Can a Real Estate Agent Help With New Construction?

 

The process of buying a home can be incredibly complex when buying a home that was built decades ago, and while many people think that buying a new home would be simpler this often just isn’t the case. In reality, however, buying new construction can have an even higher degree of complexity than buying an old fixer-upper.

 

This means that working with a real estate agent can not only make the entire process easier for the buyer but can result in significant savings by helping to prevent costly mistakes on the buyer’s part. We’re going to dive into how exactly a real estate agent can help the average buyer who may be looking into new construction.

 

Buying newly constructed homes is much different than buying an existing, previously owned home, and these differences can be monumental. Since your new home will be built to your preferences and specifications, it is often a far lengthier process than buying a house already built and can take a year or more to be completed.

 

Your agent will be an invaluable asset during this time and will make the entire process easier for you. Here are just some of the ways in which a real estate agent can add tremendous value to your home-buying experience.

 

While the builder will often have their own real estate agent, who can be another great resource for customers, it’s important to remember that they are being paid to represent the builder, not the buyer. While the builder’s agent wants their buyer to have an overall pleasant experience and be happy with their new home, at the end of the day, they still have a fiduciary duty to the builder to advocate for them. By having your own real estate agent, you will have someone advocating for your best interests, your home, and ultimately your happiness.

 

In many cases, builders work with a handful of preferred or preselected lenders, with some even working with their own lender or one they are affiliated with. On one hand, builders that do this make financing options relatively simple, though the deal may not work out to be the best deal for your transaction.

 

Working with a real estate agent means you’ll have an agent that is familiar with a wide range of financing options, often with many different lenders and loan possibilities. Some of these possibilities can include:

 

• Local credit unions or affiliated banks may have favorable terms for buyers seeking new construction
  
  
• Short-term loans cover the purchase of the land as well as the building costs, but which need to be paid off by the time construction wraps up otherwise the buyer will need to apply to a lender for a mortgage
  
  
• Construction loans automatically become conventional mortgages once the construction of the home is completed.

 

Working with a real estate agent can not only help with the entire process of building a new home, but if they have significant experience with being the buyer’s agent in new construction, they will also have extensive experience in the pricing structure for homes, as well as local averages for various home constructions. This means they will be able to advise you regarding the price, and whether you’re getting a deal or getting swindled. Additionally, when it comes to upgrades, they’ll be able to let you know if you’re being overcharged, and can negotiate on your behalf as your agent. Their experience gives them a large amount of leverage during these negotiations.

 

Your agent will be able to help you think logically about many important factors involved in your home construction, such as your overall budget, and the cost of each upgrade that the builder will try to offer you. A real estate agent can spot a deal and may be able to use their professional experience to negotiate other extras, such as sale price discounts or other buyer incentives like free upgrades or rebates.

 

While many home sales can be completed with simple boilerplate, new construction often isn’t standard boilerplate contracts. As such, they are often found to be highly favorable to the builder and even though a real estate agent may not be able to change clauses in that specific contract, they can help locate an attorney which can help guide the buyers through contract changes.

 

Initially, your real estate agent will go through the contract with a fine-toothed comb and will advise you of any clauses of contractual issues that they feel need to be addressed. They will also know when the best time is to bring in legal help, since real estate attorneys can be expensive, and their time must be managed wisely. A real estate agent can help the buyer deal with or manage many potentially unfavorable contract terms.

 

If you’ve ever bought a home before, you may have experienced a price renegotiation that was triggered by an inspection or appraisal. A similar situation can occur when a builder escalation clause is triggered, which can greatly increase the final sale price of the home.

 

Generally, escalation clauses are in place to protect the builder from things like skyrocketing material costs, so that if the prices of materials suddenly spike the builder isn’t stuck paying out of pocket for them or even losing money on the project. With an escalation clause in place, a portion of the cost of those materials, or in some cases the entire overage, is passed on to the buyer.

 

real estate agents that are experienced in helping buyers with new construction will understand just how severely these clauses can impact a buyer. Recent spikes in the cost of lumber, for example, can cause the price of a new home to by more than $20,000. These same rising material costs can affect anything that goes into the construction of your home, such as copper plumbing, steel, granite, marble, and even paint.

 

Not only can an experienced agent help the buyer to recognize and understand the potential consequences of these escalation clauses, but in some cases, they can help to renegotiate them, or even eliminate them entirely. In some cases, they can include a clause to automatically nullify the contract if a particular threshold of pricing increases is crossed.

