Why You Still Need an Agent When Buying a New Construction Home

The value of a real estate agent in buying new construction

The process of buying new construction vs. a previously owned home differs in several key ways. Your new construction will be customized to your specifications and can take anywhere around nine months to build. In that time, here’s what an agent is bringing to the table:

Advocates for your best interests

The builder’s real estate agent can be a good resource in the new construction process, but don’t forget they’re representing the builder in the sale. Seller’s agents in new homes work hard to maintain relationships with the builders, and at the end of the day, they will prioritize the builder’s interests over yours.

With a real estate agent in your corner, you’ll have someone on your side who is invested in your happiness with the home.

“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,” explains Pam Charron, a top Sarasota, Florida, agent who’s represented buyers in many new construction sales.

A seller’s agent doesn’t want the buyer to have a bad experience, but their fiduciary duty lies with the builder. Because of the commission structure, the seller’s agent is legally obligated to serve their client’s best interests.

Knows the local area and market

An agent comes to the new construction process with key area knowledge: they know how much homes cost and the going rate for different construction projects. They’ll be able to tell you if you’re getting ripped off on the sale price or if a builder overcharges you for granite countertops. Armed with this information, they negotiate on your behalf from an informed position.

A buyer’s agent will help you think through things like your budget and the cost of each upgrade. They know how to spot a deal and may even be able to leverage their past experience with a builder to negotiate the home price, free upgrades, or financial incentives, even in this market.

Sylvia Gaffney, a high-producing agent in Riverside County, California, with more than 20 years in the business, recently negotiated a reduced list price for a client in Southern California. “Once they (clients) decided which plan they wanted and which upgrades, I was able to negotiate from there.” An experienced agent knows the complicated dance around new build negotiations and when the timing is right to ask for deals and freebies.

Buyer’s agents are also there throughout the build process and will request regular construction progress updates. Or, if the builder asks for a delay in construction, a buyer’s agent may push back and try to keep the builder on schedule. Their first priority is your happiness.

Understands the fine print of new-construction paperwork

Purchase contracts aren’t standard legal boilerplate. “Many times we can’t change specifically what’s in a builder contract, which is oftentimes very builder-friendly,” Charron explains, “but we can connect buyers with a local attorney to help them through that process.”

Your agent will comb over the contract and bring up any issues to the builder and seller’s agent. Your agent will also know the right time to bring in an attorney.

Without an agent or attorney representation, you could inadvertently agree to some costly terms:

Helps navigate unrealistic escalation clauses

Just like an appraisal or inspection can cause the purchase price of a resale home to be re-negotiated, a builder escalation clause can greatly impact the final price of a new home.

An escalation clause protects the builder in the event of rapidly increasing materials costs so they don’t lose money on the transaction. In a builder escalation clause, if the prices of specific materials increase while your home is under contract, you’re on the hook for a portion or all of the cost.

If you’re not careful, you could end up paying a lot more than you bargained for that new home. The prices for input goods increased over the year with the most important commodities, namely ready-mix concrete, general millwork, and paving mixtures, seeing price growth, which made newly built homes more expensive.

An experienced agent can help a buyer recognize and understand the financial ramifications of an escalation clause. They can also help negotiate ways to minimize your risk, like requesting an option to void the contract if the total price exceeds the original price by a certain percentage.

Advocates for quality building materials

Homeowners filing lawsuits over construction defects is nothing new. These cases usually stem from issues like faulty foundations, plumbing problems, or electrical failures, leading to expensive repairs. The actual legal process is costly, with plenty of paperwork and expert reports involved.

In addition to the financial strain, the process is incredibly time-consuming. Homeowners who sign contracts without fully understanding the quality of materials used in their homes may find themselves facing lengthy, ongoing legal battles with the builder. These disputes can drag on for years, draining both time and energy.

But with a buyer’s agent who has experience in new construction, you can have more peace of mind. They can request more detail on building materials, something you as a buyer aren’t trained to spot. They can also recommend trusted home inspectors to assess the quality of the builder’s work.

Works to end construction delays with no end in sight

Barring a natural disaster or other unforeseen circumstances, a builder should complete your home in a reasonable amount of time. But some builders won’t even include a completion date in their contract. In those cases, buyers will have a challenge holding their builders to a time frame.

However, an agent with experience in new builds can help create a fair timeline for the build, including padding for inclement weather or construction delays.

Pushes back against unreasonable payment schedule

You will likely be required to put anywhere from 10% all the way to 33% of the total cost of the home upfront and then make subsequent payments throughout the process. Without a seasoned agent by your side, you could be agreeing to a payment schedule that conflicts with the structure of your loan.

Navigates changes to the scope of work

Nearly every construction contract includes a “change of work” clause. This clause explains how a builder can change construction at any point in the project and how they must inform the buyer.

However, depending on the contractual boilerplate, they might sidestep and change order proposals altogether, or amend the clause to give limited notice to the buyer. A new-construction buyer’s agent will have experience with changes in scope and can help suggest a process that’s easiest for you.

