Can you save money by not using a Realtor when buying a Brand New House?

It's perfect!

It's perfect!

With available housing inventory at historical lows, many home buyers without a tight timeline are looking at newly built house or condos.  I recently spoke with a past client who is considering combining his family with his partner’s and visited a showroom.  He asked me: Because I do not require a Realtor to buy a house with a builder, can I save money by going with the builder’s (seller’s) representative and negotiating the 3% off? Great Question.  It seems like it would be: the home is brand new and has warranties on it, the builder will negotiate because they are saving money, the salesperson said a Realtor would not be needed because the builder is in control of the process, and I'm a good negotiator myself!

Here's the great news- you can get discounts when buying a new house, and it has nothing to do with whether or not you have a Realtor with you. In fact, you can benefit tremendously from having a skilled Realtor with you to know where the wiggle room is. Salespeople may lead you to believe that there is a direct relationship between commission and sale price or upgrades, but there isn't, according to the Home Builders Association of Colorado.  

Here are some things to consider when making this decision:

1.     Builders will generally not lower the price of a new home, especially not in this red-hot seller’s market. They have more of the same model for sale, and if they sold the same product to another buyer last week at full price and that buyer finds out they were undercut, lawsuits tend to follow.

2.     Even if they would, there is no incentive for them to reduce the price, why reduce their own comps unless they absolutely had to? According to a builder I talked to, a 6% sales commission split between buy and sell is allocated ahead of time as part of the marketing budget for the overall project.  If the commission does not go to to a buyer's Realtor, it will usually go to the salesperson, who gets two commissions.  

3.     The salesperson who claims “your realtor doesn’t do anything during this process” does not represent you, they represent the builder. Most home showroom salespeople are unlicensed and want to maximize their personal profit and the builder's. They may not point out the builder’s language changes to the Colorado contract that make it much more difficult to get your earnest money deposit back, nor the warranty indemnity clauses for any construction defects inspectors sometimes miss.   

4.     Newly built houses are often built in a hurry, and often have as many defects as existing houses.

5.     An experienced Realtor knows where you can save money, for example when dealing with builders, and makes sure you don’t miss any of those opportunities.

6.     Your Realtor’s license is on the line in every transaction and is obligated to inform you fully and look out for your interests. 

Counter to what it might seem in the sales office, you could easily end up with more discounts with a Realtor in your corner, and avoid a lot of risk should things go awry.