 

It’s not incredibly common, but in some cases builders will use substandard materials, or materials other than what was specified in the contract, resulting in performance or appearance that may be undesirable for the buyer. If the buyer signs a contract with a builder that outlines material or craftsmanship requirements, a real estate agent can be a crucial resource in ensuring that those guidelines are followed. In the event that they aren’t, you will have more avenues for recourse when working with an experienced agent.

 

One of the biggest variables in new home construction can be the timeframe, and with few exceptions, the builder you choose should be able to complete your home within a reasonable and specified period. There are many factors that can impact the completion time, including weather, which can even lead some builders to refuse to include a completion date in the construction contract.

 

Having an experienced agent on your side can help you outline a fair amount of time that the builder has to complete the project, even with potential weather delays factored in. Without an agent, buyers stuck in a seemingly endless cycle of completion delays may have few options for holding their builders accountable.

 

If you mistakenly sign a contract that contains a clause waiving your right to legal recourse, you are giving away your right to pursue the builder legally for any disputes over labor or materials. Generally, you won’t need to worry about suing your builder, but in the unlikely event that something goes awry during your build process you will certainly want that option, and a real estate agent can help protect your right to legal recourse.

 

One of the big traps that new home buyers fall into, is the allure of getting to hand-pick so many components of your home. This often leads people to select options that, while generally small and reasonable upgrades, are often heavily marked up by the builder. Some of the most notorious upgrades that don’t increase your home’s value, but drastically increase your builder’s profit, are below.

 

Lighting upgrades are often lackluster and relatively generic. Lighting upgrades are simple and cheap for most homeowners, and you generally won’t need an electrician to do them for you, saving you labor costs.

 

Crown molding and elaborate trim are upgrades that often have a significant cost attached to them. This is another option that doesn’t add much resale value, but it has massive profit margins for the builder.

 

Having smart home integration is one of the most popular upgrades, but while your builder can install many of the features for you, you can do it yourself much cheaper. Just be sure that your home has cabling infrastructure that can support future integration, and get the smart accessories yourself, later.

 

Many times the builder will have options for upgrading the pulls and hinges on drawers and cabinets in the kitchen and bath. These options will often be somewhat limited as well as costly. Most hardware stores have wide selections of cabinet and drawer hardware that are incredibly inexpensive and can be installed in just a few minutes with basic household tools.

 

Flooring isn’t the most overpriced upgrade from a builder, but you’ll almost definitely pay more than you should. Rather than upgrade the carpeting, consider upgrading only the carpet pad. This will not only help your regular carpet last longer and stand up to wear better, but it will feel more luxurious and comfortable.

 

Most people don’t build a home with the intent of selling it, but they should since most people who buy new construction won’t be living in that home for the rest of their lives. While many buyers see buying new construction as a chance to make their home truly theirs by incorporating bold design choices or eccentric tastes into the construction, this can make resale more challenging if the first owner decides to move.

 

real estate agents can generally help in this respect by offering consultation and advice on which design decisions are best left to classic looks, for example, coaching the buyer on opting for a more traditional kitchen sink backsplash over a far more bold tiling option. Another example would be the current trend of working remotely, which makes homes with an office much hotter commodities while planning for the future could mean opting for more closet space instead so that a future sale doesn’t hinge on the buyer needing an additional room over additional storage space.

 

Having a home built can not only take quite a long time, but it can also result in the need for constant communication, and trying to keep up with that by yourself can almost be a full-time job. Working with a real estate agent means that when it comes to communicating with the builder about questions or issues, you will generally only need to speak to your agent.

 

In most cases, your real estate agent will be your single point of contact for anything you need during the construction of your home. Experienced real estate agents can also give you insight into the process, particularly if they’ve worked with those particular builders in the past, which can give anxious customers much-needed peace of mind. This is crucial to remember since the builder and the builder’s agent will likely not see it as their duty to keep you informed of progress on the home.

 

It’s possible to buy new construction without an agent as people do it all the time to varying degrees of success, however, there are countless ways that a buyer could make costly mistakes. The amount you save on low-value upgrades alone can often cover their commission. Your real estate agent will be your advocate, your expert negotiator, and your primary contact and source of information. They are the best option for arranging the smooth and satisfactory construction of your new home.