Wednesday, February 10, 2016

Can I use a Realtor to buy a New Home and should I?

Here in South Orange County, we have several new communities popping up. Locally we have Baker RanchThe Oaksat Portola HillsSkyridge in Mission ViejoCamden Square inFoothill Ranch just to name few.  

This is good, as resale inventory is very tight.   However, it is also an area that Home Buyers often do not think they can use a Realtor to assist them with finding a home or to negotiate terms.   Buyers often will pop in as they are driving around, fall in love and then maybe contact their local agent once they decided or have placed and offer. 

The problem here is it is too late.   If you have already visited the property and registered most new home complexes will think of you as their client and will not let you use a agent.  
Below are some tips of why it is a good idea to use an agent when looking at new homes:

1.  The Overall Real Estate Market:  Though new home pricing is going to be typically higher than resales, understanding the market trends is key in pricing negotiations.  Your agent should understand the overall market as well as the demand for these homes.

Example:   In my area the average price per square foot has increased about 22% from the first launch of a new community overall.  
• 2014 Small 1st Launch - Average Price Per Square Foot - $367
• 2015 1st Real Phase - Average Price Per Square Foot - $380
• 2016 So far - Average price Per Square Foot - $417

When you break it down further, of course attached vs detached, estates vs standard single family are all going to be different but from 2014 first introduction to what is selling today the average price per square foot rose approximately 22%.    

2.  New Home Negotiations:  There are several areas that builders will give incentives, could be lending, price, design features etc.  But without knowing the true value of the home how can you negotiate these features.

Example:  One of the Builders in the area is giving a $6k lender/design credit and homes ready to go have approximately $28,000 in designer upgrades.    Which is very generous.   However, if I take the price per square foot, at the current levels the homes in this phase are still a bit over-market with approximately 10 homes ready to be completed within the next 2 months.   Is there room for negotiation in the price... Certainly.  Might it better to negotiate design fixtures?  Is your lender providing a better deal? All these aspects should be looked at.

3.  Timing:  If you are interested in buying a new home, but need to sale your current home, timing is a critical factor.  If your new home is not going to be ready for awhile, but the market is hot now, what should you do?  Most builders do not take contingent sales, so your home needs to be listed and sold long before the close so funds, etc are available.  But where will you go...

Example:  A neighborhood of homes launching this year is previewing in April but move in dates are not until September.  The buyer is excited and has put down a reservation, thinking I have plenty of time to sell, but not thinking about the pricing of their home.   Ideally, if you were a seller you would list your home in June/July to make the move in September.   What's the problem... here in Socal late July is the beginning of the down curve in sales..  Buyers are finishing up vacations, getting kids off to school which means homes typically stay on the market longer and if not priced correctly begin to be reduced. 
Reviewing the strategy with your Realtor may help you list in spring and structure the sale of your home to include a rent back or a longer escrow. Netting you more profit!

4. Cost:  There is no cost to you as the home buyer, so why not have a 3rd party involved to make sure your interest are being looked after.   To use an agent when you shop for a new home, has a huge cost benefit to you!  Though the agent will not be involved in all the details, the builder is going to compensate the agent for bringing you in.  Looking above, if the agent is helping you to negotiate, price, design features i.e. reducing your cost,  I think you would agree it is well worth the call to have your agent go preview new homes with you.
If you are seller, understanding this structure is also important.   Is there negotiation power here for you with both the purchase and sale of your home?
It is important to note not all builders provide agents with a co-op referral and often times it is less than the average commission an agent would make.  However,  the agent should be with you every step of the process,  the builder is going to do most of the work when it comes to the transaction paperwork, etc.  

If moving to a New Build Home is a goal of yours, it is key to review the details with your local agent.   We understand it is tempting to just pop bye and preview those lovely homes but it could be costing you thousands of dollars.   PS... Agents like to look at new homes too!!

Should you be interested in previewing any of the new homes in Baker Ranch, Foothill Ranch, Irvine and Portola Hills please give us a call.  We regularly preview all new communities and have a wealth of information to share with you.   


If you do need to sell your home first, we also have a specific program designed for Home Sellers who want to buy new, so don't hesitate to give us a call.

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