Thinking About Buying New?
In this market builders have been dropping prices like crazy and offering amazing incentives. $75,000 off an already completed newly built home (or a ‘spec’) is definitely not unheard of. The deals are out there and the builders are willing to do lots to make things happen, so I can see how this would be an attractive option for buyers.
There are are few things to keep in mind, however.
#1: First and foremost, it is essential to be represented by a buyer’s agent. It is, of course, very possible (easy even) to walk into a new build development and have the agent there help you through the process. However, they will not be representing you. They will be representing the builder. They will not help you to negotiate. They will not explain to you your rights in the transaction. If you walk in to a development alone, expect to go it alone. The builder will not pay a commission to an agent representing you unless that agent brought you to the development the the first time and registered you. So even if you’re just thinking about buying new, get a good agent and drag her around with you to models. You will be happy you did.
#2: Many builders are currently hanging by a thread. They have developments they’ve poured money into that aren’t selling and they’ve dropped prices so low that they’re out of pocket in some areas. Engle has filed Chapter 11 Restructuring Bankruptcy, which they are marketing as a positive change, but that isn’t reflected in some developments where building has halted. Randall Martin has officially ‘walked away’ from their houses. Some communities are built but only half sold, and others haven’t finished building and have some owners already in. People are being left high and dry. Another builder, Trend, hasn’t released official word on financial troubles, but anecdotally, some of their offices and model home sites should have been open to sell this weekend and weren’t. It’s not looking good. It’s really hard for the general public to know which of these builders and communities are stable and which are not. It’s important that you align yourself with an agent who has an ear to the ground and can steer you in a safe direction.
#3: Being under contract for a new build house, doesn’t mean that your price is set in stone. If you’re 6 months out on a new build and you, or your agent sees that the base price has dropped or that the builder is offering new amazing incentives, your agent can go back to the builder and request (or, you know, demand, whichever tactic would be more effective) that your base price also be dropped. Builders know that even though they have your earnest money and it’s non-refundable, if they drop their prices enough, then it would be worth it to a buyer to walk away. It’s smarter for them to allow you to drop your price and stay in the contract that to risk you walking away. This is something that a smart and savvy buyer’s agent should know and be able to negotiate.
#4: A great buyer’s agent will have search resources and contacts in the new build industry to help you find the right development for you. It’s not just as simple and driving around all day following the flags. An agent can gather all of the info, find out the skinny on the builder’s financial state, get the incentive info and even schools and amenities information even before you take the time to go out and look at models.
#5: If for some reason you’re driving by models and are moved to stop and check them out and can’t get ahold of your agent, disclose as you walk in the door that you have an agent and want to be represented by them. Let the salesperson on duty know that you’ll leave if this is a problem, but that you have your agent’s name and phone number if it’s OK to register yourself with them and you’d like to take a look at the models. Many builders are OK with this as long as they know upfront.
There’s no reason to negotiate the new build minefield alone. Be a smart buyer and bring your agent along!