Before the Internet, we had to rely on books for information (thousands of Millennials suddenly gasp in horror.) We didn’t have social media news feeds, there were no blogger insights and Google was just a baby. So what did we do in the year 2000?
We went to the library and we borrowed books.
One of my favorite series from the reading room was “The Girlfriends’ Guide” by author Vicki Iovine. Popular for its extremely candid, no-nonsense take on practical tips and honest reassurance about what to expect – I have decided that this is what real estate needs.
Here it is in Top Ten format, The Girlfriends’ Guide to Buying New Construction.
#1. Who’s Who in the Transaction, A Conversation About Agency
Starting with the basics. A legally binding contract is a few things; a written agreement between competent parties with acceptable consideration. In the case of new construction, the buyer and the builder are considered the parties. Each party also has representation, much like attorneys representing their parties. So let’s be clear on who this representative is – HINT: It’s not the sales representative that works in the model home.
Let me explain why this is important. When buyers visit the sales center, they’re greeted by a sales person who should be knowledgable on the community; the lots, the amenities, the homes, the options, the pricing and the delivery dates. One can only hope that this information is readily available. Advance the conversation to contract and you’re ready to negotiate. Unfortunately some of these sales people can be rather territorial and (for lack of a better term) are “gatekeepers” to the decision makers.
The most recent example I can offer is a community in Chantilly where a Van Metre rep told my clients they needed a 5% earnest money deposit in order to secure a lot and build a home. Non-negotiable. “And we’re getting it all day long”, is the way he phrased it. FIVE PERCENT IS HUGE. That’s a lot of cash. For a contract that is completely binding after a 3-5 day (a week at best) review period, that’s an unusually large amount of money. So my clients walked away, disappointed that the subdivision wouldn’t be an option for them. A few months later another client tours West Park at Brambleton, also by Van Metre, where upon I have to disclose in warning – this might be more than you’re comfortable with since we already know that the earnest money deposit is 5%. But wait! We’re told that even with only two lots remaining, they would be more than happy to compromise on the deposit schedule.
How is it that one community tells us it’s a 5% deposit up front and the other says they’ll consider a payment schedule with the 5%? Shouldn’t the builder have policies in place about what they will and won’t do? The answer is both yes and no. While there are rules (or shall we call them guidelines), there are always exceptions. When it comes to contracts, EVERYTHING is negotiable and you won’t make any movement in your direction unless you ask.
Case in point, let your Realtor negotiate these terms for you. Don’t walk away defeated, you’re not even dealing with the decision makers. Many buyers think that it’s a good idea to cut the real estate agent out of the transaction and use the builder representative. Thinking that they’ll save the commission is a real estate myth that is absolutely FALSE. Not only is this quite possibly the best service that you’ll ever receive, you won’t be charged for it. Agents are compensated as part of the purchase, the commissions are already built into the price. If the builder negotiated this out of the contract and gave you a lower purchase price, they’d end up setting a precedence for every home buyer to approach this way. These sales representatives are not looking out for the buyer’s best interests but that of the builder. If you don’t know what you don’t know, who are you looking to for advice on what’s reasonable and what isn’t? (Please don’t say library books.)
So here is my homage to Mrs. Iovine. I present to you “The Girlfriends’ Guide to New Construction.” In this 10 part series, I’ll cover the top ten things that every home buyer should know before they consider purchasing new construction homes.
Next week, we’ll cover Part Two: If It’s Not In Writing, It Didn’t Happen, A Conversation About Contracts