Advocates for your protection

You’ll have little to no legal recourse on any of the above issues if you sign away your right to legal recourse. A buyer’s agent could help you hammer out a builder’s warranty that would cover defective material and labor as well as keep both sides from costly legal fees if problems arise.

While you hope none of the above occurs, a real estate agent with new-build experience, with the help of their attorney connections, will look for these elements in a contract and make sure that the agreement benefits both parties. Most importantly, they’ll ensure that you’re protected if the builder fails to uphold their end of the bargain.

Are builders still willing to work with buyer’s agents?

The financial relationship between builders and agents has a tendency to evolve as the market cycles through periods of high and low demand.

Many builders have learned hard lessons from past recessions and understand the value of working with agents who consistently bring interested buyers through their doors — in booming markets and during leaner times.

However, in light of the changes to real estate commission rules following the National Association of Realtors (NAR) lawsuit settlement, some builders are keen on selling directly to homebuyers, removing real estate agents and the associated commission costs. Under the new commission model, sellers are no longer required to cover the buyer’s agent fees, and buyers are expected to directly negotiate commissions with their agents.

Despite this shift, there are notable homebuilding companies that believe keeping strong connections with realtors is still crucial.

Alaina Money-Garman, founder and CEO of Garman Homes, states, “I think it’s worth every penny to have someone else on the team being compensated for setting good expectations and preserving the quality of the transaction for the consumer.”

A homebuilder survey shows that most builders (85%) expect no changes in compensation post-NAR settlement. Meanwhile, 10% stated lowering commissions and 6% shared that they were switching to a flat fee.

Some builders take the opportunity to strengthen their agent relationships by soliciting feedback about their commissions program.

“We greatly value our relationships with the broker community and are always looking to improve our program,” says Mark Kesling, sales manager for Pacific Lifestyle Homes in Oregon and Washington.

Tips for buying a new construction home

Buying a new construction home can be exciting, with plenty of opportunities to personalize your space. But the process can also be tricky if you’re not prepared, which is why it’s important to work with an experienced buyer’s agent. On top of that, keep in mind these essential tips:

Separate reality from model-home fantasy

When you get to hand-select so many elements of your home, you’ll be tempted to go overboard. In some instances, the highest profit margin for builders is in the upgrades — don’t count on them to suggest faux marble countertops over the real thing.

“Consider doing cosmetic or easy design upgrades post-construction rather than with the builder,” says Michele Mazine, owner of Nest Advise, a firm that helps buyers through the new home options and upgrades process.

These are a few examples of upgrades that don’t bring enormous value to your home, but they’ll yield high profits for your builders:

• Lighting: The lighting upgrades builders offer are typically generic, and you can easily replace lighting on your own or with an electrician for a lower cost.
• Crown molding: This design choice is an expensive upgrade, but doesn’t cost much for builders to install. On the back end, this elaborate molding won’t add to the value of your home.
• Smart home features: Unless they’re included, consider opting out of a home security system and a video doorbell to avoid overpaying at the design center. Be sure your home’s infrastructure supports your plans—Cat-5 or Cat-6 cabling and ethernet ports in rooms with computers or smart TVs should be the minimum.
• Upgraded carpet: Most flooring is often overpriced if purchased through the builder, according to Mazine. “Consider simply upgrading the pad, which will help standard carpet last longer and will likely feel more comfortable when walking on.”
• Knobs and pulls: You’ll save money in the long run if you upgrade these on your own post-construction. Builders don’t always have an extensive inventory of options, and it’s something you can change easily on your own.

“The first thing is sitting down and looking at a budget of what is realistic,” Charron says.

After you complete the home, additional costs like landscaping, window treatments, and appliances will come into play. New construction homeowners pay between $3,000 and $16,000 on average to build out the landscaping of their property though some builders may include front-yard landscaping or be willing to negotiate partial landscaping. With those numbers in mind, Charron works with her clients to create a holistic budget for their new builds.

Think long-term about resale

You’ll be the first person to ever own this house. But if you make it completely 100% yours, outfitted to all of your eclectic personal tastes or the latest trends, you could face challenges down the line if you ever decide to sell.

A report from the National Association of Home Builders shows the median duration of homeownership is 15 years. That’s a lot of time for the hottest styles to fade.

An agent can help advise you on decisions like whether bold backsplash tiling will last or if you’d be better off with classic white subway tile. Dedicated home offices are popular right now as more people work remotely, and an agent can help decide if it’s better to option the space into an additional bedroom by adding a closet for better resale value.

Charron also gives the example of a buyer who never took baths, so she built the new house without one. Trouble is … that makes a house tough to market down the line. People with kids (or those who enjoy a great bubble bath) will be disappointed.

Find the best financing for you

Some builders work with preferred lenders or have their own lending companies. This can make financing a new build easy, but won’t always result in the best deal for you.

