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What Happens When There is a Low Supply of Existing Homes

Because of the current low supply of homes, sellers have a great deal of leverage in a transaction. To avoid having to bid with multiple buyers with bids running well above asking price, many home buyers seek out a newly constructed home. There are some nuances of buying a new construction home, one of which is who should the buyer get to represent their interests. Unfortunately, many buyers go to a builder’s model home in a subdivision and “negotiate” with the representative in the model home. The low inventory in the market provides less opportunity for negotiation – or does it?

Who Does the Model Home Representative Actually Represent?

Most individuals in a model are of two types, a builder’s representative or a licensed agent. A builder’s agent is generally a person employed by the builder and paid to sell the builder’s homes. By law in most states, unlicensed reps cannot legally represent “you” as the buyer. Since they can’t legally represent “you” and since the builder compensates them, who do they owe their allegiance to? It certainly isn’t the buyer!

As for the “agent,” that is someone that the builder or listing agent hires to assist in selling the builder’s homes. As sitting in the model home awaiting buyers to come in is an “opportunity” for most agents, they are reticent to actively represent the best interests of the buyer in fear that the builder will eliminate their “opportunity.” In short, they are going to look out for the builder and themselves first, not the homebuyer. Additionally, many times the agent is also working with the same brokerage as the listing agent for the builder. That puts an agent representing a buyer in an immediate position of being nothing more than a scribe to complete the necessary paperwork. Legally, they can’t serve the best interests of both the builder and the buyer.

The listing agent certainly can’t and won’t represent the buyer.

Your Own Agent Makes a Difference

You will not save on the purchase price by using the builder’s representative. You will not get more or better appliances because you buy from the builder’s representative. The only ones who benefit are the “builders” and the rep or agent selling model homes. The builder may save commissions or the agent or rep may make more commissions.

It is significantly better for a buyer to have an agent who represents them. It makes a big difference to have someone that can and will properly advise them and knows the building process. Also, it helps to have someone objectively analyze the builder’s history and understand the changes this current market climate has produced. They can assist you with understanding your options if the builder increases the price, knowing if closing can reasonably occur when represented, and determining if the home will appraise at the price you require. These steps can dramatically affect the loan approval, the loan interest rate, and the cost of the loan. An experienced new homes agent can help you determine if using the builder’s preferred lender is really in your best interest.

How Do I Know if My Agent Knows New Homes?

When researching an agent to help you purchase your new construction home, ask the following questions:

  • How many new home purchases have you done?
  • What experience do you have with new home lending?
  • How well do you understand the building process? How did you learn it?
  • What experience do you have with new home lending?
  • How familiar are you with how loans are priced?
  • What is your process for buyers when buying new construction?

Keep asking until you get an agent with the right answers! It could make the difference between moving into your new home or starting the process of looking for a new home all over!

For representation when buying a new construction home, contact Grind Real Estate Group and we’ll make sure you get the best deal.