Tim’s Two Cents – Do You Need a Broker to Buy from a Builder?

Along with springing our clocks an hour ahead,  we have jump started the busy season for the majority of the neighborhoods actively work in throughout San Diego County. The market is very busy fueled by the same reasons that I have sighted in previous months; low mortgage interest rates, low inventory and the ability for owners to sell their properties for a profit and move that equity over to a new home as a down payment.

This month I am going to dive into New Construction Home Development Sales Sites.  There are some important steps that potential home buyers should take when investigating what local builders have to offer.  In Southern California, new construction is prized.  However, many buyers are not familiar with new homes sales, and how the process unfolds. As I write this article, several brand new model home complexes are currently under construction in our community. We even have a well-designed and well times 55+ community available for purchase in Del Sur. I thought it might be a great idea to share some of our collected wisdom, gained from our personal & professional experience, on this topic.

My wife, Kristine, worked as a new home builder salesperson for 10 years from 1997 to 2007.  She was originally selling for Presley Homes, which later became William Lyon Homes. We have personally purchased 5 new construction homes over the years from various developers in San Diego County. We have been personally been a party to 8 transactions from 1999 to current. With the majority of our purchases being new, never lived in properties that we purchased from a build sales site, we have the experience to navigate the ins and outs of these types of transactions.

I have also had the opportunity to develop and manage a contingent home sale program, and builder close out program for William Lyon, Brookfield Homes and Standard Pacific. At the tail end of William Lyon’s projects throughout San Diego County, I provided sales services for the builder. This entailed closing out, or selling, the last few remaining standing inventory new homes for the project. I would list, and market the homes, as I do any other listing. I represented the builder, who functioned as the “owner/seller.”  I share this info to demonstrate that Kristine and I possess an in depth understanding of how the new home sales business functions from start to finish. We have developed strong relationships with many of the new homes sales staff, and corporate decision makers for the prevalent builders in our community. We know the reputation of each of the builders and can advise you on their past portfolio of work.

So, what is the first step? I often hear that home buyers didn’t know that they could have a broker help with a new construction purchase. All builders display a small sign, either inside the main greeting area of their models, or posted just outside the entry to the model home complex.  This sign notifies potential consumers/buyers that if they are working with a real estate broker, they must be physically accompanied by their broker, and register with the developer’s agent in their sales office, on the very first visit. Why is this fact important to you as a buyer?  “Can’t I just walk in; choose a house from the models; tell the sales representative who is working on the builder’s behalf all of my confidential information; use the seller’s lender for my loan; have the seller complete all of the upgrades on the house and move in?” You can if you like showing everyone all of your cards right upfront!

If you have been working with a broker to survey the re-sale market, then that person should be compensated for their time, effort and experience. Whether you purchase from a builder, or buy a home on the re-sale market, you gain the assistance of your “Buyer’s Broker” for free!  The builder pays the broker, or the owner of a re-sale property pays the broker to represent you, the buyer, in a transaction with them.  The reason the builder requires that you register with them is because they are typically offering a referral fee or percentage of the base sales price to the broker representing the buyer.

You say, “But the price is the price, and the broker just signs a sheet of paper and gets paid.” Contrary to that opinion, there are many vital points to be properly evaluated throughout your transaction. Accredited real estate brokers help to insure that you know what fair market value is for similar homes in the area.  Keep in mind that you may not be purchasing your brand new home with appliances, air conditioning, window coverings, upgrades, a pool, front and rear yard hardscape and landscape. These all cost money on top of the base price that the builder is advertising. Therefore, an evaluation/assessment of the properties current fair market value is extremely important.  Without this step, on the day that you move into your new home, you could be under water and thereby chasing your home’s value with your fingers crossed for years into the future. 

We have numerous closed transactions, where we made an offer to a new home builder, and saved buyers remarkable amounts of money through negotiating a lower price, higher incentives, or even upgrades at the close or all of the above combined!

Next, when it comes to deciding what build out phase to purchase in and what lot and floor plan is best we can provide invaluable insight.  What you may perceive as a positive impact on the property at time of purchase may be the detriment to selling the property at top dollar in the future.  Road noise, powerlines, homes behind your lot & their proximity and view angles into your home and yard space, sun light angles, to build a pool or not, location within the community…and many more incurable defects can be circumvented though our expertise and guidance.

Another crucial area, where you will find tremendous value in our guidance, transpires when it comes to discerning if the builder’s lender is the right fit.  I spent 16 of my 21 years in the real estate industry selling homes and arranging mortgage loans at the same time for my clients. Consequently, I have the experience to know how to evaluate the loan.

Kristine specializes in offering advice pertaining to the developer’s massive contract, overwhelming disclosures, as well as explaining what upgrades to purchase through the builder during construction of your new home, and which upgrades you can implement after close through outside sources.  

The builder may tell you that there is no need for a home inspection. However, most who purchase a new home from a developer, do not fully realize the value of the full front curb to back fence warranty that covers everything within the new construction home for one year from the date of purchase. How many new home owners are organized enough to set a reminder for the date that they purchased, and have the proper experience and training to inspect their entire home themselves during the first 12 months. A professional home inspector will do a full property inspection including attic, roof, and all operation systems under our watchful eye.

So, the next time you decide to make a visit to a new home site, do yourself a favor, and put a little planning behind that first visit.  Call me, or Kristine, to make an appointment for you at the development sales office. Don’t just accept that the price is the price, or that you have to work with whichever builder’s agent or mortgage loan officer happens to be in the office at the moment you arrive. Let us work to educate you on the current market environment, attempt to gain more incentive money to put towards your new home or loan, make the home more turn key for you and most of all negotiate a better purchase price in the end!

The earlier you decide to team up with us as you set out to purchase a new construction home, the better we can collectively strategize, & implement a plan to purchase or sell your largest financial asset, your home!

Please be sure to watch my new construction purchase video that I produced discussing the new home buying process. I the above tips and more! You can visit us on our company web site at SkoglinRealEstate.com and watch all of our videos, TV Appearances and listen to our Radio Spots!

Happy House Hunting!

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