In conclusion: you must have a realtor when purchasing a new home!

Here is why:

“I can get this house a lot cheaper if I don’t have a realtor”
Quite the opposite: by using the right realtor, you will save money! Your representation’s commission is already built into the sales price. As your realtor, I will not only make sure you avoid costly mistakes during the purchasing process, but I will also refund you up to .5% of the sales price at settlement (for example, your closing costs might be dropped by $3000 (!), given a purchase price of $600k). So, if you don’t use a realtor, you will literally pay more and the builder’s profit is nicely increased.

“I am a great negotiator and will negotiate a price reduction myself if I don’t use a realtor”
Builders will in all likelihood not make any concessions since, given the current market conditions in Northern Virginia, another buyer for this home is usually already lined-up. Be careful that you are not being sold other discounts or incentives that the builder offers anyways. Keep in mind that in most cases a builder’s lender does not approve of any reductions in the price.

“I will go see that builder by myself first – I can always bring a realtor later”
Ooops! Fact is, most builders require you to “sign in” as you enter their sales office. An important question will be whether or not you have a realtor. If you say “no” at this point, the builder will not let you be represented by a realtor at a later time. Moreover, many builders require your realtor to accompany you on your first visit. My advice: use a realtor from the beginning, or at least state right away that you have one (you don’t necessarily need to provide a name, if, in fact, you haven’t found the right realtor yet…). I will gladly provide you with a stack of my business cards.

“They only require a few thousand dollars ‘earnest money deposit’”
Be careful! What the builder sometimes calls an earnest money deposit might in fact be a down payment. In other words, you would not get your money back should you decide to step out of the contract. A 20% down payment at contract signing is not uncommon.

“The sales contracts are all standard – I can easily represent myself”
No new home sales contracts are the same. These contracts are written by the builder to the builder’s benefit and usually include numerous paragraphs that protect the builder from all eventualities (e.g. delayed completion of the house, changes in design, material or even price). As a realtor, I know what to look out for in a contract and what can practically be asked for by the builder (without killing the deal). It is also a good idea to consult a lawyer before signing any papers.

What to look out for in a sales contract

• Delivery deadline and any late penalties
• Deadlines for choosing structural and design options
• Any clause that would prevent you, the buyer, from suing the builder at a future time
• Home inspection
• Post-ratification changes in price

“I don’t need a home inspection - this home’s brand new”
Surely the choice is yours. Personally, I would never buy a home (resale or new) without a home inspection. Such an inspection is not only educational, but will give you peace of mind that everything is all right. The home inspector should be chosen by you, not by the builder, as sometimes required. In all likelihood, the builder will only allow you to have such an inspection “for informational purposes”, i.e. the sales contract will not be contingent upon the satisfactory outcome of such an inspection. I suggest you have at least two independent home inspections done: one at a pre-drywall stage, another shortly before settlement. The builder’s walk-thru will usually also occur at “pre-drywall” and before settlement.

“Look, they are ’Starting in the low $400s’ – these homes are cheaper than most resale homes!”
The base price might be, but wait until you see the available options. The price will quickly increase after you add only a few options (many builders will use only the cheapest of all materials as “standard”, so that even the slightest increase in quality or even color becomes an “option”). This is very much in the interest of the builder: the supposedly low advertised base price is only intended to lure you into the sales office; the builder’s real profit comes from the options you choose or that are already chosen by the builder, if you purchase a spec home or partially finished home.

“I can find my own contractors for many of these options and upgrades; they will be a lot cheaper”
YES! However: many builders will not allow you to use your own contractors until completion of the home. If, for example, you want to use your own contractor to install hardwood floors, you will eventually receive a home without any carpet (most likely at no savings to you), after settlement, you may have your floor installer come in to do their job. Another important consideration: if you choose your own contractor, such costs may not be included in your loan and are usually “out-of-pocket” costs.

“That’s a really qualified and nice salesperson here at the trailer”
Please keep in mind that a salesperson at a builder’s office will not act in your best interest, only in the builder’s; moreover, such a salesperson is not required to be a licensed real estate professional; only your realtor will act in your best interest throughout the transaction.

“They offer a reduction in closing cost if I use “their” lender”
Could be a good deal, but not necessarily. I highly recommend “shopping around” for the best rates and incentives. It is doubtful that the builder’s lender will act in your best interest.

“Which settlement company shall I use?”
Most builders also have their preferred settlement company and they won’t let you choose your own. This usually puts the builder in a preferred position as well, even though the settlement company should act as a neutral facilitator of the transaction. Be sure to receive a settlement sheet (HUD1) prior to the settlement to prepare for eventualities. Some builders will try to impose the grantor’s tax onto the buyer, which is sometimes nicely “hidden” on the settlement sheet.


That’s why you MUST have an agent when you buy a new home…

In conclusion:
Having a realtor when buying a new home makes business and financial sense

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