Do I Need a Realtor When Buying New Construction?

Americans are very consumer conscious. It’s a fact. Whether it’s buying the tastiest beverage at Starbucks, or finding the best bang-for-your-buck flat screen at Best Buy, or even when it comes to buying a new home, we think to ourselves, “I’ve got this.” But when it comes to building a house, you might ask, “Do I Need a Realtor?”

Photo of two home buyers looking at building plans.
Building a new home is quite exciting! There are so many choices you get to make. The question is should you have someone on your side helping you with all the hundreds of different choices?

Stop and think for a minute. Some purchases are more complex than others. Buying a new home is just about at the top of that list.

Now, most home buyers take advantage of the fact that using a Realtor to help them navigate this treacherous terrain costs them nothing. Zero dollars. Nada. Zilch.

There’s simply no reason for a home buyer to try and go it alone.

But there are times when people might get confused and think to themselves, “I don’t need a Realtor if we build a new home. We’ll just go to the model home and order one up, you know, like a pizza.”

Ok, ok, I’m being extreme in my comparison. But this phenomenon does happen more often than you might think.

Home buyers looking at existing homes almost always choose to use Realtors to help them. But once the idea of new construction becomes the chosen path, some believe they don’t need a Realtor because they can just work directly with the builder.

This is a dangerous road to travel.

Louisville Home Builders

Ask a group of Louisville home builders if the people they are building homes for need a Realtor and you’ll get a wide variety of answers.

“Of course not! I’m a reputable builder. Says so right there on the sign!”

Reputable or not, what this person is really saying is, “I’d prefer not to pay my client’s agent and keep that money for myself. How’s the client going to know?”

Now, I do not want to paint all builders with the same brush. I actually do know some local builders that prefer their clients to bring representation. Why? Because it takes some of the work off of their shoulders and, even more importantly, reduces the risk that something terrible might happen to derail the purchase.

Photo of a new construction Louisville KY
There are literally hundreds of decisions that go into building a complete house. How well do you know them all?

Playing With the Numbers

Here’s another point that needs to be understood. One of the main tasks for any builder is keeping track of all the numbers.

There are numbers for the estimates. Numbers for the labor. Numbers for the change orders. And numbers for city regulators. The numbers change, then they change again and the builder needs to keep track of it all!

Sometimes it might seem as if home builders spend most of their time wearing an accountant’s hat. I even know a local builder who used to be a CPA. (He’s a great builder, by the way.)

So, because builders are specialists at knowing the price of every ingredient in a purchase costing several hundred thousand dollars, they hold a distinct advantage over a home buyer who only sees a partial picture.

I’ve heard a home buyer say, “I can get a better price if I don’t bring a Realtor with me.”

My question back would be, “How do you know?”

If the builder is holding all the numbers and only shares what he wants to with the consumer, the only true way to determine if this is true would be to:

  1. Bring a Realtor with you when you meet the builder.
  2. Pick out the lot, the house, and all the options and come to a detailed bid.
  3. Try to fire your Realtor and ask the builder to redo the numbers without the agent’s commission.

There is this concept of double pricing. The regulatory systems in our country want consumers to have expert representation when making complex or expensive buying decisions. You’ve heard of the Consumer Protection Agency (CPA), haven’t you? Well, it’s now called the Bureau of Consumer Protection.

This organization works to make sure consumers aren’t being taken to the cleaners. They frown upon any situation where a company “steers” consumers by offering a lower price if they don’t have expert representation.

Choosing a Reputable Louisville Builder

Even before we get to the stage of assessing pricing, how does the consumer know if they’ve selected a great builder? A knowledgeable agent can help them find builders who have strong reputations.

Most cities have four to five very large builders who build 60%-70% of all the homes in the market. Louisville isn’t like this. Our largest builder is Ball Homes. I estimate that Ball builds only about 15%-20% of all new construction homes in Louisville in a given year.

Given that the largest number of new construction homes in our city is being built by a big group of smaller builders, making the choice between them becomes even more difficult. Having some guidance from a Louisville real estate expert becomes paramount. No one wants to be involved in a horror story while building their dream home.

Expert Advice During the Selections Phase

There are literally hundreds of choices that go into building a home. From the home design to the lot placement, to the dozens of finishes that cover almost every surface of a new home.

With most of these, the builder will work with the buyer to come to acceptable solutions.

But what about all the choices being made by the builder without any input from his client? Did he talk to you about the R-value for the attic insulation? What about the size of the water main? What joists will be used? There are lots of new options out there, you know.

Perhaps he muttered, “All that stuff is standard.” Well, what exactly is standard? Smart consumers will have a Realtor guide them throughout the process.

I don’t want anyone to think that new construction is a bad way to go. It’s not! It’s just a different way to go—a path less traveled.

But never forget that in the end, the home buyer will pay for every choice the builder makes, with or without the knowledge of doing so.