Most real estate agents are experienced with buying and selling resale homes, but what about newly constructed houses?
In 2016, sales of new single-family homes rose 12% to 563,000 units, according to HUD and the U.S. Census Bureau. That was the highest annual rate since 2007. Housing starts are expected to increase 10% in 2017, according to the National Association of Home Builders (NAHB).
It’s easy to see why buyers like the idea of purchasing a brand new house no one’s lived in. The opportunity to get all those dream amenities, energy efficient technology, modern design, and smart features is hard to pass up. But resale and new home sales are not the same, so it’s wise to learn a little more before considering buying or selling new houses.
How are New Home Sales Different from Resales?
New home sales are often more complicated and require agents who are experienced. The buyer’s agent may need to accompany the buyers on their first visit to the new home development and register them.
There are several ways new home builders are different than sellers of “used” houses. Builders have no emotional attachments; it’s all about the bottom line. The longer a new home sits unsold, the more money the builder’s losing. A good agent will see old inventory as an opportunity to strike a good deal for her client.
While the listing prices of resale homes are based on the prices of similar properties in the area, a builder’s prices are influenced by the cost of the land, size, material costs, and labor costs among other factors. Also, near the end of a quarter is a good time to take advantage of incentives builders offer to meet their sales goals.
New Home Sales Myths
Myth: Buyers just walk into the builder’s office, pick the design and lot they like, and sign the contract. No need for a real estate agent, right? But it’s not that straight forward. That new-home site salesperson represents the builder’s interest, which is getting as much money as possible. When a buyer hires a real estate agent, he or she has an experienced advocate whose only loyalty is to the buyer; the only goal is to get the best deal for the buyer.
Myth: If you don’t use an agent, the builder will reduce the price because there’s no broker commission. Wrong. Buyers are not saving money here. Lowering prices on newly constructed houses will affect sales of other properties in the neighborhood.
Myth: Money is not negotiable. While the sales price may be firm, closing costs and upgrade costs may be negotiable. A smart real estate agent will know where there is some leverage.
Myth: Early bird gets the best price. Sometimes waiting can save buyers money. When a new phase of construction starts in the development, prices for the previous phase may be set to increase. Buyers can save money if they can reserve a home beforehand.
Myth: You’ll automatically get the design options you see in the model homes. The builder’s models are advertisements to entice buyers. They include the best design options the builder has to offer. These attractive options are likely add-ons or upgrades that the buyer will have to pay for.
Tips for New Home Sales
If you’re new to the new home sale biz, here are a few tips:
- Buyer’s agents should determine which options are standard and which are available at a price; tell buyers about this to avoid unpleasant surprises later.
- Do your homework. Construction terminology and methods, blueprint reading, and architectural and site design are just some of the unique features agents should learn to best serve their clients. Can you look at construction drawings and see whether they match what the buyer expects? Do you know which is the best lot?
- Consider buying the model home. When the new houses in a development are nearly full, the model home may be for sale. This house has all the best features and upgrades.
- Ask brokers in your office with new home experience for advice and tips. Accompany him or her through the new construction process to learn how it all works.
- Emphasize the contemporary finishes and energy efficient features.
- Research the builders. Question the builders’ previous clients about whether they were happy with what they bought. Also check builder credentials, ratings, subcontractors, and financial health.
- Research the service and warranty policies and procedures and educate your clients. Good builders are willing to correct their mistakes.
- Advise loan shopping. Some builders may offer incentives to use their preferred lender. But buyers should still shop around for the loan that’s right for them.
And that’s just the beginning; there is so much more to learn about new home sales.
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