UPDATE 12/10: Since we published this post we have been hired by two home buyers to represent them on their purchase of a New Construction home. Utilizing our knowledge of the industry and our negotiating experience we were able to negotiate $75,000 off of one home from a national builder and $35,000 off another home from a local builder ( We will be happy to provide contact info and confirmation). If you are thinking about buying a new construction home or any home, give me call (571-235-4821) for a free no obligation consultation.
There’s no rule that says that you must have a real estate agent representing your interests when buying a new construction property from a builder. While it’s always wise to ensure that you protect your financial interests, if you feel competent to fulfill the role that a good real estate agent would perform, it is possible to make your purchase without an agent. However, enlisting a Glass House Realtor to represent you will ensure your interest are represented and you will get a 2% Realtor Rebate.
Builders are masters at getting a premium for their properties, and they do it by killing you with kindness. The methods they use aren’t exclusive to new construction. Builders typically employ friendly, bubbly negotiators to catch you off-balance and convince you to pay more than you should by ostensibly finding ways to “help” you get the home that you want.
You can avoid this pitfall by keeping your head on straight and following this timeless advice before signing on the dotted line:
- Appraisal Contingency – Have you considered what will happen if the appraisal shows the property to be worth less than you’ve agreed to pay? If the comps are to close to comfort ask for this contingency, however most national builders will not allow this contingency unless you are using an FHA or VA loan. If you don’t work out this detail in advance you could be required to bring cash to the closing table to make up for any deficiency between the appraised value and the agreed-upon sales price. By requiring an appraisal contingency – in writing – you can avoid this problem and get a better deal.
- Negotiate in Your Comfort Zone – The builder’s negotiator will be skilled at the art of negotiation and they’ll pull out all the stops in order to win at any cost. Negotiating with the builder’s representative is high-level negotiating at its finest. A good way to throw the negotiator off their game is to negotiate by phone. It might sound crazy, but this strategy really works. If you’re not there in person you have the upper hand. You can’t as easily be pushed to make a decision right away, which gives you the convenience of simply walking away from the deal if you don’t get the deal you want.
- Arrange Your Own Financing – A hidden profit center lies in the financing. Unless you have cash in hand, you’ll need to get a loan, but you don’t have to use the builder’s lender. Most builders receive a “kickback” from the lender if you utilize their services. Give the builder’s lender a chance to win your business, but ensure that the loan terms are competitive with what you can get independently.
- Don’t Get Too Attached – Most people have a love affair with their home. An important point to keep in mind is that love can be expensive – very expensive. Don’t fall in love with a home based upon a quick walk-through. There are many other homes out there that could meet your needs for the long-term. Remember, you’ll make memories wherever you choose to live. You have options, so don’t overpay for your home or you might wind up falling out of love rather quickly, especially when you’re writing out a monthly mortgage check for more than you should pay.
- Don’t Supersize – When making your purchase you’ll be offered numerous upgrades. While you could theoretically accept these upgrades, you’ll likely overpay substantially. Instead, arrange for upgrades yourself by hiring a competent contractor to do the work for you. The quality will be just as good or better, and you’ll save big.
- Require Inspection – While the home you purchase is new, there’s only one way to know with any certainty that it is flawless. By requiring an inspection as a condition of purchase, you’ll have the peace of mind of knowing that everything is as perfect as it appears. If the builder balks at this requirement, remind them that you’re the customer and that they don’t have anything to worry about if the property checks out with the inspector.
You can come out on top when negotiating the purchase of your home without a real estate agent, but it will take some common sense and a willingness to keep your eyes open to some of the shenanigans that builder representatives will use to coerce you into paying more than you should.
In our experience in dealing with builders we’ve seen it all. If you’ve never before dealt with a builder you don’t know what you’re in for, so let us know any questions or concerns you have about the process. It’s always better to arm yourself with the ammunition you need to shoot down the builder’s best efforts to get you to pay more than you should. You can post your comment below or contact us directly for immediate answers.
