SHOULD AGENTS EXPECT TO BE PAID BY A BUILDER WHEN THEY DIDN'T INTRODUCE THE BUYER?? BY REQUEST.

By
Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

Builders paying real estate commissions.

I received mail from a member who asked for my opinion about agents collecting commissions from builders who require that the agent introduce and register the buyer. 

One of the reasons many agents don't include new construction in home tours is because a "to-be-built" home takes months to deliver and the agents don't want to wait for their commission.  All I can say to that is "send them to me".  I'm happy to wait for a commission.  For me, it's like another little annuity.  You almost forget about it and there comes a nice commission check.  Of course, we usually follow the new construction throughout so the commission check is a welcome reward for our patience.

I'm not sure of the details of the transaction for which the agent believe that you should be paid. There was a suggestion that the builder tried to convince the buyer that they could get a better deal without an agent.  That is a risk an agent takes when they have not introduced the buyer to the builder.  Some builders pay their representatives a higher fee if the buyer doesn't have and agent, but that's not a problem if the agent has accompanied the buyer to the site and registered the buyer.  Some builders have a 30 day registration.  That means that the agent must reregister that buyer every 30 days until they buy something.  This is a case where the seller/builder has the power and weilds it like a club studded with nails.

THE COMMISSION IS EARNED WHEN THE AGENT INTRODUCES THE BUYER TO THE BUILDER.  When an agent is working with a buyer, that agent MUST take the buyer into all new home locations in the buyers price range and location of choice. It doesn't matter if they buyers has specifically stated that they aren't interested in new homes. Experience says, get them in and get them registered. We know the builder's requirement with respect to introducing the buyer to establish procuring cause. If an agent follows that process, there is no problem collecting the fee, unless, of course, the buyer changes agents and removes the original agent's name and replaces it with their new agent.

SCHEDULE REGULAR TOURS.  If an agent is merely "working with a buyer" and then finds that the buyer has visited the new homes and registered themselves with no agent, the agent has no claim on a commission if the buyer buys a home. Agents who work hard advising buyers of the processes, touring with buyers, planning new and resale showing, will collect a commission. Agents who do not do not and should not.

FOLLOW THE BUILDER'S RULES AND GET THAT BUYER REGISTERED EVERYWHERE!  If agents don't want to follow the rules and get their buyers into the builder and get them registered, let another agent work with that buyer. Many agents work hard selling new homes. We tour them and develop relationships with the builders rep. I also make sure that my buyers know that I must introduce them to new home builders to qualify for the fee.

IF YOUR BUYER IS INTERESTED IN NEW CONSTRUCTION, LET THEM KNOW THE VALUE OF WORKING WITH A BUYER'S AGENT.  If an agent can establish their value, by virtue of their knowledge of the new home process and real estate in general, many buyers will have a sense of loyalty and not visit new home builders without their agent. If an agent is concerned that the builder's rep will offer a better price to the buyer without an agent, the only safe procedure is, don't let the buyer visit builders without the agent. "After the fact" buyers agents commissions are not fair to agents who make sure that they introduce buyers to builders.

COLLECTING YOUR FEE FROM THE BUYER.  If an agent has the buyer under a Buyers Agent Agreement and the buyer buys without their agent registered, the agent can proceed to collect their fee from their buyer, assuming the buyer doesn't have a claim of abandonment. So, get those buyers under contract or at least get them out to visit the builders with you and get them registered.

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Comments (25)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lenn, I don't have any knowledge in this area, but it looks like to me from what you wrote, that if a Realtor follows the rules and does his/her job (and not be lazy) there would not be a problem.

Mar 23, 2009 09:30 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Richard.  Your system of opening a lockbox is an excellent one.  That alone shows procuring cause even though the builder doesn't have the buyer's name.  However, we're usually talking about buyers visiting model homes. 

Marty.  By asking buyers about a buyers agent, you're doing what agents are supposed to do on Open House.  If the buyer says yes, then you can register them with the agent's name and pay them.  However, those of us who work hard to do our job and spend the time showing homes and earning our fee, mmmmmmm.  BTW, I reported my ReBlog feature broker. 

