BUYER S REP TODAY S. New Opportunities. New Homes = page 4 LOOK INSIDE... New Construction Pop Quiz page 3
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1 TODAY S BUYER S REP A publication of the Real Estate Buyer s Agent Council, Inc. A wholly-owned subsidiary of the National Association of REALTORS February 2014 Volume XXIII Number 2 New Homes = New Opportunities No matter how you do the math, it s a good time to learn more about new homes and representing buyers in these transactions. The new home segment of the housing market started rebounding in 2011 and current indicators, including permits, housing starts, construction, completions and sales are all generally positive. Pent-up demand and rising consumer confi dence have helped reinvigorate the market and boosted homebuilder optimism. The National Association of Home Builders (NAHB) housing market index a measure of homebuilder confi dence surged to 58 in the fourth quarter of 2013, its highest level in eight years. (Any reading over 50 means that more builders think sales conditions are good rather than poor.) While fl uctuating from month to month, sales data largely supports their optimism. Opportunities are picking up, but tapping into them requires cultivating a specialized understanding of the new home industry and builders perspectives. Armed with this knowledge, a buyer s representative can add considerable value to new-home transactions. If you haven t explored new homes before, now is the perfect time to start. Look inside this issue of Today s Buyer s Rep to get a taste of what s involved and special insights on how to be successful in this niche market. LOOK INSIDE... New Construction Pop Quiz page 3 7 Need-to-Knows When Representing New-Home Buyers page 4 New Consumer One-Sheet: Why a Buyer s Rep Provides a Better New Home Buying Experience page 7
2 MEMBERSHIP UPDATE WORTH QUOTING... The road to success is always under construction. - Lily Tomlin Plan Now for Special Course Offerings at the REALTOR Party Convention Held May 12 17, 2014 in Washington, D.C., the upcoming REALTOR Party Convention & Trade Expo offers excellent opportunities to attend several of our newest and most popular courses! Day 1 COURSE e-pro Recently-updated, e-pro provides a roadmap to build your business and serve the hyper-connected consumers of today and tomorrow. Learn about the changing market and how to connect with consumers, manage your online reputation, generate leads and gain referrals by signing up for Day 1 of the certifi cation course. Upon completion of Day 1, students must complete Day 2 online to earn the e-pro certifi cation. The e-pro certifi cation counts as an elective course towards the ABR designation. NEW COURSE New-Home Construction and Buyer Representation: Professionals, Product, Process Solid increases in single-family starts, still historically low interest rates, and high buyer demand point to healthy sales of new-home construction. This one-day course provides buyer s representatives with the product knowledge and increased confi dence to make newhome construction a win-win transaction for buyer clients. Counts as an elective course towards the ABR designation. CORE COURSE NAR s Military Relocation Professional Certifi cation Core Course When service members and their families relocate, the services of a real estate professional who understands their needs and timetables makes the transfer easier, faster, and less stressful. This course educates real estate professionals on working with current and former military service members, fi nding housing solutions that best suit their needs and how to take full advantage of military benefi ts and support. Required for the MRP certifi cation and counts as an elective course towards the ABR designation. For additional details on these courses, or to register for course offerings at the REALTOR Party Convention, please visit REBAC.net. Connect online with fellow ABR s for news, tips and REBAC.net 2 TBR February 2014
3 New Construction POP QUIZ Knowledge is the name of the game when representing buyers in new home sales. The more you know about the construction process, the more value you can bring to clients as a source of helpful information and advice. Test your current knowledge with this sampling of questions taken from REBAC s course, New-Home Construction and Buyer Representation: True or False? 1. The most expensive component of a new single-family home is the kitchen. 2. Insulation is rated by its low-e factor. 3. If the builder does not pay for materials or work completed, a subcontractor can file a construction lien to hold the owner responsible for payment. 4. Buyers of new homes may be funding new roads, parks, water and sewer hookups, schools, and fire and police protection in their community. 5. When evaluating upgrades in a new home, an appraiser will note granite countertops but will not adjust for the quality grade (1 to 4) of the stone. 6. An Energy Star home must be at least 10 percent more energy efficient than homes built to the 2009 International Energy Conservation Code (IECC) and include additional energy-saving features that typically make them 10 to 20 percent more efficient than standard homes. 