An experienced new-construction agent helps you weigh the benefits and drawbacks of your lender and loan options, which may include:

• Banks or credit unions in the area that offer good terms for new construction
• Different types of home construction loans, such as:
  • Short-term home construction-only loans, which cover the costs of the land purchase and building costs. You’ll either need to pay the loan off when construction wraps or apply for a mortgage.
  • Home construction loans that auto-convert to traditional mortgages once the home is complete.

Coordinate closely with your builder through your agent

Staying in constant contact with your builder can be a full-time job. “Having a Realtor® gave me peace of mind,” explains Angela Worley, who purchased a new build in 2018. “She would even drive to the lot and take pictures for us to update us,” noting that the builder’s agent didn’t do a sufficient job of keeping them in the loop on the construction progress.

A seasoned agent with experience in new builds can give you invaluable insight during the process. Whether they’ve done business with those particular builders, or are aware of other comparable communities in the area, they can provide a wider context to your transaction. They might have an existing relationship with your builder, easing any tensions that might arise.

Charron shares the example of a client who wanted a pool in the backyard of the new home. The builder approved it right away, “but my experience said go back and ask what size,” Charron explains. In this instance, the pool the buyer was dreaming of swimming laps in was in fact a glorified plunge pool where you could barely doggie paddle.

It isn’t the responsibility of the builder or builder’s agent to keep you in the loop, but a buyer’s agent will stay in touch as construction progresses, and advocate for your needs as the buyer.

Partner with a team of experts

If everything goes 100% according to plan, great. If not, it’s nice to know you’ve got backup. Worley says, “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.”

Work with an agent from the beginning

If you’re considering working with an agent on your new build, don’t delay the decision. The further you get into the home shopping process, the more challenging it becomes to bring in an agent. In fact, if you’ve already registered with a community, it might 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 Charron.

Remember, some agreements with new builders won’t include an agent’s fee for the buyer. That means if you’ve already signed with a builder and want to bring in an agent, you’ll pay the agent’s fee directly.

The structure will vary by builder, but it’s important to get a copy of the commission structure from the builder at the start of your search so you know who’s paying your agent’s fee. The fee is often up for discussion, and a good buyer’s agent will negotiate with the builder to include their commission in the sales price, in addition to the savings their experience will bring.

If you’re building what you buy, you might think, “Why would I need an agent?” However, new construction is a complicated and expensive process. The experience a knowledgeable buyer’s agent brings to the table is worth more than you’d save in commission or an agent’s fee.

The key is finding a pro who’s seasoned in the world of new construction. Don’t be afraid to ask:

How often do you work in new construction?
The agent should be able to tell what percentage of their clients fall into this category and estimate the number of total new-build transactions they’ve advised on.

Do you have a relationship with any local builders?
It wouldn’t hurt to work with an agent who’s on a first-name basis with builders across the city. An agent who has established relationships can ease the process, and shows a depth of experience across multiple companies.

What value do you bring to this transaction?
Buyer’s agents in new construction serve many different functions. An agent should be able to explain the process and suggest ways to make it easier for a buyer.

Things to consider if you buy a new home without an agent

In the event you decide you’d still like to go it alone, it’s up to you to advocate for yourself. Builder’s sales representatives are often helpful, but they’re looking out for the company’s best interests. Do these seven things to prevent unwelcome surprises:

Research builders thoroughly. Ask friends, family, co-workers, and neighbors for their recommendations. Walk through a new community recently completed by the builder and talk to buyers about their experience. Read reviews and testimonials, and get a glimpse of the builder’s financials to check for any red flags.

Know what’s included in the base price. It’s easy to fall in love with a model, but it often comes with expensive and optional extras. Get a spec sheet of what comes with your home plan so you can decide what to upgrade.

Establish a budget for options and upgrades. This is where you can easily add tens of thousands to the home’s base price. Prior to your design center appointment, decide how much money you can spend on your home’s personalization and prioritize accordingly.

Shop for your loan. Many builders require pre-qualification through their preferred lender, but you’re typically not required to use them. They may be able to offer the best deal through incentives, but do some research on other lending options before committing.

Get contract help. Read the fine print. Or better yet, hire a real estate attorney to do it for you so you don’t miss anything that leaves you vulnerable in the agreement.

Request a single point of contact. This person could vary from builder to builder and could be the sales representative or even a construction manager. Whomever it is, ask for the same person to communicate with you and establish a communication timeline throughout the build process.

Don’t neglect the final inspection. Take your time during the final walkthrough to identify any issues that need fixing prior to close. If there are any major items that need addressing, determine a reasonable completion date beyond move-in. Get the punch list in writing and request a copy for your records.

Ready to buy a brand-new home?

There’s a wide array of agents out there and new construction is a different world compared to resale. Taking the time to find the right agent to fit your needs can make the whole process smoother. They’ll be firmly in your camp so you enjoy a relatively stress-free experience building the home you’ve envisioned, from plan selection through final home delivery.

HomeLight simplifies the complicated process of finding an agent by using data to match you with an agent with a proven track record and relevant experience for your needs. Find top-performing realtors in your area today.

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