How to effectively negotiate on a new construction

Question

Considering investing in a new construction property in San Ramon, CA. If I bring along my own realtor, builder has to pay 2.5% buyer's agent commission. Instead, can I negotiate with the builder to provide me concession for directly working with the builder? If so, please share negotiation tips.

Vishal Chowdhary · Answer

Thanks for your suggestion @Lydia S. I agree and will be using a realtor

Doug Smith · Answer

One thing to be mindful of when buying in a development from a realtor is that they really can't lower the price for you. Real estate transactions are public record in most places, so what you pay is going to show up on the MLS and impact every other sale they make in the neighborhood. If they cut price for you, they have just added a lower comp for every future home they sell in the neighborhood...not to mention opening themselves up to discrimination suits from previous homeowners who paid more for the house (true or not...an attorney can sue for pretty much anything these days). Instead, they might negotiate in things that won't show up in county records/the MLS like upgrades or picking up closing costs. That being said, it would be rough on the builder in a development to lower the price on a home for one person without having to do it for everyone.

Vishal Chowdhary · Answer

Thanks @Doug Smith. Makes perfect sense.

Lydia S. · Answer

@Vishal Chowdhary

Use your buyer’s Realtor®.  Builders typically have their own contracts and are not there to protect you as a consumer. Your Realtor® is there to protect you.  It’s possible that the builder may say you don’t need or can’t have inspections, their contract may not have the typical ‘escape’ clauses for a low appraisal or other valid concerns (and lose your earnest money deposit if you do terminate), and your Realtor® can hopefully negotiate some extras into the deal for you (appliances, upgrades, credits) and fight for you when things go sideways.  Such as delays, rising costs of the build being passed onto you by builder, and any poor workmanship.  Who’s going to be honest with you, your own Realtor® or the builder?  Is that house already built or in the process?  If in process, your Realtor® can make sure you get some visits to see how things are coming along at different stages.  I’ve had to press hard to get completion and a certificate of occupancy before my client’s rate lock expired and rates were jumping, so they would have lost the ability to buy it, along with the money they had spent on inspections & appraisal.

These are just a few examples of why to have your own representation when buying new construction.