Purchasing new construction is just as complex as any regular real estate transaction… if not more so. When purchasing new construction, you will need to:
  • Navigate the fine print within builder-friendly contracts
  • Resist the temptations of deluxe upgrades
  • Trust that all of the pieces will come together and become your new and amazing home
  • Recognize that buying new construction, on average, costs about 30% more than the average price of a resale home.
Working with a knowledgeable buyer's agent with much experience when it comes to new construction and local builder connections is priceless. If you had the thought that purchasing new construction without the help of an agent would save you money, I'd think again. Traditionally, the builder will pay the agent's fee, so hiring professional help shouldn't even be a question. The next pages will serve as a guide to help you get the most out of working with an agent when purchasing new construction.

The Value of an Agent in Purchasing New Construction
The method of buying new construction compared to a previously home differs in many crucial ways. New construction will be personalized to your specifications. The building process itself can take anywhere from 8 to 16 months on average to complete. While an agent of a previously owned home will assist you in finding a home and making an offer, an agent involved in new construction will focus on these main conditions when working with a builder:

1.   Advocate for your best interests
Having a real estate agent in your corner will provide you with an advocate who is interested and invested in your happiness when it comes to your new home. While the builder's agent can be a beneficial resource in the process, they are representing the builder, so they will prioritize the builder's interests, not yours. This is because they want to maintain a positive relationship with the builders. "The builder is working for the builder, and their staff is working for the builder," explains Matt Braun, who has represented buyers in many new construction sales. "Obviously, builders want happy customers at the end of the transaction, but they are looking out for themselves. If you hire a realtor as a buyer's agent, our goal then is to help protect you." At the end of the day, a seller's agent doesn't want the buyer to have a bad experience, but their fiduciary duty lies with the builder. Due to the structure of the commission, the seller's agent has a legal obligation to serve their client's best interests. On the other hand, a buyer's agent will help you work through things such as the budget or the costs of each individual upgrades. Say, for example, the builder requests a delay in construction. At this point, a buyer's agent would push back on the builder and try to keep them on schedule. A buyer's agent's first priority is your happiness, not the builder's.

2.   Decode the fine print of new construction paperwork
Purchase contracts aren't standard legal pattern. "Many times, we can't change what's specifically in a builder contact, which is often times more builder-friendly," Matt explains, "but we connect our buyers with local attorneys to help with that process."
Your agent should comb through the contract and raise any issues to both the builder and the seller's agent. The agent should also know the appropriate time to seek legal assistance from an attorney, as well as when to let things go and save money when it comes to legal representation. Without proper legal assistance, you risk agreeing to some terrible terms such as:
  • Using inferior building materials without your knowledge
  • Delaying construction with no end in sight
  • Unreasonable payment schedules
  • Changes to the scope of work
  • Waiving your right to legal recourse in disputes


3.   Separate reality and the model-home fantasy
Due to the fact that you get to hand-pick many elements of your new home, you may be tempted to go a little overboard. Sometimes, the highest profit margin for builders comes from the upgrades. Therefore, you shouldn't count on them to suggest faux marble countertops over the real deal.

Here are some examples of upgrades that yield high profits for your builder without bringing a large amount of value to your home:
  • Lighting
  • Crown Molding
  • Knobs and Pulls
"The first step is sitting down and taking a look at a budget of what is realistic," Matt says. After the home is completed, additional costs such as landscaping, window treatments, and appliances will come to light. Homeowners who purchase new construction pay an average of $3,000 to $15,950 to build out the landscaping on their property. Based on these numbers, Matt works with his clients to create a budget encompassing each detail of their new builds.

4.   Think long-term about resale
While you'll be the first person to own this house, making it completely and 100% yours, such as the inclusion of eclectic personal tastes or the latest fads, may bring challenges down the road should you choose to resell. A report from the National Association of Home Builders shows that today's average buyer stays in a home for an average of 13 years. Over that pretty long period of time, the hottest styles from when you built your house will fade. Therefore, your agent can help advise you when it comes to decisions on backsplash tiling, such as whether a bold style or a classic white subway tile would be better. Matt also provided an example of a buyer who never took baths and decided to build her new home without one. The exclusion of bathtubs can make the house tough to market down the road. People with children, or even those who enjoy a good bubble bath, will be disappointed.