Michael R.  My buyers have a supply of my cards if that should happen.  Fact is, my buyers are not likely to visit a new home builder without me.  If they exihibit a propensity to do so, I drop them because I'm not going to spend the time and resources with a buyer showing resales and then have them "drop in" to a new home builder and the builder refuse to pay me. 

Fact is, I don't chase commissions.  If a buyer with whom I'm working has "dropped in" a new site without me, they're on their own.  Chasing a commission with a builder isn't my cup of tea and even with a BA Agreement, I have to pay legal fees to collect and it's not the way I want to collect a commission.

Jo.  That's very nice, but those of us who work hard to follow the rules, spend the time touring and getting our buyers registered, AND SHOWING THE HOMES AND COMPARING THE VALUE TO OTHERS, are not being treated fairly when an agent can just "send their buyers out to find a home" and then they waltz in and sign the broker addendum on a contract.

Ken.  That's the way it should be done.

 

Mar 23, 2009 09:40 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

George.  By George, I think he's got it.

 

Mar 23, 2009 09:45 AM
Celeste "SALLY" Cheeseman
Liberty Homes - Mililani, HI
(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

lol...by George...he has got it. Bottom line...do our job and get them all registered....lest lose the chance of getting our clients in contract. All our new builders specifically state in the application that if they have an agent they have to bring them with them to register ...or snooze out. :)

Mar 23, 2009 10:42 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Right you are Sally.  It's the rule and eliminates any risk of getting paid for our hard work.

 

Mar 23, 2009 10:47 AM
Cameron Wilson
Labrum Real Estate - Murrieta, CA
The Short Guy - Murrieta,Temecula,Menifee Californ

The builders rules are very simple and easy to follow so my rule is show em and register the buyer.

No big deal.

Mar 23, 2009 12:16 PM
Konnie Mac McCarthy
MacNificent Properties, LLC - Cobb Island, MD
Broker/Owner - VA & MD "Time To Get A Move On!"

Lenn.... selling new construction is pretty easy...so I do believe that we need to work to earn our commission..however,.....there are uniquie circumstances..I was working with this couple.....who had been focused on resale homes,(actually homes that were in higher altitudes was their preference,  they appeared to have specific criteria and never mentioned being even interested in new construction....after about 3 weeks of working with them, we had finished up a day of "looking" when I left them, they were going to consider some of the ones we saw...

My phone rang about an hour after we parted....it was my clients...they decided to stop by a new home community, and they loved it....(I thought all was lost and they were calling me to let me know they bought a home ) they were at the sales model, told the sales person they had an agent and that they would not write a contract, unless, I was going to be able to represent them ... :) :) so, in that case ( and maybe because it happened to me) yeah... a commission is due :)   But, normally, I am a firm believer in working for a living...

Mar 23, 2009 12:51 PM
Terry & Bonnie Westbrook
Westbrook Realty Broker-Owner - Grand Rapids, MI
Westbrook Realty - Grand Rapids Forest Hills MI Re

In the current market the builders need us and have been a bit easier to deal with. It is the best policy to registerall your buyer that might buy new. Good reminder.

Mar 23, 2009 02:49 PM
Julie Ferenzi
john greene Realtor - Plainfield, IL
Julie Ferenzi

I had the same exact experience as Konnie and the builder agreed.  We close on Friday. 

I felt guilty, but I worked with her extensively to the point that she knew what she wanted because of all the work I had done with her prior.  She made her decision because I worked so hard showing her what this new construction was competing with.

Mar 23, 2009 04:09 PM
William Johnson
Retired - La Jolla, CA
Retired Real Estate Professional

Hi Lenn, You surely did hit the nail on the head. You have summarized this very well, in fact, I  haven't read anything like it, ever. Nicely done and very useful for the new agents and the seasoned ones that don't show much of the new products around. Sadly, many Buyers, not knowing any better because their agents have done little counseling on this issue, wander around and get excited about seeing what's new , usually on their own. Too late most of the time for the agents to back track this. I give all my perspective Buyers a stack of cards and teach them to lead with them. If they are out, my card upfront . I have had a builder call me once and said my client was there, What did I want to do? They actually allowed me to fax my registration in and then let my clients go through. They didn't end up buying there but I was certainly impressed with the Builder's agent that would even consider such a thing. Sometimes life just drops a little kindness our way to get our attention.

