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Builder preferred Realtor: Who are they working for?

By
Real Estate Broker/Owner with Distinctive Properties

 

Builder preferred Realtor: Who are they working for?

It has been brought to my attention by a past client that she would like to purchase a new build.  Her friend & past neighbor has moved into this wonderful retirement home.  She invited me over to give her an idea of value & discuss commission.  When she told me about her friend she mentioned that she had used he builder's preferred Realtor to buy & sell her home.  The preferred Realtor was going to list her home for FREE, why was I not offering that?  When I left her home I was a bit set back & went home to figure out how I was going to justify my already discounted commission since I was going to help her buy her new home. builder preferred realtor

My first step was to figure out her comps, I wanted to see time on the market & efforts it was going to take to market her home.  I ran across the friends sold comp.  This comp sold a month faster & was listed for 10K less then the other 3 homes that sold within the time frame.  So after a bit of "PI" work I figured out what is widely known (assumed) by most : Builders preferred Realtors will list for free because they take the 2% they would charge for the listing & deduct it from the price.  It all works for all parties Buyer, Seller & Builder!  House sells fast for seller, Buyer can move quickly into new build & Realtor just closed a property they didn't have to prospect for.  So what's the problem?  Does this type of pricing impact the home values for the seller's house?  And the neighborhood comps as well? Was the seller made aware of how the builder preferred Realtor is able to sell it for free?

I'm really curious how the Realtor community feels about this- as I am really torn!

My husband also wrote a blog that discusses this in a possibly different way. Real Estate Values: Are some Realtors pushing us "below the bottom"?

Katie Knop

KnopHomeTeam.com

Distinctive Properties

   

Comments (5)

Dee Mayers
Covina, CA
San Gabriel Valley, CA

You said "Builders preferred Realtors will list for free because they take the 2% they would charge for the listing & deduct it from the price".   If that 2% ends up in their pocket the listing is not free?  How exaclty would that be itemized in escrow?  I'm not sure that I understand. 

Nov 24, 2010 04:39 PM
StapletonHomeTeam KnopHomeTeam Distinctive Properties
Distinctive Properties - Denver, CO
For an UnReal Estate Experience call the Knop Home

I'm sorry I wasn't clear- Let me try again.

When listing broker signs listing contract listing agent only charges the selling brokers commision.  At the time of the closing of the sellers home,  the seller only pays the a commision to the selling broker.  The listing broker walks away with no commision. The overall question was...

Who is the Listing agent really looking after if they drop the price possibly below market value to sell in order to get the new home buyers agent commission?  We all agree that a lower commission may be in order knowing you are getting the buy side but to completely take the listing agent commission out of the picture is it hurting the market and the sellers(who they have a fiduciary responsibility to) leaving money on the table?

Sorry for the confusion.

Katie

Nov 25, 2010 06:15 AM
Jane Wallace
HomeSmart Realty - Denver, CO
CRS | SRES, Denver Real Estate

Katie, I believe that they get the commission from the Builder on the Sale of the Builders home if the Buyer has no Realtor, and they charge 3% to list which is 2.8% for the Selling agent and .2% to the listing agent. I had a deal like that and the Listing agent got .2% and works a lot in Stapleton. (hmmm wonder who).

Nov 27, 2010 04:12 AM
Justin Ross
Stapleton Mortgage LLC - Denver, CO

...play nice now Knopps's.

Nov 29, 2010 01:51 PM
Justin Ross
Stapleton Mortgage LLC - Denver, CO

...play nice now Knopps's.

Nov 29, 2010 01:52 PM