Most builders pay commissions to agents ONLY IF the agent accompanies the buyer to the development on the first visit.
So agent beware: If your buyer(s) “just wanders into a new constriction’s sales office” and registers on their own, it can, as I worked with one agent for many years whose brother and sister-in-law did just that!
That cost the agent about $30k in lost commissions, and the strife within the family made for a tense Fourth of July celebration!
It’s better to find out which developer(s) pay commission and deal with that issue immediately before the same situation happens to you!
Why a New Home May Cost Less Than Expected
It may be time for agents to escort buyers to look at new construction who need help finding suitable existing homes for sale.
Homeowners continue to hang onto their low-rate mortgages rather than sell, keeping existing homes off the market.
Meanwhile, homebuilders (nationwide) have hundreds of thousands of unsold dwellings in their inventories.
Many home builders offer incentives to entice buyers into signing purchase contracts. According to the National Association of Home Builders, 57% of builders provided some kind of incentive in February.
Even first-time buyers, who tend to have lower housing budgets than move-up buyers, could benefit from shopping where new houses or condos are going up.
Believe it or not, a few builders pursue first-timers. D.R. Horton is one; it reported that 65% of homes it sold in 2022 cost less than $400,000.
Understanding how new construction deals work differently from existing home sales can help you find savings behind the sticker price.
Builders prefer incentives to lower prices.
The NAHB says 31% of builders reduced prices last February by an average of 6%. That signifies distress; builders don’t like to trim prices.
“You can’t just blindly reduce prices,” Sheryl Palmer, CEO of Taylor Morrison Home Corporation, said. “I think the more you just reduce prices, the more the consumer expects us to do.” Plus, cutting prices in a housing development can infuriate customers who bought earlier at higher prices”.
Using incentives can decrease the total cost of the buyer’s contract while making it appear they paid the same as their neighbors. Palmer added that customers mostly need “help on the monthly payment and help with cash to close.”
Builders across the US have landed on that same conclusion, focusing on financial incentives to sell homes.
According to the NAHB, in November 2023:
• 29% of builders paid closing costs or fees.
• 27% offered options or upgrades at no or reduced cost.
• 26% paid to reduce the buyer’s interest rate temporarily.
• 24% paid to reduce the buyer’s interest rate permanently.
Negotiate lower closing costs, such as rate locks.
When you get a mortgage, you incur thousands of dollars in fees, known as closing costs. However, because large homebuilding companies offer mortgages or are affiliated with their preferred lenders, they can employ creative financing.
The builder can pay some closing costs while holding the line on prices. It’s a way to offer a quiet discount while standing firm on price.
With construction delays rampant, one type of closing cost has become prominent: the fee paid for an extended rate lock.
Lenders often charge additional fees to lock a rate for more than 30 or 60 days. So, what if a builder doesn’t complete the house on time? In that case, it might extend an expiring rate lock without charging a fee.
Construction delays aren’t the only reason a builder’s lender offers a free or inexpensive extended rate lock. Extensions can also help buyers who need to sell their current homes first.
Look for discounts on upgraded amenities.
When you shop for a new house under construction, the builder tries to upsell you with customized amenities and fancier materials: a kitchen island, gorgeous shower tile, and ultra-energy-efficient windows.
Ideally, both sides benefit from upgrades, with the builder making a profit on markups and the buyer paying less than it would cost to get the work done later as a renovation.
An eager-to-sell builder might throw in such upgrades free or for cheap while holding the line on the home’s base price.
The builder will likely request a bigger deposit for upgrade discounts. After all, if you cancel the purchase after the builder installs your upgrades, the builder might have to cut the price to attract buyers who don’t share your taste.