Mar 23, 2009 04:09 PM
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices

Lenn,

We learned it the had way. Had the girl coming form South Florida. Showed her different places, and registered her with the builder. She left being instructed to call us if she wants to see it again, or wants to make an offer, and with any other need first call us. She had inactive license, so she knows how it works. Comes in 4 months unannounced, went straight to the Builder and made an offer. Then came to us and told us not to worry, that she specifically told the agent that we were with her first time, and he did not object, said we wold be fine. Well, she lied. We went there, the agent said she did not tell him that she was working with the agent, and that we were showing it to her before, and registered (the time elapsed). He opened the contract and showed us a disclaimer, stating that she was not working with any other agent. She signed it.

Well...

Mar 23, 2009 04:54 PM
Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services

Lenn- Oh boy! How I hated that part of the business when I first moved here and was working with buyers! Because I had to call every single builder ( this was 14 years ago) to see if they even co broked. Lennar was so good though, I loved showing their new construction- they let me register over fax just in case the client came without me. But I found that each builder did things differently. Now they are all begging for agents to bring clients that they are much more lenient here.

Mar 23, 2009 04:59 PM
David Painter
Keller Williams Realty - Spartanburg, SC

We find that the builders are very willing to pay us a commission, even if we just send a buyer their way. We, of course, do all of the follow up work with the buyer to get the deal to the closing table.

Mar 23, 2009 07:03 PM
Maggie Dokic | Miami, FL | 888.883.8509 X101
eXp Realty LLC - Miami, FL
GREEN, CDPE, SFR, Pinecrest | Palmetto Bay |

oh that George sure is a funny one.  =)  Sometimes, it isn't laziness.  Sometimes the buyer has shown no inclination to look at new construction and "just drops in." Yikes!  But of course, you're right about no commission being due in that case. 

As if our work were limited to just making the introduction.  If that were the case, I'd be running a tour bus to the new developments =)

Mar 23, 2009 10:19 PM
Allison Stewart
St.Cloud Homes - Saint Cloud, FL
St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904

LENN- as always great advice.  Most of the sales offices builder's once had here are closed. The properties are on the market at tremendously reduced asking prices.  But when they return (and they always do) this is important infomation.

Mar 23, 2009 10:20 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Allison. Things are different across the country, but one thing is for sure.  When the new home market returns, builders will tighten their requirements for registration. 

Maggie.  I have learned that buyers don't know what they want until they see it.  I've had many buyers out who only wanted "older", "brick", "resale", etc. homes.  However, when you walk them into a beautiful model homes, they are "SOLD". 

 

 

Mar 23, 2009 11:18 PM
Chip Jefferson
Gibbs Realty and Auction Company - Columbia, SC

Lenn, Ill wait as well. I make it a practice to send all my clients and potential clients new home construction. I have a great relationship with all my new home agents around my town. One call does it all!

Mar 24, 2009 12:11 AM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Laura.  Indeed.  It pays to take the time to get to know the new home agents.  I visit them regularly and can call and register a buyer.  I've done my home work, know the builders, stay on top of their inventory and help them sell their product. 

We do NOT have to chase commissions.  We can earn them. 

Mar 24, 2009 12:21 AM
Carol Culkin
Diamond Partners Inc - Overland Park, KS
Overland Park Residential Real Estate

Lenn - Great ideas! I have had buyers tell me they don't want to "build", only to later find out they visited the builder's model and might be suddenly interested in the construction process after all.

Mar 24, 2009 03:54 PM
Laurie Mindnich
Centennial, CO

Lenn, when I was on site, the smart Realtors would call me when they had a buyer, to check inventory, pricing, or incentives. While I wasn't able to register the buyer over the phone for them, they'd provide the name and it really helped. If the buyer stopped in, they'd be advised to call their agent NOW if they wanted the input/participation of the Realtor. Rarely did the buyers understand that the trip to the mall (with a quick peek at a builder) compromised their representation. Once explained, buyers were more than willing to call their agent and get them to the site without registering with us. That registration form is key...

Mar 26, 2009 06:44 AM