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If I buy a new home, do I need an Agent?
Searching new home ads and driving to model homes
There is not as much difference between buying a new home and an existing home as there is when buying new cars or used cars. A ten year old home that has been well cared for and is located in a good neighborhood can be as well-built, as useful, and perhaps better all around than the new home; it might even be worth a lot more. You do not need a real estate agent to buy a new home. But a home is such a large investment that it makes sense to consider using an agent. Here are some reasons you might want to consider using an agent to help you purchase a new home.
Price comparisons
Let’s look at the example above, of two similar houses, one new and the other ten years old. The “older” home might be in a much better neighborhood, closer to many more shopping and work areas, with better schools. The new home might be worth $300,000, and the older one $350,000. This situation of new vs used rarely happens with other types of assets. Rarely is a ten year old car worth more than a similar new one, for example. An agent can show you the new home developments or even new home plans that might emulate the existing properties.
Area comparisons
There are certain areas in every housing market that “ripen” very well; they become extremely desirable within the first decade of their existence. Sometimes they become even more desirable after the second and third decades. The trend can continue with new developments. An agent that is familiar with new housing can give you a very good indication about the ability of certain areas to match the future value increases of those fine older areas.
A professional on your side
Keep in mind that the builder’s salespeople are similar to a sellers’ agents in the existing real estate arena; they owe their fidelity to their company. You, on the other hand, will only be their customer. You will be your agent’s client, and your agent will owe his or her fiduciary responsibility to you.
How is the agent paid?
Builders have certain marketing budgets; included in those budgets is a real estate commission. Commissions paid to brokers by builders vary, but they are typically in the range of the commission the buyers’ agents receive on an MLS commission for existing properties. The fact that the commission is part of the builders’ budgets, the fact that there is an agent involved will have no bearing on the price of the home.
Why would a builder want to pay a real estate commission?
One would think that builders would not want to pay a real estate commission and reduce their profit on a particular house. But most builders welcome the help of real estate agents. Each additional buyer increases the builders’ sales volume, which increases their buying power with sub contractors and material suppliers, and it also increases the bottom line profit at the end of the year.
How is a new home’s value determined?
Professional real estate appraisers use the prices of recent home sales (comparables, or comps), replacement cost, and property condition to come up with the value of a particular property. Builders rely on construction costs and the cost of land to set a minimum price, but are forced by comparable sales in the area to set the final selling price of their homes. In other words, if an area is selling in a price range of $100,000 to $200,000, it’s very difficult for a builder to build a house that will appraise for $300,000 on an existing lot; however, there are exceptions. Irving and the Park Cities have many examples of wide variations in the value of houses in the same neighborhoods.
In most areas of the DFW Metroplex, the value of new homes generally stays within certain parameters set by the surrounding neighborhoods. But value for the buyer is not simply in price. Purchasing a house that provides many benefits and future appreciation is more important. This is where a knowledgeable agent can lead buyers to the best new home value.
Do you have specific questions on purchasing a new home? PLEASE CALL US.
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