7. Speed is an indicator of poor quality construction. 8. Builders like to do landscaping as soon as the exterior is finished so plants can take root before the new owner moves in. 1. False. The land the home sits on is almost always the most expensive component. 2. False. Insulation is rated by R-value. Low-e is a rating for windows thermal properties. 3. True. A lien holds the home owner responsible for payment and clouds the title until cleared. 4. True. If a community is experiencing substantial growth, it may be hard pressed to meet accelerating demand for services and infrastructure improvements. In this case, municipalities will impose impact fees on developers, which are typically passed along to their home buyers. 5. True. Buyer s reps can help their clients make more informed upgrade decisions and avoid potential financing problems from upgrades that raise the price of their new home above its appraised value relative to comparable home sale prices. 6. False. Energy Star standards are stricter than this. Homes must be at least 15 percent more energy efficient than the 2009 IECC and include energysaving features that are 20 to 30 percent more efficient to earn Energy Star ratings. 7. False. This is a common misconception. Reducing a home s exposure to weather is one benefit of faster construction. Further, for production crews, speed could simply indicate that they are familiar with the various home plans and able to work more efficiently. 8. False. Landscaping is usually left to the last minute so builders can avoid the responsibility and expense of upkeep. How did you do? REBAC s course on representing buyers in new home purchases is the best way to ramp up your knowledge. This one-day class is loaded with everything you need to quickly come up the learning curve. Learn more at REBAC.net under the Elective Options tab. TBR February
4 From the Ground Up: 7 Need-to-Knows When Representing New-Home Buyers Do new home transactions create a different set of representation issues for buyer s reps? Yes and no. Regardless of whether a buyer wants to purchase a new or existing home, your job is to ensure their best interests are represented throughout the transaction. But new home sales definitely involve a different set of players and steps leading up to closing. In this sense, new home transactions are very unique. To truly look out for your clients interests, you ll need to develop a better understanding of every step in the construction process as well as an appreciation for the roles and perspectives of builders and their sales representatives. Armed with knowledge and sensitivity to the nuances of the new-home sales process, you ll be able to provide genuine value to your buyers. What are some of the most important points to keep in mind? Following is advice from ABR s who are already actively involved in new home transactions: 1. Upfront Research on Builders 3. Establishing Representation Do your research before your buyers start shopping around. Rather than learning about new-home options alongside your clients, take the time to get educated on builders and developments that might be a good fi t, advises Kit Fitzgerald, GREEN, with Red Barn Real Estate in Boise, Idaho. This will help make the initial decision-making process go so much better and immediately demonstrate to your buyers that you are an asset to their transaction. 2. The Construction Process Building a new home is considerably more complicated than purchasing an existing one. Fortunately, a builder s onsite rep handles many of those details, but that doesn t mean buyer s reps should kick back and relax. It is so important that buyer s agents understand the critical path of the building process as well as the timeframes for permitting, codes inspections and certifi cates of occupancy, explains Bobbie Noreen, ABR, CRS, GRI of Village Real Estate Services in Nashville, Tennessee. This requires additional education and/or intense in-the-fi eld experience. Buyers are looking to their representative to guide them every step of the way, which can be up to a year before moving in. Onsite sales reps play an important and valuable role in the buying process, but consumers can also be vulnerable when they walk into a model home center without a complete understanding of the sales reps role. Consumers need to understand that, many times, the sales rep is not even a licensed real estate agent, points out Philip Becker, ABR, CRS of Becker Properties in San Antonio, Texas. They should be aware that this person represents the builder s interests and doesn t have much authority to negotiate. Further, be sure your clients understand they can jeopardize your ability to represent and serve them in a new-home transaction if they tour model homes or a spec home without your involvement. At a minimum, make sure your buyers have several copies of your business card and understand why they should give one to a sales rep and explain that they are already working with you. Also warn your clients against signing anything (especially a registration statement) without consulting with you about the implications of doing so. By and large, builders are interested in working with buyer s reps. But if buyers fail to disclose their representation relationship, they may fi nd themselves unable to benefi t fully from the services you provide in the transaction, especially if the home isn t listed in the MLS. 4 TBR February 2014
