Before You Walk Into That Model Home… Read This
I love a model home.
Everything is spotless. The furniture is perfectly placed. The kitchen counters are enormous and somehow nobody owns a toaster. You walk in thinking, I’m just looking, and twenty minutes later you’re mentally deciding where the dog beds will go.
But before you head out to tour new construction, there is something I want buyers to know:
Consider calling your Realtor first.
Not because you need someone to help you admire the kitchen backsplash. You can handle that part.
You want someone there because the builder already has professionals representing the builder. It makes sense to have someone representing you.
MONIKA’S TIP
Thinking about spending Sunday touring model homes? Call or text your Realtor before you go. Some builders have specific rules about when your agent must register or accompany you. Don’t wait until you’ve found “the one” to mention that you have an agent.
But Aren’t New Homes Easier to Buy?
They can certainly feel that way.
You aren’t negotiating with another homeowner. There’s no wondering what somebody did to the plumbing in 1997. You may have warranties, energy-efficient features, modern floor plans and the ability to choose finishes.
And right now, builders may have another very attractive advantage: financing incentives.
You’ve probably seen the advertisements:
“Rates starting at 4.99%!”
Meanwhile, you’re hearing that mortgage rates everywhere else are considerably higher.
So how can the builder do that?
Here’s the simple version:
Someone is paying to get that interest rate lower.
Think of a mortgage rate as having a price. Money can be paid upfront to the lender in exchange for a lower interest rate. That’s called buying down the rate.
With a traditional home purchase, a buyer might choose to pay that cost themselves.
A builder, however, may offer to pay some or all of that cost as an incentive to get you to buy one of their homes—especially when they have homes or lots they want to sell.
For example, let’s say the regular market rate available to a buyer is around 6.5%, but a builder is advertising 5.5% through its preferred lender.
The builder hasn’t discovered a secret mortgage rate nobody else knows about.
The builder is essentially spending money to help get your rate from 6.5% down to 5.5%.
Why would they do that?
Because lowering your mortgage payment can make the house more affordable to you—and that can help the builder sell more homes without necessarily cutting the advertised price of the house.
That’s why those incentives can be very valuable.
A Lower Rate Doesn’t Always Mean a Better Deal
Don’t look at the interest rate by itself.
Maybe the builder is offering a fantastic rate but the home is priced higher than comparable properties. Maybe there’s a large lot premium. Maybe the beautiful model you’re standing in has $100,000 worth of upgrades that aren’t included in the base price.
Or maybe it really is a terrific deal.
The point isn’t that builder financing is good or bad. The point is to understand the whole deal.
The Person in the Model Home Is Doing Their Job
And their job is to sell homes for the builder.
There’s absolutely nothing wrong with that, but it’s important to understand who represents whom.
The builder’s sales representative works for the builder. The builder’s contracts were prepared for the builder. The preferred lender has its role. The title company has its role.
Who is looking specifically at the transaction from your side of the table?
Your agent can help you evaluate the entire transaction—not just the shiny house in front of you.
What Could an Unrepresented Buyer Miss?
New construction comes with decisions and details that aren’t always obvious when you’re walking through a gorgeous model.
The contract. Builder contracts can differ significantly from resale contracts. Deposits, deadlines, cancellation rights and construction delays all deserve careful attention.
Your deposit. Deposits can be substantial, especially once you add upgrades. Know when that money becomes nonrefundable and what happens if something changes before closing.
The real price of the house. The base price may not include the lot premium, flooring, countertops, landscaping, appliances or the upgrades you loved in the model. Those additions can add up quickly.
Incentives versus price. A lower rate or closing-cost credit may be a great deal—but look at the whole picture: price, financing, incentives, upgrades, fees and comparable homes.
Inspections. New doesn't mean flawless. Depending on the builder and contract, you may have opportunities for independent inspections during construction and before closing.
Construction timelines. Completion dates are estimates. Materials, labor, permits, weather and other factors can affect your move, current housing and financing.
The final walkthrough. This isn't just your chance to admire the new kitchen. It's when you identify unfinished or damaged items and determine how they'll be handled.
After you move in. Builder warranties have procedures, deadlines and limitations. Know what's covered and how and when to report a problem.
Resale considerations. You may be building your forever home, but plans change. Lot location, floor plan, upgrades and the surrounding community can affect the home's eventual appeal.
None of this means there is something wrong with buying new construction. It means there is more to buying a new home than picking your favorite floor plan and choosing countertops.
“But Won’t I Save Money If I Don’t Use a Realtor?”
This is probably one of the biggest misconceptions about buying new construction.
Not necessarily.
The builder establishes the price of the home and determines what compensation, incentives or concessions it is willing to offer. Choosing not to have your own representation doesn’t automatically mean the builder will take whatever it might have paid a buyer’s agent and hand that money to you as a discount.
And remember: the builder already has representation.
You can absolutely buy the house without an agent.
The question is whether you want to make one of the largest purchases of your life without someone whose job is to represent your interests.
For me, that’s what buyer representation is really about. It isn’t about having someone unlock a door or walk around a model home with you. It’s having someone help you ask the right questions, understand your options, keep track of the details and look at the transaction from your side of the table.
One Important Thing Before You Visit
This is the part I really want buyers to remember.
Call your agent before you make that first trip to the model homes.
Builders have their own policies regarding buyer-agent registration and compensation, and in some cases your agent may need to accompany you on your first visit.
Don’t wait until you’ve toured the models, fallen in love with Lot 27 and started discussing numbers to say, “Oh, by the way, I have a Realtor.”
Make that call first.
When you choose an agent to represent you as a buyer, you’ll also have a written Buyer-Broker Agreement explaining your relationship with the brokerage, the services your agent will provide and how your agent will be compensated.
That’s a good thing. Before you get deep into a transaction, you should understand who represents you, what they’re responsible for and how they’re being paid.
If you have questions about the agreement or buyer-agent compensation, ask. A good agent should be able to explain it in plain English before you sign anything.
New Construction Can Be a Great Option
I’m not trying to talk anyone out of buying a new home. Quite the opposite.
Between builder incentives, financing opportunities, warranties, energy efficiency and the ability to personalize your home, new construction can make a lot of sense for the right buyer.
I just don’t want you walking into the process alone because the model-home experience makes it feel simple.
The builder has a team.
You should have someone on your team, too.
And yes, I’ll happily spend a Sunday touring model homes with you.
Someone has to make sure you don’t accidentally buy a house because you fell in love with the backsplash.
Mabel’s Tip: Tour the model home. Admire the backsplash. Call your Realtor before you pick out the dog bed location.