can you lock in if the home will not be complete and closing will not occur until 6, 9 or 12 months down the road? One option would be to float until you’re within a standard lock period, typically 60 days. That could work out great if the rates stay largely the same or drop. Another option would be to go with some form of extended lock or cap to protect your rate until closing. This can give you some peace of mind and eliminate the concern over rates increasing. This option will vary among lenders but typically expect to pay a higher interest rate for a longer lock period and may include an upfront fee for that protection. In some cases, the upfront fee may be credited back to you partially or in full. Beware though, if your construction time frame exceeds your lock period, your deposit may be forfeited. If the rates are higher at the time of expiration, you may be subject to a higher rate.
If the builder requires you to provide the construction financing, then the most common product would be a construction to permanent loan. This can be complicated but simply stated, the C-Perm loan closes then the money is disbursed to the builder in draws as the construction progresses. Expect to pay interest on the money drawn as well as inspection and title update fees at each draw. Once the construction is complete, the loan then modifies into the Permanent financing like a typical 30 year mortgage.
So, if you can’t find the home on the market that suits you, then perhaps new construction could be the way to create your dream home. If so, then for most buyers it will be basically the same as buying an existing home except you have to wait longer to move in. For others, a C-Perm loan will be more complicated but certainly a good option if needed.
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Michael Guthrie, CEO/Broker
Roy Wheeler Realty Company
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5 good reasons : Have a pro on your side throughout the process
Buying new construction seems simple, right? Just pick out the floor plan you want, choose the perfect lot, and watch it go up. No sellers to deal with, no unexpected repairs that come up during inspection, no drawn-out negotiations. Right? Not so fast. In any real estate transaction, it’s important to have a professional on your side, even if the process seems straightforward. “Having your own agent provides a sense of security,” says Kristy Weaver, who has bought two new construction homes from two different builders. “It gives you some peace of mind, knowing that someone is looking out for your best interest.”
Peace of mind is just one benefit of having an experienced agent along for the ride. Read on for five more reasons you’ll want a local real estate agent by your side when buying a new construction home.
1. Help you find a reputable builder
“Your agent can rely on their own experience and that of their colleagues to help you find a builder you can trust.” “What’s the quality of the workmanship? What kind of warranty do they offer? What’s their track record of resolving issues? Getting a clear understanding in the beginning can alleviate serious headaches down the road.”
2. Go to bat for you
The timeline for purchasing new construction is typically quite a bit longer than buying an existing home. From the first time you visit the sales center, to choosing your layout, construction, inspections, and finally closing, there are ample opportunities for things to go sideways — think construction delays, permit issues, and financing concerns. An experienced buyer’s agent can help you navigate all of these sticky situations.
3. Help you review your contract
Even if you’ve purchased a home before, the contract for new construction is a whole different animal, and an experienced agent can help you make sure you understand everything, from floor plans to earnest money requirements, deadlines for requesting changes, and timelines for completion. “It’s crucial to have a third party who represents your interests in the transaction,” says an agent who has represented new construction buyers. “A good agent can add the proper addendums to protect you if something falls through.”
4. Assist with negotiations
Buyers’ agents know the areas where you’ll find the most wiggle room when it comes to negotiations. “Builders are trying to keep their sales price up so that the next buyers through the door see the higher closing price.” “They’d much rather throw in closing costs or additional upgrade credits.”
5. Point you toward smart upgrade choices
Builders will offer you endless options for finishes and upgrades, and it’s easy to get overwhelmed. A seasoned real estate agent can recommend the upgrades that will get you the most bang for your buck in resale value, suggest finishes that might be cheaper to do on your own, and help you avoid over-improving, which can jeopardize your appraisal before closing.
Even though a friendly sales representative will greet you with a smile the moment you walk through the door of the sales center, don’t forget that they work for the builder. Bring your own agent with you starting with your first visit — in fact, many builders require your agent to register with them from the very beginning in order for them to be involved in the process and receive their commission.
With a professional you trust by your side, you’ll rest easy knowing someone is there to protect your money, your time, and your new home.
Call 434-951-5155 or email RoyWheeler.Move@gmail.com to get in touch with a local, professional agent today!