Buying from a builder

**SFlaDave** · 04-19-2009, 06:32 PM

Hi guys,

I am a first time home buyer, and a self-admitted real estate rookie. I have been searching for real estate on my own for the past few months. I haven't found anything that really excited me, and I have been on the verge of finding an agent -- until today. I found the perfect townhouse -- great location, great community, very well designed site plan and floor plan, reasonable price, and low HOA fees. I stopped by the builder's office and picked up some information and browsed the models and I was impressed with what I saw. Unfortunately, I'm unfamiliar how to proceed with buying from a builder.

* Should I still hire a real estate agent, even though I found the property that I was looking for? Or just skip the agent and look for a real estate lawyer to help with the contract?

* If hiring an agent, who pays the fees? Usually when buying from a seller, the seller pays the agents fees. I'm not sure how this works though when buying from a builder.

* The builder's lender is FHA approved and is offering up to 6% for closing costs as an incentive. Am I obligated to use the builder's lender, or should I use my own?

* How much bargaining potential is there when buying from a builder? The townhouse I'm looking at is a 3/2, 1500 SF in Miramar, FL and the price range quoted to me is $210k-$225k (depending on the upgrades). While that's quite reasonable for this market according to Zillow, I'm reluctant to match their offer, given the fact that Moody's has projected this market to drop another 24% by March 2010, and won't bottom out until 2011. Would offering 10% below the builder's asking price be unreasonable?

Sorry for all the questions. Any advice would be greatly appreciated.

**jamesww** · 04-20-2009, 12:32 AM

Bargaining power depends on the area and is best answered by an agent in the local area. You should at minimium hire a lawyer to review your contracts. The builder is likely to have their own contracts and they are always one sided. Therefore it would be seriously wise to have a lawyer or agent review them to let you know a little about what you are getting into since you're so green. A real estate agent's real job actually starts once a home is found. You can find propeties online so easily today the home search part of an agents job is very little. Now the research that needs to be done to determine an appropriate offer, the negotiations, completing the contract are the second part of the agents job and much more important. The third stage of the job and in most cases the most difficult and important is keeping the deal together despite the literally hundreds of problems that can come up.

Now a lawyer can do a better job of completing the legal agreement and can advise you on the contract, but they almost never have solid market knowledge and really are not aware of the items that can go wrong during escrow (the period after signing a purchase and sale agreement and actual closing that puts the property in your name). Therefore, I think you should find yourself an agent and tell them that they need to negotiate their commission in the purchase agreement to be paid by the builder. If they are unable to do this then they are not a very good agent. Hope that helps you can IM me if you have any further questions.

**Greg** · 04-20-2009, 05:17 AM

Don't be fooled by the low HOA fees. The developer is currently paying for most of the cost usually handled by the HOA fees. When the developer is done they will turn over all the expenses to the HOA and the fees will most likely go up. I saw one development's fees triple when the developer pulled out.

If this developer has done any similar projects see if you can find out how much those developments are paying in HOA fees. This is an old trick used by developers.

As for the agent, since you have already spoken with the on-site agent the developer most likely won't pay for your agents commission.

Ignore the numbers you are getting from zillow. This website has been proven to be wrong more then 50% of the time.

**SFlaDave** · 04-20-2009, 12:50 PM

Insightful responses, guys. Much appreciated. You know, I've been searching for real estate online and even bought a real estate book, thinking I'd be able to make a purchase on my own. "How hard could it be?", I questioned. Well, the more I read and the more people I speak to, the more I realize the error of my thinking. I've diverted much of my focus today on researching realtors in the area. Thanks again.