Should you buy a new home directly from the builder?

Some new home buyers believe that if they buy a new home directly from the builder or the builder’s sales person, they will get a better price.  But is this true?  Do you get a better deal buying a new home directly from the builder?

First, we should address a “better deal” and what constitutes a good “deal”.  If it is strictly price, then, while I think it is somewhat short-sided on the part of the buyer and falls in that “penny-wise, dollar-foolish” category, in some instances, with some builders, the builder will save some cost by you buying from their agent.  This is the result of the builder having an agent that will get paid less commission that the builder would pay a buyer’s agent then if the builder chooses to pass that savings along to the buyer, rather than keep it, the buyer should receive a better price.  However, just like the possible savings motivated the buyer to deal directly with the builder, it is unrealistic to think that a builder is not going to feel the same and be motivated to have a better profit margin dealing directly with the buyer and instead would choose to forego the savings and give it to the buyer in the price. Plus, most builders appreciate and understand, the vital role a buyer’s agent plays in the transaction and wants to encourage agents to show and sell their homes, so they typically avoid doing things that look like they are trying to cut an agent out of a deal by dealing directly with the buyer.

Next, since there are many more important things to be focused on when buying a new home other than price (although value is certainly one of the things to be considered) I think it quickly becomes apparent, a good new home buyers agent is a “must-have” on your new home checklist.

Why do you need a buyer’s agent when buying a new home?

I could go into great detail here, and make this a rather long article, however, instead, I’ll give you the bullet points and then recommend you check out my “Things To Consider When Buying A New Home…from an industry insider” page for complete information.

  • Representation and Fiduciary Responsibility.  A buyer’s agent works on your behalf and, in fact, has a legal, fiduciary responsibility to work in your best interest at all times.  Your agent’s license and livelihood depend upon doing this as, if they fail to represent you properly,  they put their license at risk.  Additionally, if the agent makes an error or mistake, they are most likely covered under an Errors and Omissions insurance policy.  The new home salesperson, or marketing representative, working directly for the builder may not even be licensed (it’s not required if they are an employee for the builder) but, even if they are, have a fiduciary obligation to work in the best interest of their client, the builder.
  • Builder reputation and past experience with the builder.  An experienced new home buyer’s agent is going to be familiar with the builders in St Louis, know their reputation and, in many cases, have sold one or more of their homes before.  This prior experience can go a long way to helping a home buyer choose the right builder and feel comfortable that their home building experience will be good and that the finished product will be the quality they expect.
  • Value.  This is where the agent’s experience can help tremendously again.  when you buy a new home, you almost end up with some “negative-equity” when you are done meaning that it may be difficult to resell your home immediately for what you paid for it.  This is ok, and to be expected as there is a price to pay for new construction and for getting your home as you want it.  However, a good agent can help you make smart choices on where to spend your money, in terms of features and upgrades and where not to.  Your agent can also show you comparably existing homes so you can see the premium you may be paying for new construction and weigh the difference.
  • Affiliated business relationships.  Many builders have relationships with, or own in part or whole, a title company, mortgage company and/or another service provider, and will, in many cases, strongly encourage you to use these companies. While the recommended company may be a good one, and in fact, the best choice for you, a buyer’s agent will make you aware that you have a choice as well as provide you with information on other providers.
  • Survey, Inspection and more.  I think it is safe to say that most buyers that buy a new home direct from the builder do not obtain their own boundary survey from a third party survey company, often don’t obtain a title examination and title insurance from a third party company and rarely have a private building inspection done.  Given the size of the investment you are making, these are all important things to consider and things a good new home buyers agent will make you aware of.

There are the bullet points. For more information, I would suggest you check out “Things To Consider When Buying A New Home…from an industry insider

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