Many people ask this question and are surprised to hear that the answer is yes, if you want your interests to be protected when you buy a new home. The builder does not require you to work with a REALTOR®, but since there is NO CHARGE to the buyer for REALTOR® representation, why would you consider purchasing a new home without an experienced, knowledgeable agent working on your behalf? Similar to the question, “Should I have an attorney represent me in court?”, the answer is why would you assume the risk of representing yourself with one of the largest financial purchases you may ever make. A REALTOR® is your advocate.
Can’t the Builder’s Sales Agent Help Me?
They can. However, when you enter a new home sales center and are greeted by the builder’s sales agent, remember that person is employed by and represents the builder, and has an obligation to get the best deal for their employer. That does not mean they will intentionally take advantage of you, but they may not work on your behalf to get you the best deal. Builder contracts are created by lawyers employed by the builder. You need a REALTOR® to help you understand your contractual obligations, advise you with decisions and inspections, negotiate with your interests in mind, make sure you and the builder meet contractual terms, and guide you through the process with the builder, lender and title company in a timely manner, protecting you each step of the way. Similar to representing yourself in court, if you are unfamiliar with the process, why take the risk? It’s a very good idea to work with a REALTOR® to buy a new home!
What if I Just Want to Look Around First?
Maybe you just want to just stop by a new home sales center to take a quick look around, check out floor plans and prices and visit the model homes. You are just beginning your search and aren’t sure what area, subdivision or type of house you may want. In your mind, you are just looking and may not want to “waste” the time of a REALTOR® until you are further in the process. You might be a first time home buyer and just want to see what is out there.
In Arizona and many other states, all the builders place a sign on the door entering the sales center that reads something like, “If you are working with a REALTOR® they must accompany you on your first visit to this community.” They believe that notice provides you with notification that once you enter the sales office without your REALTOR® the builder can claim to be “procuring cause”, a real estate term which means the builder made you aware of the product first and you are now their customer, without REALTOR® representation. According to the builder rules, since your REALTOR® was not with you at your initial visit, they would not acknowledge them as procuring cause at that community. This is true even if you didn’t sign a registration with the builder, if they remember you, hand you any information or answer any questions, the same rule applies.
A REALTOR® can be a valuable asset throughout the process and wants to be with you even in the “just looking” stage. As you interview REALTORS® be sure to ask if they are REALTORS® experienced in new home sales to ensure your best outcome. A REALTOR® who has new home sales experience will be familiar with the builders, subdivisions and floor plans that will be in your budget and meet your desired features. They can save you time and money finding the best home and builder. They’ll know the right questions to ask on your behalf and what builder incentives might be available from each builder, incentives that you would not know were available on your own.
Can I Save Money if I Don’t Use a REALTOR®?
No, REALTOR® Services are FREE to you as a BUYER. All builders price their homes to include compensation for a real estate broker in the base price of the home. They do NOT discount the price of the home if you come without your REALTOR®, it just improves their bottom line. In fact, you may spend more money without a REALTOR® because a REALTOR® experienced in new home sales knows when and where a builder may be willing to negotiate and can often secure savings or additional incentives for you. A builder recognizes the value that a REALTOR® brings as they become the liaison between the builder and the buyer and can help facilitate communication and processes. Why would you choose to purchase without an experienced agent on your team?
A home purchase is one of the largest financial transactions you may ever experience. Constructing a new home can be a way to get everything you desire in your home. A REALTOR® familiar with new home sales can help insure your new home purchase is as stress free and enjoyable as possible. If you are considering a new home purchase call your REALTOR® first.
DeWitt & Sharon Lang are Associate Brokers with Realty Executives in Scottsdale, Arizona. They, and members of their team, have years of experience in working with new construction home buyers and have helped hundreds of new home buyers through a smooth and successful transaction with the builder. Their greatest satisfaction is delivering keys to buyers that just couldn’t believe they could actually purchase a brand-new home! Their client dedication drives them to go beyond normal agent performance. Their motto is “When Experience Matters” They can be contacted at 602.796.9060 or www.azhomeonline.net
A First Time Homebuyers Introduction to FICO
The first step in buying a home is to obtain a lender prequalification. First time homebuyers should be prepared to have their loan originator investigate their credit worthiness as every loan program has minimum FICO requirements.
