Buyer Representation and New Construction

By
Managing Real Estate Broker with Benchmark Realty, LLC TN Broker License# 289736

Recently, I have been brought in to a few situations where our agent was not getting paid by the builder on a new construction contract because they were not with the buyer when they visited the model home to write the contract.  Since you were not with them, the on-site agent will claim you did not “introduce” them to the home and will claim they are the procuring cause.  Yes, unfortunately, this really happens.  This is why it is critical you clearly educate your buyer client at the BEGINNING of the buyer/agent relationship so they understand the importance of not visiting new construction sites without you.  Unfortunately, they do and will write a contract because they fell in love with the home plan the builder’s agent presented to them and want to get the deal sealed before it gets away.  

I know of two transactions in the past couple of weeks where our agents were excluded from the deal because they were not with the buyer at the time of writing the contract.  How can you prevent this?  And, how can you get paid?

First, as I said, EDUCATE your client!  Use my “Home-Buyer Partnership” form I created a while back as a guide when having the conversation about how you run your buyer representation side of your business. (You can download the form from my book site here)  Second, you need to have a signed buyer representation agreement in place with the buyer before any offer is made on a property – this includes new construction.  Third, if you want to get paid and you are not receiving compensation from the seller/builder, the buyer needs to understand the compensation terms and condition in the Purchase and Sale Agreement.  These paragraphs explain in detail to the buyer that you will still be due a commission if the buyer works directly with another broker or agent in purchasing a home. And, if a compensation is not being offered by the seller/builder or their broker, you will be paid the amount you entered in the agreement.

It can become problematic when a buyer says they did not realize they had to pay you, their buyer representative, a commission if you did not receive compensation from the seller/builder. That is why it is critical you review the buyer rep agreement in detail with them.  Don’t be afraid to go over the compensation sections.  Remember, you are operating a business and you get paid for your experience, knowledge, negotiating ability and knowing how to manage complex real estate transactions.  If they clearly understand what buyer representation is all about and the benefit it provides them they will want YOU to be with them when they visit new construction homesites.  They will know you “have their back” and are working in THEIR best interest and not the seller.

Posted by

John M. Giffen, CRB, CRS, GRI

Principal Broker / Benchmark Realty, LLC

(615) 371-1544

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John Giffen

CRB, CRS, CDEI, GRI, SRES, BROKER, REALTOR®
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