5 4. Compensation Don t assume that builders don t want to work with you. One of real estate agents biggest misconceptions is that builders don t see a place for them in the transaction, claims Becker. In reality, good builders consider buyer s agents to be an extension of their sales force and have already built compensation into their pricing. Fitzgerald points out that the situations that don t go well occur when a buyer s rep comes in after all of the work has been completed, has no involvement and then wants to be compensated. A great buyer s rep earns the business and respect from the builder and their clients. 5. Working WITH Sales Reps Sometimes on-site sales reps and buyer s agents wind up working against each other in an unspoken competition to impress the buyer. This is one reason it s so important to spend upfront time establishing relationships with builders and their sales reps and to let them sell their product to your buyers, explains Noreen. After all, who has more intimate knowledge of the product? Trying to prove your value by disproving someone else s is never a good way to enter into any relationship. Knowing what role you play and being confi dent in that role allows both of you to do your job well. The building industry recognizes that we have the buyers, and that we develop wonderful relationships with them. We bring a wealth of experience and a calming presence to the industry, adds Fitzgerald. 6. Inspections Municipal building codes mandate various inspections throughout the construction process. While these inspections are benefi cial to buyers, they are not focused specifi cally on protecting a buyer s interests. You should advise your client to also arrange independent inspections at various stages and suggest reputable inspectors to conduct this work on their behalf. Make sure your buyer s contract with the builder gives them the right to hire independent inspectors and gives them access to the building site during the construction process. Continued on page 6 Laying a Solid Foundation Understanding the ins and outs of the construction business is essential for getting a leg up on representing buyers of new homes. What are the best ways to do that? 1. Attend a boot camp. REBAC recently launched a new course, New-Home Construction and Buyer Representation Professionals, Product, Process. It s the perfect way to get all the most essential information streamlined into a one-day class. Visit training4re.com to find offerings. 2. Local research. Go online to collect information on builders and inventory in your area, including: Find the nearest local chapter of the National Association of Home Builders (nahb.org) Identify specific builders, subdivisions and spec homes (new homes are now included on realtor.com ) Research consumer reviews of builders homes on sites like Yelp and Angie s List. Or simply search for complaints against (homebuilder s name). 3. Read what builders read. To learn more about construction trends and methods, subscribe to magazines like: Builder (builderonline.com) Journal of Light Construction (jlconline.com) Green Homebuilder (greenhomebuildermag.com) Custom Home (customhomeonline.com) 4. Schedule appointments. Success often hinges on relationships and new construction is no exception. If a builder has retained a sales rep(s), make an effort to meet them prior to introducing your buyers. (See related sidebar on page 6 for more suggestions.) 5. Attend major meetings. National and regional building expositions are held across the country, offering a great way to learn more and network with builders. Try searching for Builders Shows (your city or state). TBR February
6 From the Ground Up: 7 Need-to-Knows When Representing New-Home Buyers Continued from page 5 Maintain a good paper trail, monitor the progress and be present for inspections and walk-throughs, advises Becker. After closing, you can provide a valuable service by reminding your buyers to do another walk-through and schedule an independent inspection about 4 6 weeks before the warranty period ends. With new homes, problems often take time to surface and it s easy to overlook this fi nal opportunity to get them fi xed. 7. Financing Options Financing a new home purchase can also have some interesting nuances, especially if you are dealing with a custom build rather than a production or spec home, points out Noreen. An agent who can direct their client to good sources for loans pertaining to their specifi c needs can prove invaluable when dealing with buyers who want to build their dream home on an already purchased lot. Is it worth it? Yes! New home construction may require developing a whole new set of knowledge and relationships, but there are also substantial benefits. Once the buyer decides on a builder, their team drives the process of selecting a fl oor plan, options and upgrades. You should remain involved in watching out for your buyer s interests, but the process is quite different from showing home after home of existing properties. Builders warranties and errors