What is a FICO Score?
FICO is a software company based in San Jose, California. It was founded in 1956 as Fair, Isaac and Company. Its founders were an engineer, William Fair, and a mathematician, Earl Isaac. Together they created a method to measure a consumer credit risk known as your FICO Score. The FICO Score has become one of the most accepted methods used by U.S. lenders and credit companies. FICO is now a publicly traded company on the New York Stock Exchange.
How are my scores measured?
The rating system determines your credit worthiness based on a number as low as 300 to as high as 850. The higher the number, the lower credit risk you appear to the creditor. Most home loan programs require a score in the range of 580 to 640 for government insured loans but conventional products might require a score above 680. You can consult a lender for more specific information.
Most U.S. consumer credit information is collected and kept by at least three credit reporting agencies. Those are Experian, Equifax and TransUnion. When you borrow money from a bank or use a credit card the creditor files a report with the credit reporting agencies as to how you have handled your credit. Did you pay on-time? Did you pay the amount due? Did you borrow up to your maximum credit limit? A variety of other data is also taken into consideration. All of your credit information is analyzed and reported by the credit reporting agencies to any creditor who wants to purchase that information. Mortgage lenders are a primary user of these credit reporting agencies and rely heavily upon the information provided. Credit reporting agencies are regulated with oversight by the Consumer Financial Protection Bureau (CFPB).
What is a Tri-Merge Credit Report?
When you apply for a home loan the first thing the lender asks for is your name, address, social security number and your permission to access your credit history. The lender uses a special software program to connect to the three credit reporting agencies, Experian, Equifax and TransUnion. These three reports merge your low, mid and high FICO scores and the mortgage lenders generally use your mid score as the basis to approve or deny your ability to qualify for a particular type of loan and will help determine your financing options.
How can I see my credit history before contacting a lender?
Federal law allows you to get a free copy of your credit report every 12 months from each of the three credit reporting agencies. You can get access online at www.annualcreditreport.com. The data provided on the free sites generally do not provide you with a FICO Score but does give you information on your credit history. Many sites charge to report your FICO Score so you should investigate the details of the site providing you the credit history. While the cost is relatively low, there is nothing worse than thinking you are getting free information only to find out a fee is required. Even without a score, your credit history will reveal a lot of information. As a new home buyer, you should pay close attention to any negative information and review that for accuracy. You have the right to challenge the information in your credit history but it may take more than a phone call or a letter to clear up inaccurate information. Consult with your lender before opening a dispute. Please note that the scores presented by the free site may not be the same as the lender receives and may reflect a higher FICO than your lender score. This is primarily due to the merging of the three credit reports and the special software program used by the lender. At least you will have some idea of your current credit and will have information to discuss with your lender regarding your credit. Don’t be discouraged if your credit score is under 580, a good lender can make recommendations regarding ways to improve your credit.
If you are a first-time homebuyer, need down payment assistance, have credit challenges due to foreclosure, bankruptcy, student loans, medical bills, give us a call. We have lenders who have programs that may be able to help you. Together, as a team, we can work toward achieving your goal of buying a home!
Disclaimer: This article is not intended to provide legal advice. For legal advice, consult an attorney.
DeWitt & Sharon Lang are Associate Brokers with Realty Executives in Scottsdale, Arizona. They have years of experience in working successfully with credit challenged buyers. Their greatest satisfaction is delivering keys to buyers that have repeatedly been told no and were losing hope. Their client dedication drives them to go beyond normal agent capabilities. Their motto is “When Experience Matters” They can be contacted at 602.796.9060 or www.azhomeonline.net