Custom home builder and realtor WWYD

[firstbaby]

We found a lot and house plan on line with a custom builder that *on-line* fits perfectly what we are looking for We have also been in touch with a realtor about listing our home once she helps us find the right next home for us and she has asked us to sign a listing agreement, which DH and I understand. We've not yet signed the agreement. Here's my question: now that we've found this land and builder, are we better off reaching out to him through the realtor or contacting him directly? We would need to get more information about the land and really have no idea how much the house would be on top of the lot. The lot is listed separately so someone could purchase the lot and bring in their own builder, but it looks like this builder currently owns the lot and has a house plan for it that *on paper* would be perfect for us. Anyone go through this that can give us some advice? Does the builder have to pay a realtor's commission and would they negotiate with us more or less if a realtor was involved?

[egoldber]

Who owns the lot? If the builder owns the lot, then you don't need a realtor to buy the land, because typically the land and house will be bought together form the builder.

When we did this a few years ago, we bought a lot (using a realtor), and then contracted with a builder to build one of their plans on the lot we owned.

Now, I would be VERY VERY careful to make sure that the plan as shown by the build is EXACTLY what you want. Often it's one of their spec houses with 'standard" features. If you want to make changes to the plan, as much as possible you should make a detailed list of what you want to change and how much that will increase the cost. For example, when we did this, we took the builder's spec house, and by the time we added all the changes and upgrades we wanted, it was an additional $150K. The original house spec was well under our budget, so we could do that. Things you should consider.....

cabinet upgrades
flooring upgrades
counter top upgrades
bumped out the garage to make it 3 vs. 2 car
added a mudroom/walk in pantry
straightened an odd angled wall, which meant a longer beam was needed (that was a $5K upgrade!)
made the basement ceiling 9 feet (so it could be 8 feet when finished)
made all first floor ceilings 10 feet
made second floor ceilings 9 feet
upgraded the siding
upgraded the roofing material
added a TON of outlets
added a TON of overhead canister lights
added in wall conduit for TV and cable/satellite wires
added pre-wiring for ceiling fans in all bedrooms
high outlets on walls for TVs
upgraded paint (plan came standard with one color, we ended up hiring our own painter to come in at the end to re-paint because it was a lot cheaper)
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[Pear]

We used a realtor in this scenario. I am glad we did. You will have the same legal process of closing on the house. The realtor will also be there to go to bat for you in case something happens. We had silly things like the builder installing the wrong faucet and then balking at fixing it. The realtor made sure it happened.

[egoldber]

You will have the same legal process of closing on the house.

Not necessarily. Our only "closing" was when we bought the lot. The house construction was essentially a private transaction between us and the builder. Essentially it was like doing a large home improvement project on a property you own. But the legal transfer of property happened with the closing on the land.

That's why I asked who owned the lot. If the builder owns the lot, then you will probably be buying the built house and land together in one transaction. But since OP said it's a custom builder, many custom builders don't work that way. They only deal with scenarios where they build on property you own. Of course, some builders do both. Buying a new construction house (unless it's part of a development, or an already built house) can be tricky. I have found that many realtors are not very familiar with the process, unless they specialize in it. We knew a LOT more than our realtor did about how to buy a house this way.

[firstbaby]

It looks like the builder owns the lot. I found the property on a real estate search site and it had a comment that a home could be custom built by XYZ Builder. When I went to the builder's website, they have a properties tab and it listed this property and a picture of the floor plan and elevation of the house. How would the financing be handled in this scenario? We would buy the lot and then do a construction loan? Something else? DH and I aren't sure if we would be better off reaching out to the builder directly or having the realtor do it. I really appreciate your input!

[egoldber]

I would reach out to the builder. Has work started on the property?

The other thing to consider is how much will this home be worth vs. the other homes in the neighborhood. Is this an area with a lot of new construction? Is it an area where homes are being re-built (aka "teardown" neighborhoods)? Are there a number of comparable value homes in the neighborhood?

[firstbaby]

Beth, those are all really great questions. It doesn't look like construction of the house has started, but I don't know if there's any clearing to be done or if there's a drain field there yet. It doesn't look like it's in a neighborhood per se but I can research how much homes around it have sold for. I don't think it's a teardown neighborhood - I think it's several large parcels of land with varying types/ages of houses.

We really thought we would buy a resale but now that we're seeing what's out there and the amount of work to be done to stay under our price point makes this other option look like a dream. Although, the price may make it stay in dream land for us!

[westwoodmom04]

Have you driven by the lot and checked out the neighborhood? That would be my first step. Quality new construction will almost always cost more than comparable older resale. It would give me pause if the new home option was the cheaper of the two -- I would definitely check out the lot in person, and the reputation of the builder before contacting the builder directly.

[SnuggleBuggles]

I'd probably use a realtor. I think you'll be happy to have the guidance re. the neighborhood, the analysis of the property and development, reputation of the builder and just some basic hand holding. We bought resale but looked at new construction with our agent and she was tremendously helpful about it all.

[Momit]

Even if you use a Realtor, you may not want to use the same one who is selling your house. In many market areas, Realtors tend to specialize as buyer's agents or listing (seller's) agents. Even in areas where Realtors tend to do both, we have often found that the person we want selling our house is not the same one we want showing us properties and helping us buy a house.

Each builder differs on how they work with Realtors. I worked for two large, production builders and while they claimed to want to work with Realtors they preferred when buyers didn't use them and would often negotiate additional discounts with the customers who didn't use and agent. They were sticklers that the Realtor had to be with the buyer the first time the bury visited the sales office or else the builder would not pay the commission.

As with any real estate transaction, there can be advantages to using a Realtor, even if it means you miss out on the very lowest price. Your Realtor will be your advocate through the process and can be very helpful with everything from up-front negotiations to closing. If you get a good one. And IME the good ones are hard to find.