Special offer

Myth or Fact? A better deal on New Construction without an agent.

By
Real Estate Agent with Keller Williams Realty

Our experience over the years and still continues. Buyers are convinced that if they visit a community and register with the sales rep and purposely tell them, No I don't have an agent, that they will get a better deal.

MYTH, there are NO better deals because you do not have an agent!

I will tell you straight up, it makes NO DIFFERENCE. the base prices are set with commissions and they will not reduce their price. More people lose in this deal at the end. 

The question buyers should be asking the sales rep is, If I register, will you put in writing that I don't have an agent,  and offer a 3% reduction in price, or offer 3% more in upgrades at no cost. 

I actually would love to see that happen so we can once and for all prove this MYTH. 

I can't tell you how frustrating this is in our market. So many lost commissions to great agents because of a simple registration form. Builders are making out on this theory. 

Buyers please talk to an agent about representation before going in to a community. Remember that rep is there to make a sale for the builder and they are working for the builder. Who is working for you in your best interest? Yes, it appears on the outside it's not a big deal. But the reality is, are you properly being educated about the market resale. Have you weighed out your options between new construction and resale? 

What if an agent could get you relatively the same home for $50,000 less. What difference would that make on your decision? The builder rep is not going to educate on the market, they will do anything to get you into a contract with their community. 

Buyers, it is a MYTH that you receive a better deal on New Construction without an agent!

Comments (101)

Maddy Everhart
Lyon Real Estate - Fair Oaks, CA

Great info!  I just recently spoke to a new construction sales rep who actually appreciates working with Realtors because we can even BRING them clients!  ::gasp::: Imagine that! ;)  

Jan 19, 2013 05:08 AM
Mitch Muller - Charlotte NC Real Estate
ProStead Realty Charlotte, NC CRS SRES mitch@prostead.com - Charlotte, NC
Certified Residential Specialist

I've seen "some" builders in the past offer a sweeter deal without the Realtor.. Funny how I can't remember who they are, because they are not around anymore!

Jan 19, 2013 05:19 AM
Dana Hollish Hill
Hollish Hill Group, JPAR Stellar Living - Bethesda, MD
REALTOR * Broker * Coach
I had buyer clients who came to our company because they were unhappy with another agent. That agent had a contract that said you could not sign up with another agency for 90 days after termination. My clients waited the 90 days and then came to me. We saw several homes and then started looking for new construction. We found a great home and were ready to write an offer. The sales rep said that their previous agent would receive the commission. My clients were shocked. They had never seen new construction with that agent. Upon further investigation, it was discovered that the previous agent had gone online and registered my clients with several new builders even though he had never shown then the developments. And he registered them after they had terminated with him. The builder said they would honor the online registration for one year regardless of whether or not it was done with my buyers' knowledge. Seemed crazy to me, but that is they did and there was nothing we could do to change the builder's mind.
Jan 19, 2013 05:38 AM
Beverly Herdman
Keller Williams Realty - Culpeper, VA
Northern VA Wine Country Experts

Wow Dana!!(# 84) That is just wrong!

Jan 19, 2013 06:11 AM
Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC
The RIGHT CHARLOTTE REALTOR!

Beverly, I have seen it from both sides--representing a builder AND having had buyers who originally did NOT want new construction, drive around and decide that they were willing to wait for a new build.  There is a national company who has cheated me out of my commission TWICE and I now tell my buyers of that experience.  It's their option as to whether or not they want to visit those showrooms or not but, most of them feel that if the developer/builder was 'stiffing' a top selling real estate agent, they will surely not get the customer service which they expect or deserve.  

I have one client now that is working with that builder and guess what?  It's been a nightmare for them. The sad part about this one for the builder/developer is that my client is a physician who comes in contact with numerous DIFFERENT people every day and he is surely letting them know to stay away from this particular builder.  Oddly enough, they continue to do what they've done for years.  It makes no sense--I know I'm not the only agent who has had this experience in my area so, their poor reputation is only getting worse by the day.  But, they have the national 'brand' keeping them alive.  Something has to change at some point!

