Research builder, shop for mortgage, get lawyer’s advice

(06-08) 04:00 PDT Washington –

Don’t even think about visiting a model home by yourself and signing in – at least not if you want to be represented later by a real estate agent.

It’s just one of many things that make buying a newly built home different – and sometimes trickier – than purchasing an existing one, even as builders slash prices to reduce inventory.

Once you sign that list, many builders won’t pay a commission to your agent, figuring they have already lured you in. So if you still want an agent to guide you in such things as negotiating price and extras, you would have to pay the commission yourself.

“If you don’t bring an agent in the beginning, they won’t honor that agent after that,” said agent Jennifer Walker. “I think there’s things that an agent is able to guide a buyer through that they would not know on their own.”

To make the most of a new-home purchase, shoppers should come armed with knowledge.

That might mean reading up on a builder. Is he solvent? Are his homes sound? Does he back his product?

Or it could mean hiring a real estate agent for guidance or a lawyer to review the contract and to add consumer-friendly clauses.

Look out for your interests

Remember, agents and lawyers say: Just because builders have salespeople at the model homes, offer ready-to-sign contracts and can arrange a mortgage, that doesn’t necessarily mean they’re looking out for your best interests.

“Everyone working on the site is working for the builder,” said Robyn Burdett, an agent with suburban Re/Max Allegiance. “There’s not one single person there who’s working for the buyer.”

Then again, there’s the other side.

First off, said Bruce Labovitz, chief financial officer of Comstock Homebuilding, not every builder automatically blocks an agent after someone signs in at the model home.

Plus, he said, “The consumer has the right to vote with their feet. They’re certainly welcome to shop elsewhere. Nothing compels them to buy without representation.”

“We don’t discourage you from bringing an agent,” he said, “but you can certainly still get a fair deal if you don’t. It’s purely up to the customer.”

James Brincefield, a real estate lawyer, said it can’t hurt a prospective buyer to hire a lawyer to scrutinize the builder’s contract.

“Every builder contract in the Washington metro area that I have seen is very one-sided,” he said. “The builders’ contracts take away from the purchaser every right and remedy the homeowner would want to have.”

If a salesperson makes a promise, like a flower garden or a completion date for the home, he said, get it in writing.

Protect your deposit

When it comes to deposits, Brincefield said, whenever possible, put them in an escrow account outside the builder’s control in case the company runs into financial difficulties. Troubled builders have been known to use the deposits without delivering the home.

It might sound self-serving, but Brincefield, like many other real estate lawyers, insists, “When you sign a builder’s contract, you’re taking a much bigger risk than you realize, unless you’ve had a knowledgeable real estate attorney review the contract with you.”

He said, “I’ve been in the practice of real estate law for over 40 years, and I never had anyone come to my office and say, ‘I’m so glad I didn’t have an attorney when I bought a house.’ ”

Real estate agent Debbie Wicker said customers in this down market shouldn’t be afraid to negotiate for more extras and a better price.

Some builders have their own mortgage company and push buyers to use it.

Maxine Schwartzman, an agent with suburban Long & Foster, said it’s a good idea to shop around for a mortgage instead of quickly settling on the builder’s lender.

Schwartzman said some buyers mistakenly assume that because a house is new, it doesn’t need an inspection. New homes are often more flawed than ones for resale, she said, because many problems in existing homes have already been addressed.