Using a realtor to negotiate with a builder (Austin, West: short sales, foreclosures)

[swingr]

Hi there,

My family and I are relocating to Austin next year and we are wanting to build. I have been exchanging e-mails with a sales consultant at David Weekely Homes over the past few weeks discussing pricing for options on a specific plan that we like. He mentioned that they are offering a 7% discount and they will cover the cost of the septic system up to $15,000.00. The 7% discount seems like an offer they will continue to provide and the septic sytem offer will change next month to whatever else they come up with.

What I really would like to know is how could a realtor representing me negotiate a better price? I know that everything is negotiable to some extent but could a realtor really get a better price? I know realtors also help with all the jargon and paperwork so price isn't the only factor I should take into account when looking for realtor representation. I would ultimately feel more comfortable having a realtor present during negotiations and I do realize that it wont cost me a penny having them work for me.

Any help would be appreciated.

Thank you.

[tourbound129]

My wife and I bought our home in October 2007. We were working with an agent for a while but then he decided to change companies and happened to be in the middle of the transition when we stumbled on our home. He wasn't actively representing us at the time and we were able to negotiate an $18,000 discount on a $214k house. This was an inventory home. It had been completed for a couple weeks with a buyer or two falling through. When I originally asked about doing better than $214k, they originally offered a $14k discount. I asked if there was any more they could go since I wasn't represented and they came back with $18k. I snatched it up quick.

They were also offering 5.25% interest locked for 30 years, builder paid all closing costs and paid 15 months of HOA dues.

The builder won't have to pay the agent so they should be able to give you a little more.

However, to each his own on the negotiations. I felt perfectly fine doing it myself.

[woodinvilleguy]

We used an agent and found it very beneficial through the negotiation and building process.

[RandyAH]

If it is not costing you anything, why not use one? They will help oversee the process, and if they do there job correctly, possibly help you with negotiations...

Do your research and find a good agent, don't just throw a dart at a list of names...

[FalconheadWest]

Originally Posted by tourbound129

The builder won't have to pay the agent so they should be able to give you a little more.

Realtor fees come from a completely different account and will have no impact on your purchase price. It is against RESPA for a builder to offer one price to a buyer with representation and another price for a buyer without representation. THey must treat ALL buyers equal.

Yes, a Realtor could probably get you a better deal. But with the numbers you posted above, who knows what your deal actually is. Just by saying 7%, that means nothing as you didn't even mention the price range.

You are the buyer which means you have an emotional tie to the negotiations. A Realtor doesn't use emotion to negotiate and can usually get further.

[tourbound129]

Originally Posted by FalconheadWest

Realtor fees come from a completely different account and will have no impact on your purchase price. It is against RESPA for a builder to offer one price to a buyer with representation and another price for a buyer without representation. THey must treat ALL buyers equal.

That may well be the case but would be tough to prove as a buyer.

[RandyAH]

Originally Posted by tourbound129

That may well be the case but would be tough to prove as a buyer.

Why would you need proof?
If it is against RESPA, then it is against RESPA...Period... Some folks are so distrusting...makes me a little sad really...

If it is the home that you want, and you feel the price is right for that home, then what is a point or two?? If it is that big of a deal, then perhaps Fox and Jacobs might have something more inline with the finances?? Of course I am making a general statement, no one should take offense, and if they do, then I am most certain I will not loose any sleep over it

[austin-steve]

What I really would like to know is how could a realtor representing me negotiate a better price?

Depends on the Realtor and what they know about working with builders. The builder may not let you bring one in at this stage anyway.

Mainly, your biggest risk going it alone is that you don't know what you don't know. A 7% discount plus free septic might still leave you paying way too much, or it might be an ok deal. Against what data and information will you measure the deal so that you know if you're paying the right price and making a smart purchase? More important than the floorplan, does the development itself survive proper scrutiny?

The amount or percentage of discount is a worthless, completely useless number. I don't know how to state that more clearly. All that matters is what you pay and if that's a price that will be higher or lower than the resale value of the home the day you move in.

So you want to start with the current market value of the home, and move down in price from there. The list price, or builder's price sheet is of absolutely no value or significance in the equation whatsoever. If you don't understand that right from the start, you can't negotiate properly. On the other hand, many Realtors don't even know this, so hiring one won't necessarily help you unless you have a good one.

Here are some questions you should have already asked the builder, if you're doing a good job of representing yourself.

1) How many homes will the subdivision eventually have?

2) How many have been sold thus far? (and thus, how many homes remain to be built)

3) What is the projected build-out date?

4) About how many homes a month are selling at present, the past 3 months, this year? (use some mental math with #1, #2, #3 to see if it makes sense). How many are completed and empty and how long have they been sitting?

5) What is the average and median price of the homes being sold? Where is your candidate home in the price-point spectrum?

5a) What is the average and median square foot size of homes in the neighborhood. What is the largest and smallest allowed? (you don't want to be the biggest, most expensive in the subdivision)

6) What are the property tax rates? What components make up the tax rate?

7) What type of utilities are available and what are the average costs? Is there central propane or individual propane tanks? Can you opt out (if Central) and go electric only if you want, or do you have to hook into the CP?

8) What are the schools, how are they rated, where are the current boundaries, and what might projected growth patterns do to the future attendance boundaries? How might that affect home values?

9) What type of septic is allowed? Is it a conventional drain field system or an aerobic spray system? How does this affect the useable area of your yard and/or the ability to build a pool, have a guest house, expand, etc?

10) Is the home in a County jurisdiction only (septic makes me suspect so), or in a municipality? How does this affect the building code requirements. What are the leash laws and do you care? Is annexation a future likelihood? How will that affect property tax rates?

11) How many homes have resold in the neighborhood? How many of your floorplan have resold, and what price was obtained? Are there foreclosures and/or short sales happening in the neighborhood? How many?

12) What is the HOA structure and fees? What is included in the fees, what is not included?

And the list could go on.

If you've thought of all of this, and know the answers, you might not need a Realtor. If you haven't thought of even half these questions, or don't understand why they are important, you need to be better represented than you are at present, lest you make a really bad purchase decision.

Steve

[Austin-Willy]

Originally Posted by FalconheadWest

Realtor fees come from a completely different account and will have no impact on your purchase price. It is against RESPA for a builder to offer one price to a buyer with representation and another price for a buyer without representation.

This is completely misleading. A builder can certainly reduce the purchase price for one buyer if their closing costs are lower than they would be for another buyer.

[Austin-Willy]

A buyer's agent may be able to help you negotiate the business points - price, option period, closing date, etc., but they are not going to be able to advise you on the builder's purchase contract -- assuming that it is not on the standard agent forms, which is a pretty safe assumption.

Any time you get off the forms that are sanctioned by your state, you are opening yourself up to potentially large liabilities if you don't have an attorney review the contract for you. As an attorney who has reviewed a number of builder's contracts, I can tell you that they are notoriously heavy-handed. Good luck.