and omissions insurance also reduce your liability to risks like undisclosed conditions and major structural and site defects. Besides, new homes are fun to sell. Not only is it exciting to see dreams become reality, you are on the front lines of the newest home trends. Plus, new homes deliver substantial buyer satisfaction, which makes you look good! You should remain involved in watching out for your buyer s interests, but the process is quite different from showing home after home of existing properties. Working with a builder s sales rep is not that different from working with a listing agent in each case, you represent opposite sides of a real estate transaction. Promoting win-win results requires understanding their perspectives and forging cooperation. Here s how to get off on the right foot with a builder s sales rep: Step 1. Do your research. Similar to going on a job interview, you want to know something about the builder and the development before you arrive. It will demonstrate genuine interest and you ll be able to ask better questions. Your First Meeting with a Sales Rep Step 2. Schedule an appointment. Don t just show up, expecting them to drop what they re doing to meet with you. They re busy people too, juggling numerous details on behalf of their builder and various buyers. Step 3. Ask how they see the buyer s agent s role. Give them a chance to take the lead and do more listening than talking. Their answers will reveal a lot about their expectations, how to work with them and add value for your buyers. 6 TBR February 2014
7 Why a Buyer s Rep Provides a Better New Home Buying Experience Do you plan to purchase a new home? It s an exciting and appealing option. But buying a newly constructed home typically entails considerably more steps and decisions than most existing-home transactions. It s hard enough to keep up with all the details, much less know how to make the best decisions. Your new home buying experience will be more successful and enjoyable if someone is looking out for your interests. Builders and their representatives may be searching for buyers to purchase their product, but only a buyer s representative will be 100 percent loyal to you, providing advice and guidance on: Builders reputations - A qualifi ed buyer s rep will be familiar with builders reputations and references and should be able to help you make a good choice. Inventory - Builders aren t obligated to show you every new home they have for sale, much less other builders homes. In contrast, a buyer s rep helps you see the full range of new and existing homes on the market. Contract review - A buyer s rep can alert you when a builder s deal seems one-sided and advise when legal counsel is needed. Disclosures - Buyer s reps are familiar with desired property disclosures (environmental hazards, Megan s law, pests, pollution, etc.) and can help you obtain these from a builder. Upgrades - Gain input from a buyer s rep on which upgrades are most likely to improve your home s resale value, as well as guidance on making sure your home s price doesn t exceed its appraised value. Inspections - New homes are inspected for compliance with municipal building codes at several stages in the construction process. However, your buyer s rep can help arrange your own independent inspections, providing another level of assurance that any problems will be spotted and resolved. Financing - Buyer s reps are familiar with a wide range of fi nancing options. They can advise you on the merits of a builder s options (if fi nancing is offered) or suggest other lending sources. Closing considerations - A buyer s rep can alert you to issues that may not be addressed, including title insurance and protection against mechanics liens. Sale of existing home - If your purchase also entails selling a current home, you ll appreciate having someone representing your interests and coordinating details on both sides of your transaction. These are just a few ways buyer s representatives can improve your experience when purchasing a new home. To learn more, talk to your Accredited Buyer s Representative. The Accredited Buyer s Representative (ABR ) designation is awarded by the Real Estate Buyer s Agent Council (REBAC), a subsidiary of the National Association of REALTORS (NAR). To learn more about REBAC and access various home buyer resources, please visit REBAC.net.
8 Real Estate Buyer s Agent Council, Inc. 430 North Michigan Avenue Chicago, IL REBAC@realtors.org TODAY S BUYER S REP February 2014 Volume XXIII Number 2 Members Only: Drip Campaigns Made Easy! Have you investigated Pop-a-Note yet? REBAC s partnership with RISMedia makes it super-easy to use conversational marketing to stay top-ofmind with potential buyers. With Pop-a-Note, you can send interesting and entertaining messages covering real estate topics as well as popular lifestyle information (health, travel, entertainment, etc.) Customize the system to match the topics and timing you prefer and easily track your results. REBAC members can set up an agent-branded account with 50 contacts free of charge and receive discounted pricing on larger packages. For more information, visit REBAC.net.
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