Do I need an agent if I’m buying a brand-new home?

Brand-new scenery

Recently a new client asked me if he needed an agent to buy an new home.

“No”, I told him, “In fact, you don’t even need an agent when buying a resale home. So why would you need one for a new home?”

Some of the same reasons, some different ones.

 

Changing roles, changing needs

The role of realtors has changed a lot in the past ten years, that’s for sure. How I do my job now is nearly 100% different than it once was.

At the same time, the amount of information available to consumers has expanded so much that their needs and expectations of realtors and real estate transactions has changed.

But most people already know this. This blog post is not about change.

Of course, some realtors still behave like they are the gatekeepers to the information or that the consumer is the resource that they must sign up to a six month buyer agency agreement and then set loose to do the leg work themselves. They are going to be there for the important part, “the negotiating”.

Right.

And, I sometimes get an email or a homebuyer pop up on the chat widget with:

“I found the house, do I still have to use my agent?” 

or

“I don’t know why I need this guy standing beside me when I buy a new condo. He’s getting a fat commissions for nothing”.

 

Misinformed. Greedy. Outdated. Ignorant. Foolish. Think about how dumb the average person is. Now think, half the people in the world are dumber than him.

 

Do I need an agent if I’m buying a brand-new home?

Yes of course you need an agent when buying directly from the builder. Here’s why.

1) You are not going to negotiate to yourself the commission that the builder would be paying your agent.

Just try.

For the builders, the commission is an expense, like advertising. If you walk in off the street and say “I want the saved commissions”, they are going to say, “Forget it. If you don’t buy this home someone else will”.

 

2) The builders are setting the price not the buyers, not the market.

The builders price their homes with what the market will bear, whereas in resale real estate, the market sets the price. The difference is obvious when you come to things like lot premiums. I’ve always had a problem with lot premiums. They always seem arbitrary. (One builder I was dealing with recently had premiums on all of his lots!) It is not unusual for a builder to charge $40, $50 or even $70,000 for a lot premium (say to back onto green space), but do you think you are going to get that back when you try to resale in 4, 5 or 7 years?

No way, Olay.

The other sold homes in the neighbourhood (the so-called “comparables”) are going to bring you down. It is gong to be a hard landing.

Upgrades too are over-priced by the builder. Everyone loves granite countertops and hardwood floors, but be careful. Styles change and colours colours change and what is trendy now maybe completely out of style and out of date when you come to sell. Your $100,000 in upgrades are now worth $25,000.

 

3) New homes cost 20% more than resale homes.

 

4) Neighbourhoods appreciate at different rates.

Whereas established neighbourhoods are well understood, new subdivisions are a gamble. We just don’t know for sure if the new neighbourhoods are going to be great and popular (like Laurelwood) or near disasters (like Activa and Huron Park).

 

5) Emotion and logic

Touring a model home with all of it’s upgrades and features, with a the salesperson who is gushing about how great it will be to live here, telling you that they are going fast and you better not take too long to decide is a con game. You need a trusted advisor by your side to remind you of the points above and to ask the hard questions you might not know to ask.

 

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