As from a builder's rep perspective--I went out of my WAY to 'romance' the Realtors® in the area.  If they brought us a buyer, they received flowers and the promise of my being available for any part of the process so they could go out and work new business.  We made their life blissful!  We were incredibly grateful for them bringing us business and we would NEVER, in a million years, as some of these builders do to floating buyers, suggest that they will save money without an agent!

Jan 19, 2013 07:18 AM
Jane & Jeff Daley, PhD
Luxury Valley Homes Scottsdale - Scottsdale, AZ
Scottsdale Real Estate Arizona

It is a Myth with a capital (M). A new build is when the buyer should really find themselves a good agent to represent them in the transaction. Usually the builder uses their own contract and typically it’s written so the builder has an advantage and sometimes a ridicules advantage. There is more work on the part of the agent but clearly it is rewarding because typically we have saved our clients thousands or lots of grief and sometimes both. Great subject matter here and probably lots of stories.

 

Jan 19, 2013 07:45 AM
Margaret Hickman
Keller Williams Realty - Cenla Partners - Pineville, LA
REALTOR®, GRI, ABR®, SRS

Good comments!  However, I am going to present a different point of view. 

I have a new construction listed.  About two weeks ago, I started getting calls and texts from a potential buyer who was unrepresented.  Her house is under contract in another state, and she was reluctant to commit until it sold.  I explained contingency offers, but told her to let me know when she was ready. 

She went to get her pre-approval this week, and she asked the lender about getting another agent.  Fortunately, this lender and I have worked together previously, and she told her I would represent both sides fairly. 

The buyer needed closing cost assistance.  When I approached the builder, he shared he had gone over budget on the house, and would not be able to contribute much toward closing costs.  However, since I was representing both sides and work for a company that allows me the flexibility to make such decisions, I volunteered to help by reducing the commission.  After all, if I represented only one side, I would make only 2% anyway.  This way, instead of being greedy and insisting on the full 4%, I reduced.  I will still make more than 2%.  The buyer gets the house and closing costs assistance, and we have a closing.  The builder sells the house, and I believe will give me more business.

Had she gone with another agent, the builder could not have had the flexibility to provide as much assistance as needed.

By the way, in Louisiana, there is a state law prohibiting interference in a REALTOR-client relationship.  If one of my clients in an existing relationship with me was influenced, I would have no problem reporting that agent, builder, lender, attorney, etc.  It also pertains to relocation companies who try to squeeze a referral fee out of the agent when the relationship is already established.  If your state doesn't have such a law, maybe that is something your PAC would want to explore.

 

Jan 19, 2013 09:51 AM
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Beverly,

Smart builders like working with agents, as some of the comments here show. Smart buyers do too, because a good agent can help them through the process to a reasonable outcome. Buying a new home has a completely different set of issues than resale.

Jan 19, 2013 10:45 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Dana in #84:  I have never heard of a registration that lasted one full year... especially without the agent NOT ever bringing those clients to that builder.  I wonder if this on-site rep's own sales manager knew about this, or even the VP of Sales & Marketing.

I worked on-site for several Virginia new home builders... and this policy that you shared would never have been held by any of them.  Wow.

Jan 19, 2013 10:54 AM
Dagny Eason
Dagny's Real Estate - Wilton, CT
Fairfield County CT, CDPE Homes For Sale and Condo

Beverly,  We have not had much new construction here in years, and I am eagerly working with a couple who are thinking of buying new construction.    We will babysit the process the entire way through, and make sure that the builder will follow through for them.    I am enjoying the comment stream here - a lot of education here, once again!

Jan 19, 2013 11:29 AM
Mary Padilla
YES! Realty - Albuquerque, NM

My buyers almost made the mistake of not using me.  Thankfully,while they were in the model, they asked if they could bring in their own Realtor. They sure were GLAD that did when, in the end, lots of things were wrong with the home and I was their knight in shining armour.  The builder, Beezer was going out of business in NM, selling off their existing inventory and NM and moving to AZ.  When the house was complete, there were so many problems.  The hood for the stove didn't fit properly, the upstairs bath only ran cold water, the water heater leaked and on and on.  They really didn't care about the client and if it wasn't for me houding them day in and day out, I honestly don't think the items would have ever been fixed by the builder. 

