This has come up several times in my career. I have had people ask me “Do I really need an agent to represent me if I’m working directly with a builder?”
The answer is yes. Always. However, there are misunderstandings about what an agents’ role is during a build, and a myths about the agents commission that I hear quite often from buyers. Here are just a couple of them that I hear the most often:
Myth #1. An agent won’t really do much to help a buyer during a build. Buyers should just work with the builder on their own.
First, let me say that there are definitely a few agents for whom myth #1 is true, but that is certainly not the case for the vast majority of hard working, great agents out there. Working with a builder can be a little intimidating, especially if you have not done it before. The builder typically has their own contract (which protects THEM. Not the buyer.) The builders contract usually consists of more than 100 pages of legal jargon and addenda, The buyer’s agent’s job is to read, understand, and communicate all of the points of the contract to their client and negotiate with the builder so that their client gets the best terms possible. A good realtor will be able to point out verbiage in the contract that could conflict with a buyer’s needs or wants during the home building process and address those concerns with the builder. Additionally, many builders are willing to reduce their sales prices or offer buyer incentives like free options or upgrades, but they won’t tell that to a buyer. In fact, what they will tell buyers is that they do not negotiate costs. Ever. Again, this is where having a great agent working on your side can greatly benefit you. Most people find the negotiation process to be painful and uncomfortable. The last thing they want to do is start a conversation asking for a reduced price or worse – a freebie. This is where your agent comes in. I have personally negotiated for reduced sales prices, increased builder closing contributions, free upgrades, free options, extended contingency time frames and many other discounts for my clients. We agents like negotiating. It’s what we do. And we especially like making our clients happy.
Myth # 2. If a buyer does not use their own agent, the builder will then “gift” (in the form of upgrades/ extras) them the money that would have been used to pay an agents’ commission.
This myth is by far the most believed, I think. I have actually encountered people who, after showing them many homes, decided that they wanted to buy a brand new home but no longer wanted representation. They believed that their builder would discount the sales price of the new home by the amount that they would traditionally have to pay an agent. After experiencing this, I decided to ask a few builder representatives that I know if this was true. Would a builder give the buyer an unpaid commission in the form of either a price reduction or upgrade? Absolutely not, was the answer from each person I talked to. Why? Well, builders LOVE realtors! We are constantly bringing ready, willing and able buyers to their fancy new homes and selling them! We have the buyers, they have the houses. It’s a win-win for both of us. That’s why almost all builders automatically include agent’s commission into the base price of every home they offer for sale. Every home. Not some of them, all of them. They want to work with realtors. It doesn’t do them any good not to. They have a “slush fund” of sorts that is already budgeted out to pay commission on every single house they sell. If you choose not to use an agent then that’s just another few thousand dollars to the good for them.
Bottom line? Agents work for their client, not anyone else. Our primary focus is to do what is best for our clients, all of the time. Make sure you have a good agent with great negotiating skills representing you if you decide to build a new home. You’ll be happy you did!
If you have any real estate questions, I’m always happy to answer them. Give me a call or shoot me an email!