Buying New Construction

Of course, buying new construction brings on the fulfillment of living in a brand new home. Before you jump in and sign a contract, there are a couple of things you should be aware of.

When you start looking at new construction, there is usually an agent or a group of agents there to service you. These agents are hired by the builder of the development to help sell the properties. In a normal transaction this type of agent is considered the “Listing Agent” and has a fiduciary duty to his/her seller (in this case, the builder). If you recall in another article we wrote, Agency Relationships, an agent must represent his/her seller with utmost care, honesty, etc. In other words, this agent does NOT represent you, the buyer, in any way.

Furthermore, an agent who represents a builder presents a purchase agreement to you written entirely by the builder. In a normal transaction, C.A.R. (California Association of Realtors) documents are filled out. These documents are recognized by the Department of Real Estate and have been drawn, edited, redone and updated by legal attorneys to protect buyers from injustice. If you as a buyer walk in to sign the builder’s purchase agreement, not only are you unrepresented, you are signing unrecognized documents and you are agreeing to the builder’s terms and conditions.

Our recommendation… Have a real estate agent represent you when looking at new construction. Instead of relying on yourself or the listing agent (who does not represent you), you can go to your own agent who has the professional background to answer questions and concerns, who has the knowledge in what to look for in the builder’s purchase agreement and who has the experience in negotiating price and terms.

We know what you are thinking… Who pays for a buyer’s representation? When the property is sold a commission is paid to both agents from the seller’s profit. In this case, the builder does.

*IMPORTANT* – Your agent MUST be with you the FIRST time you visit the new construction sites. If not, most builders will claim you as their client and you will be unrepresented. Why? Obviously, they want to avoid dealing with other agents who have the negotiation skills to lower the price and change the terms.

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