Jan 19, 2013 11:54 AM
Jamie R. Bell
Bell Realty Group at Berkshire Hathaway HomeServices NEP - Glastonbury, CT
Your Central CT Realtor

Bev, I couldn't agree with you more. It is so hard to buyers to explain to buyers that they are not saving themselves anything and unfortunately they won't know unti the end if it was worth it to them. I definitely like your comment about the buyer asking for the discount or upgrades in writing. 

Jan 19, 2013 09:12 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

This is a myth that is hard to kill off. Our builders in the Charlotte area do not reduce their prices by 2.5-3% if someone comes in without buyer representation. They pay us out of their marketing budget and if they avoid a commission, they just spend the extra money to attract more agents with their clients! Many buyers don't realize this and sometimes it's hard to get them the story before it's too late.

Jan 19, 2013 09:21 PM
Rob Renk
Center Street Lending - McKinney, TX
AE | Fast Fix/Flip Loans for Residential Investors

I know the builders won't do a reduction of the price.  As a buyer it is always better to have someone there that can read over the contract and have direct dealings with the sales people from the builder.

Jan 19, 2013 09:32 PM
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Hi Beverly, we think it really depends on the builder and the builder's rep.  But every business person looks at the bottom line.

Jan 19, 2013 10:23 PM
Real Estate Kareer - Sara Kareer, CLHMS
Re/Max Real Estate Centre Inc., Brokerage - Mississauga, ON
This Kareer Helps You Build Real Estate Wealth

Great blog post Beverly!  Buyers definitely need to be educated to understand that the Builder Sales Agents work directly for the Builder and do not represent the best interests of the buyers. 

Buyers need to have their own agent to recommend areas and locations that will offer good value/appreication, recommend reputable builders that offer great after-sale service, review the builder contract/upgrades/closing date, etc.  

 

 

Jan 20, 2013 01:51 AM
Randy Hilman REALTOR® Associate Broker
Randy Hilman Homes in partnership with Bean Group - Moultonborough, NH
Guide & Mentor to Home Buyers & Sellers

Hi Beverly:

The sales scenario you present is not likely to happen in New Hampshire among scrupulous licensees as we are required to disclose the difference between customer and client relationships at our first meeting with unpresented consumers.  It would be a severe violation of our laws to attempt to establish an undisclosed dual agency by trying to "sign up" unrepresented consumers.  Aren't some of the horrors described herein representative of the various kinds of professional misconduct with which state real estate commissions concern themselves? 

Jan 20, 2013 04:10 AM
Dale Taylor
Re/Max 10 New Lenox Illinois http://dtaylor.remax.com - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

Great post Beverly - and very timely, as Buyers are starting to commit to their relocation goals now.  When I built my 5100 square-foot dream home in Frankfort, Illinois back in 2003, I started right at this time of year.  I moved in my home during the Labor day weekend.

Jan 20, 2013 10:05 AM
George P. Cruz Sr.
Premier Brokers International - Port St Lucie, FL
PSL FL CDPE, TRC, CIPS

Great post some home builders do look at their bottom line and some more than others..

 

 

 

 

 

Jan 21, 2013 12:37 AM
Anna Niehaus
Keller Williams Realty Wellington - Wellington, FL
Anna Niehaus

I worked for a home builder for almost 20 years and was always involved in the pricing of the homes.  When working on our budgets, we estimated that about 1 out 10 homes was sold thru a Realtor. So, in our budget we added one tenth of a typical commission as a line item. When I explain this to my customers now that I work as Realtor, they can see how little of an advantage it is to visit the builder's office without a Realtor.  Here in Florida, most builders do not plug in a large number for Realtor commissions and therefore they can't give big discounts when a buyer shows up without a Realtor. But most importantly, the builder never wanted to alienate the Realtor community by rewarding unaccompanied customers.

Jan 21, 2013 01:19 AM