Use my own agent to purchase a new build? Or use sellers agent?

Question

I have a few questions regarding new builds and what I can expect my buying agent to be able to offer. There are a lot of new builds coming up in an area that I believe will continue to appreciate, and as with other areas in the other country I believe, prices are getting discounted by builders. These could make very good rental units and I am getting ready to make an offer on a few of them.

In the past, when using an agent to make offers, I expect that the agent I use will make more than their worth to me by helping me to make a competitive offer, running comps, negotiating, having a rolodex of contacts if needed, getting what I need to know about why the original seller is selling, and possibly finding me deals to offer on and so on. However, with new builds, there is not much room for negotiating as everything is new. There will be no haircuts or credits after the close we can negotiate as again everything is brand new. These homes also come with a builders warranty (I believe its 5-10 years or so).

I am considering reaching out to the seller's agents and seeing if they would work out some sort of a discount for using them, and they in turn would be both the sellers and buyers agents. On some of these homes, even a 1-2% discount could represent upwards of 30k-50k depending on the home. But if I am willing to pay the asking price, this could be the only way I see to get any money off the deal, and again, since everything is new, I do not see much room for negotiation after anyway. Obviously since the same agent is the buyer and the seller this leads to some opposite drivers as far as who they would represent the best and will put who's best intentions forward, but I know people have done this is the past.

I am hoping someone can enlighten me on:

1) the pros/cons of using the same agent

2) what a buyer agent can provide, that I'm not thinking about, that would be worth more than a potential 1-2% discount I could try and work out with the sellers agent

3) how I can protect myself if I decide to use the same agent for both the selling/buying of the home

4) best approach to reaching out to the listing agent to see what they can offer as a discount - if you've done this in the past - what discount have they given you?

5) anything else I am not seeing or should be considering with purchasing a new build

Thank you in advance, I have learned so much from this forum already and looking forward to a great discussion!

Eliott Elias · Answer

Use your own agent, one that has experience with new builds. They will represent your best interests, the sellers agent won't care if there are still finishing touches that need to be done after you close. Builders want to move inventory, not make sure you are 100% protected

Billy Daniel · Answer

A single agent representing the buyer and seller is referred to as "dual agency".  Some states don't even allow it.

You could get a commission discount if the agent is willing, but why would they be willing?  If an agent easily gives up on negotiating their own pay, how well are they going to negotiate your $300,000 purchase?

While agents have a fiduciary duty to every client, most agents who represent builders have a deal to sell all their new builds.  This means that the agent will likely be more interested in preserving the relationship with the builder to ensure future listings.  Therefore you could expect them to be weak when negotiating for you and strong when negotiating against you.  Obviously this isnt true for every agent, but there are some bad actors out there.

Even for the best agents dual agency is hard.  My advice would be to get your own agent and pay the full commission.  Especially if you are spending millions of dollars on properties as you stated 1-2% could be $30k-50k.  Pay the money and get your best representation.

Malkia Ra · Answer

Never use seller's agent... period.

Lydia S. · Answer

In addition to the great responses so far, let me add a few things.

Builders are not known for reducing the sale prices and may suggest they’ll throw in some upgrades if you don’t use your own representation, however, a good buyer rep will still negotiate those things for you AND get you a possible price reduction.

Your rep will point out differences in the builder’s sale contract (as they don’t typically use the State Real Estate agreement, at least in my experience).  These differences include the appraisal contingency, which requires the buyer to cover any difference if the appraisal comes in low, unlike the State contract which allows the buyer to negotiate the price, or terminate and get earnest money back.  I was recently able to negotiate a substantial price reduction for my buyers after a low appraisal on a new build.

A buyer rep may need to be a squeaky wheel to get various documents or State electrical inspections or the certificate of occupancy if the listing side is dragging their heels on deadlines.  I have had to be persistent with the sellers rep to get these things done in time on a build that was falling behind the timeline and the buyers rate lock was about to expire, meaning they would’ve had to nearly double their interest rate!

Of note, many builders are offering discounts or credits where I am since the market has cooled and buyers can benefit from interest rate buydowns.  If you don’t have an agent, you may not be aware of the savings offered, so definitely ask.

If the building is not yet complete, your agent should and could ensure that you get inside for a few walk-throughs to check on progress along the way.

Lastly, if you are looking for a new build and a completely new neighborhood, just remember there might be an HOA which could limit the number of rentals now or in the future.

Wale Lawal · Answer

@Jeremy Carlson

Below are fiduciary duties cover six distinct areas.

• Accounting – The buyer agent must account for all funds entrusted to her and not commingle (combine) buyer’s funds with her personal and/or business funds.
• Reasonable Care – This duty implies that the buyer agent should use all her skills to the best of her ability. Buyers can have a reasonable expectation that the agent knows how to show houses, negotiate, write an offer and give relevant advice.
• Confidentiality – A buyer agents must keep any information given to her by the client confidential. This is especially important when it comes to price and motivation. This information stays with the agent and the latter must not share it with anyone else without explicit permission from the buyer.
• Disclosure – This duty states that the buyer agent should disclose all relevant information to the buyer.
• Obedience – It requires an agent to obey all lawful orders given by the buyer.
• Loyalty – The agent must put the buyer’s interests above her own and show undivided loyalty to the buyer. Of all fiduciary duties mentioned above, this is the most important.

For buyer agents, homebuyers can find their fiduciary duties in a buyer agency agreement. It explains the agent’s responsibilities and obligations, the agent’s commitment to representing the buyer and the length of his or her service.

Good luck!

Marcus Auerbach · Answer

Most builders in my area have commission baked into their price, especially if you buy a spec home. We have had good luck negotiating concessions with builders in the last couple months. It's tough for a builder to tell me "no" at this point.

While I think in theory you save the builder the commission I would not be willing to bet on the fact that this will benefit you. It is possible, especially with a smaller builder, but most likely you are just beefing up their bottom line.

There is a big difference, if the builder has a broker on staff or if they use an independent agent. If they use an independent agent, the builder does not stand to gain anything, because the listing contract dictates that the full commission goes to the listing firm if there is not buyers agent. You can't change that.

Finally, sometimes everything goes smooth, but if it does not, you might be happy to have someone in your corner.

Jeremy Carlson · Answer

Love it! thanks for that post Billy. I've had great experiences using my own agents in the past and definitely understand the value they provide. As I'm trying to stay an informed investor, I am also always trying to see the big picture and know all my options. Great to hear your viewpoint you make some excellent points. Thanks for shedding light on some angles I did not see. Looking forward to more discussions and opinions as well!

Use my own agent to purchase a new build? Or use sellers agent?

Most Popular Reply