5.   Finding the best financing for your individual needs
Some builders may work with preferred lenders or have their own lending companies. While this can make financing a new build easier, it won't always result in the best deal for you.
An experienced agent should help you weigh the pros and cons of your lender and loan options, which may include:
  • Local banks or credit unions that offer good terms for new construction
  • Different types of home construction loans, such as:
    • Short-term home construction-only loans
      • These cover the costs of land purchase and building only
      • You'd either need to pay off the loan when construction ends or apply for a mortgage
      • Home construction loans that automatically convert to traditional mortgages when the home is complete

6.   Buyer-Builder Communication
Maintaining constant contact with a builder can be a full-time job. "Having a realtor gave me peace of mind," explains one client, who purchased new construction in 2018. "She would even drive to the lot and take pictures for us to update us since the builder's realtor did such a terrible job at keeping us in the loop in the build of our home." An experienced agent can and will give you priceless insight during the building process. Whether they've done business with certain builders or are aware of various comparable communities in the area, they can provide a much wider context to your transaction compared to working without an agent. They may even have an existing relationship with your buyer, which can work to ease any tensions that may arise. Matt shares the example of a client who wanted a pool in their backyard of their new construction. The builder approved it right away, "but my experience said go back and ask what size," Matt explains. In this specific instance, the pool that the buyer dreamt of was merely a glorified plunge pool where they could only doggie paddle, rather than swim laps in. It is the responsibility of the builder or the builder's agent to keep you informed, but a buyer's agent will keep in touch as construction progresses, while advocating for your own individual needs as the buyer.

7.   References & referrals
If the process runs smoothly and goes 100% according to plan, amazing. If not, it's nice to know that you've got backup! "I wanted to make sure that the purchase of our home went smoothly and have the backing of our agent's broker and the team of attorneys to handle it should something go wrong," said a recent client.

8.   Comparable data & deep knowledge of the local area
An experienced agent will bring key area knowledge to the new construction process. They'll know how much homes cost, as well as the going rate for different construction projects. Further, they'll be able to tell you if you're getting ripped off when it comes to the sale price, or if the builder is overcharging you for your preferred granite countertops. Armed with this crucial information in their back pocket, your agent will negotiate on your behalf from a position of power. They will also know how to spot a deal. Just because a builder won't often lower the base price of a home doesn't mean that there isn't room to negotiate free upgrades or financial incentives. An experienced agent will know how to navigate the complicated process of new construction negotiations, while also knowing when the time is right to ask for better deals or freebies.
 
Who Foots the Bill? Why You Need to Work with an Agent from the Beginning
If you're considering working with an agent for your new build, don't delay this decision. The further you get into the shopping process, the greater the challenge becomes to bring in an agent. If you've already registered with a community, it may be too late. "Some builders are very agent friendly, and some are absolutely not. If you go into new construction and register without your agent, it may be difficult to have them come in later," explains Matt. Other agreements for new builds may not include an agent's fee for the buyer. That means if you've already signed with a builder, but want to bring in your own agent, you may end up paying the agent's fee directly. While the structure varies by builder, it's extremely important that you acquire a copy of the commission structure prior to your search so that you know who's paying your agent's fee. In a majority of cases, if the property is listed on MLS, they may offer a fee, "but they don't have to," explains Matt. Fear not, for this fee is often up for discussion. A good buyer's agent will work to negotiate with the builder to include their commission in the sale price. On top of that, their experience will save you a lot of money. If you're building what you buy, you may ask yourself "Why would I need an agent?" New construction is a complicated and expensive process. The experience that a knowledgeable buyer's agent brings to the table is priceless compared to what you might save in commission or agent fees.
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Learn more about New Construction in the Dallas Metroplex
 
Matt Braun
Real Estate Professional

COMPASS

TX License Number: 754454
Phone:
Address:
6801 Gaylord Parkway, Suite 110
Frisco, TX 75034
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