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Buyers agent and new construction townhouse?

We met with a buyer's agent briefly (about 30 minutes) yesterday. Later that day we heard that a builder was going to build additional new townhouses nearby. Are there any advantages or disadvantages to having a buyer's agent in this situation? For example, would they make our lives any easier in terms of dealing with lendors and the developer? Or would the developer give us better incentives if we came in by ourselves and with our own lender (since they wouldn't have to pay commission)? Just trying to understand exactly how the dynamics of this situation would work. Thanks!
  • December 13 2009 - North Kensington
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Answers (10)

"The bottom line is that it should not cost YOU any more to have representation."

Alex, this is disingenuous, especially when discussing new home construction. The builder/seller obviously prices homes expecting a real estate agent for the buyer getting their respective 3%. If a buyer negotiates his own deal, that 3% is in play. Although technically the buyer does not "pay" it, doesn't he really if it is factored into the final asking price? Merry Christmas. Jim
  • December 30 2009
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"they can help you look at your new home from a resale perspective."

Come on now. Buyer's agents aren't really trying to get away with that one so soon after the 2004-2006 fiasco, are they? Personally, I rank that as the number one reason to avoid an agent altogether.

  • December 30 2009
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There is a lot of really great advise in here. The bottom line is that it should not cost YOU any more to have representation. A Buyer's Agent is really a good idea. As stated, they can help you look at your new home from a resale perspective. This is important especially if you can't afford EVERY option you want, and need to figure out what makes the most sense to invest in.

One point I always recommend is focus on the structural elements first. Why? Because you can always replace carpet with hardwood, but adding a 2-story sun room is a different story. When a builder poors the foundation, you want that included in the basement. Those types of things may not be first on your mind. Most people when buying a new home get caught up in the model home feel.

So in many cases, that Buyer Agent can help ground you. Plus they can tell you what is standard contract language in Maryland, vs what the builder wants you to sign for them. They can also walk you through the pros and cons of most scenarios including different options for loans.
  • December 29 2009
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The advantages of using an agent depends. Some agents' will sign you in and walk away after that. Other agents will be involved. An involved agent will look over your shoulder and guide you through and warn you of potential threats against your deposit and other items...

There is a reason the builder wants you to go in it on your own. In many states the is a tax that here in California we call Mello-Roos. It can vary from low to very high. Mine is $222 per year until 2017, the one across the street is $3,700 per year until 2039. This can go up or down... There is one on a house I just sold at $2.55M that has a Mello Roos of $9,900... This isn't negotiable and varies from development to development.

Another issue is using the builder's lender. The development across the street from me had the most foreclosures in the entire area, and it was because they used the builder's lender.

Use a direct lender and  get a fixed loan.Good luck

  • December 14 2009
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Hi abjmail: My initial reaction depends on your comfort zone in negotiating and understanding the process. If you understand the process and are comfortable with in the process, you have just saved 3% that the seller does not have to pay to your buyer agent. However, if this is your first foray into home buying, or you are uncomfortable in negotiating, the representation of a buyer's agent may be invaluable. Remember however, most builders have a standard contract they use that has been vetted by their legal team, and it may not allow even a one word change. Many times, the incentives allowed by the builder also lock you in to a particular lender, however, if you come in prequalified by another lender, you can still many times negotiate the same incentives. I hope these thoughts help. Jim
  • December 14 2009
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"The builder cannot give a better deal or incentive to someone who is not represented" - Not True.

Read what NWHome.us wrote several times including the link. Also read what Hamp linked too. Be cautious of buyer's agents who always tell you how valuable they are by using fear to convince you of their value.

To specifically answer your two questions, yes a buyer's agent could make your lives a little easier and yes you could get better incentives dealing drectly with the builder.

  • December 14 2009
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The builder/developer's incentives should be the same for all.  As such, an experienced agent can bring quite a bit to your side.  The right agent can serve as your advocate and confidant in areas such as:
1.  Site/builder selection -- marketability, resale, etc.  Example: What is the incremental resale value of an end unit vs. interior; walk-out vs. walk-up basements; etc. etc.
2. Contract negotiation -- apart from incentives, look at the details (transfer taxes, county development fees, front foot fees, warranty, schedule, price protection, etc. etc.)
3. Construction -- do you obtain independent inspections or not?  What is the builder's practice regarding radon, mold, etc.?
4.  Financing -- what are the options?  Compare, compare, compare.  There are reasons the builder wants you to use their lender.
5. Settlement -- does everything come together in "your" best interests.  Who is on your side on that day?

This is just a snipet of the kinds of things we get into on a daily basis.

In sum, it's your call.  An agent is not required, but the right one can be a real "ally" to you.
   

  • December 14 2009
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You may also want to read this thread from MD.
  • December 13 2009
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Profile picture for nwhome.us
You might search for threads about that question on this site.  Here is one in Washington.  In the end I think it depends on your education, contract negotiating skills and how you want to spend your time.
In most situations we will recommend a buyer's agent because, in theory, they are your advocate in a field that they work in full time.  They should understand the nuances of the market and be willing to place your goals above theirs. (Pretty dreamy).
Unless you feel you know the market and can negotiate in it I'd suggest that you have a buyer's agent who has some experience in new construction contracts.  I personally don't think that the agent needs to be a local one because, if they aren't, they can avoid the local perceptions of how much something is worth.  Many locals feel that they service only the best neighborhoods when the fact is if you put it into a greater context, you may be willing to push a little harder on price.
If you feel you know the market and can negotiate, then using the seller's agent is certainly open to you.  Typically they have a listing agreement with the builder, so it is your best opportunity to manipulate that agreement (with one of the parties).  They have the legal right to amend it where a buyer's agent is not part of that agreement so has no right to interfere.
  • December 13 2009
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I would recommend you ALWAYS have a buyer's agent looking out for your best interests.
The builder cannot give a better deal or incentive to someone who is not represented.
Your buyer's agent would make sure that the "deals" you are offered are actually GOOD, FAIR ones, and can help you compare other loan offers out there. They also will help to keep the builder on track.
Whether you buy new or resale, please always be represented!
  • December 13 2009
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