Working with New Construction Home Buyers: 5 Things Agents Should Know

Selling new construction homes is a different beast.

The new construction market is booming and more buyers (especially first-timers) are opting for building new construction homes. As a real estate agent, this is a market you shouldn’t ignore. It’s important to know that this market is different, and it involves different processes, partners, and best practices. Want to give your client the best home buying experience? Here are five things you should know when working with new construction home buyers.

1. Give your buyer info up front

As a real estate agent working with a new construction buyer, it’s critical that you are completely educated on not just the mortgage process, but the process of building a new home too. And with that, it’s important that you educate your buyer on both processes and how they work together. But be forthcoming with information. Giving information to your buyer up front sets realistic expectations for them and helps shape a clear path to the closing table.

If you’re a smart real estate agent, you know it’s so important to have relationships with home builders. One of the best things about having a relationship with the builder is that you can be the first to get information. It benefits you and your buyer to be completely in the know about the builder’s process and selection options. Plus, if you have a good relationship with the builder and they give you specs about the property and neighborhood, you can take those to your buyer’s lender. This can help move your buyer through a pre-qualification more quickly and can make for an overall smoother mortgage process.

It’s critical that you are completely educated on not just the mortgage process, but the process of building a new home too.

2. Work for your buyer’s best interest

Since building a new construction home is a fairly complex process, it benefits you and your buyer to pay attention to the details of the process, have good communication with the builder, and make sure nothing is overlooked. This means you ensure that things like upgrades or special requests happen on time and as agreed upon. Having open communication with the builder is key to this process. Working for your buyer’s best interest means you’re not just checking in on the process—you’re making sure their home is being built on time and to their liking.

A real estate agent with a client building a new construction home has a unique role in that they can clearly set expectations that the mortgage lender can’t. They also understand the needs when building a new home and can point their buyer to the best lender for the job. A lot of builders have preferred lenders, and you might think that sending your buyer to one of them is the best way to go. Sure, it might be more convenient for you, but it’s better to do your homework.

Don’t always assume the builder’s preferred lender is giving your buyer the best deal. It’s important to compare the builder’s preferred lender with other lenders and to be well-versed in the fees and requirements involved in the mortgage process. You should know where flexibility is possible. For example, the builder’s preferred lender might not budge on FICO requirements, but a non-preferred lender might. They also might have fewer overlays and fees. Just advocate for your buyer and point them to the best lender you know.

3. Educate them on the builder process

The process of building a new construction home can be very different from the process of purchasing an existing home. And it’s up to you to know the build process well and know how to best advise your buyer. Home building is a market all its own. If you want happy customers, you should know everything that surrounds new construction building and lending. Things like home design and layouts, blueprint reading, different materials used, etc. All these and more are good to know so that, when your buyers have questions, you know what you’re talking about and can help them have the best home buying experience.

Plus, each builder is slightly different. The construction process can vary depending on who’s building the house. And on the mortgage side of things, some lenders have builder-centric loan products. They might offer loans specifically for new construction or renovation homes, with features like extended locks and programs that protect against rate changes. Knowing who offers what is crucial to getting your buyer exactly what they need.

Home building is a market all its own.

4. Talk to them about the costs

Another important part of your job is preparing your buyer for additional costs. Help them realize that costs change throughout the process and, based on their selections, they may incur additional costs that the lender will need to verify in order to make sure they’re getting the right loan for their needs. So while you’re setting expectations with your buyer, be sure to ask the lender the right questions, like “Where can we expect added costs?” and “How do those costs affect my client’s mortgage or the approval process?”

It also helps to debunk a myth for your buyer: the builder isn’t going to lower the sales price of the home if they go without a real estate agent. Sadly, this is a myth a lot of home buyers believe. But most builders actually expect to pay commission to the buyer’s agent, so that cost is already factored in from the start. If the buyer goes without a real estate agent, the sales price won’t decrease. Rather, the builder could simply pocket the commission that would’ve gone to the agent.

On the topic of costs, you should also find out which options are standard versus which ones are upgrades. Then, tell your buyer so there are no surprises down the line. Upgrades equal added costs, and the model home will always have all the best features and upgrades because the builder is out to make the most money possible. So before you walk through the model, be sure to ask the builder’s representative what’s going to cost extra so your buyer doesn’t fall in love with upgrades they can’t afford.

Smart Home Upgrades: How to Renovate for the Future

5. Know where to negotiate

Again, this is a huge part of working for your buyer’s best interest. You’ve got to know that builders, unlike sellers of existing homes, aren’t emotionally attached to their properties. They make decisions based on what’s going to best impact their bottom line. Which means there are areas you can negotiate to get a better deal for your buyer.

Usually, a builder won’t budge on the price tag. Building and labor costs are pretty set so it makes it very hard to negotiate the purchase price. However, the longer a house sits on the market, the more money the builder is losing out on. You can make this work to your buyer’s advantage by finding out which of the builder’s homes have been on the market the longest and negotiating the purchase price on those. Or, regardless of how long the home has been sitting on the market, see if the builder will offer to pay for closing costs or design upgrades. There’s usually some wiggle room in there if you know where to look.

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About the Author

Laura is one of our blog authors. Currently living in Charm City, she's a Great Lakes native who likes salsa dancing, brews a mean cup of Joe, and reads the Chicago Manual of Style for fun. As a young first-time home buyer, Laura likes writing educational pieces that dispel mortgage myths and give helpful hints about what the home buying process is really like.