Get real! Why would I want to have an agent act as a middleman when I can deal with the builder? I can get the house for less because there will be no commission to pay. Why should I lose thousands of dollars just to have you walk in with me? If you are a home buyer how often have you thought this? If you're a Realtor how often have you heard this?
When the cat is away the mice will play. There are so many things that can work against a home buyer when they aren't properly represented. Check out the latest scandal by some home builders. No agent to review your paperwork and you aren't an attorney or well versed in deciphering a harmful clause in a real estate contract. Glad I'm not you.
People will pay legal fees to protect themselves in a small civil case but think they can "wing it" on their own when buying a structure costing hundreds of thousands of dollars. As I recall a lot of people were taken advantage of by builders. For example, everyone in the real estate community in Sacramento knew to steer clear of this company. These unlucky home buyers who went at it alone ended up with a huge mess on their hands. A mortgage on a home they couldn't occupy.
Don't think this is an isolated incident. Visit www.ripoffreport.com and type in your favorite builder and see what pulls up. Most complaints are made by buyers who were not represented by an agent. To further drive my point home, how many of you reading this post think oversight of mortgage lenders and investment people is a good idea? Who is going to oversee your new home purchase? The agent who is paid by the builder? Uh huh, you catch my drift.
You're not hiring a person who lets you look at the inside of houses or a shuttle driver. You're hiring a professional who's little subtle re directions during the transaction helps you avoid disasters. You think it was a great idea and we know it was more than that. It saved you from a lawsuit. These lawsuits aren't always contractual either. Many can fall into the form of discrimination. Some blatant most subtle. I didn't know is no excuse in a courtroom.
Even if your theory of a home being sold for more holds true, hiring a Realtor to represent you in a purchase of a new home is much cheaper than the potential mounting legal bills or paying for a home you can't even occupy. Agents know contracts, federal and local laws, have the inside scoop on bad and good builders and always stay abreast of breaking news that could affect the area you are buying in or the credibility of the builder. If the builder thinks they can pull a fast one on you to make more money, then there's a good chance they might.
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The builder pays the commission not the buyer and I would imagine that if the buyer doesn't have a Realtor, most builders charge the same thing and just make more profit.
We had SO many issues that I wish we were represented when we bought our house. They kept on building the wrong specs. It would have been nice to call an agent after we visited the home (usually after hours) so they could deal with it the next day!
Great advice!
Having worked for builders and general brokerage, I can see both sides of the coin. Even now, representing a builder, we encourage having a buyer's agent.
Wendy - I agree
Renee - I look at it this way, you may have a good case but you still don't go in front of a judge without a lawyer. When buying something as expensive as a home why would anyone think that a builder who stands toprofit will represent them. I guess people don't believe that things will go wrong- It won't happen to me!
Jeff - That is so refreshing to hear. Some builders are in financial duress and will make decisions that may not be in the buyers best interest.
Great post Nevin, This gets to the heart of WHY people need representation. An agent represents the buyers best interests and not the builder's. A builder represents his best interests, not the buyers. Am I being redundant?
Wanda - I don't think you are being redundant. I think some folks have to hear it from other people to understand what is truly at stake when they enter into a contract without representation.
Wanda - I don't think you are being redundant. I think some folks have to hear it from other people to understand what is truly at stake when they enter into a contract without representation.
Today's blog: Home run with the bases loaded, 3 runs down, in the bottom of the ninth in game 7 of the World Series!
If NAR, and Realtors alike, would spend more time promoting the fact that buyers do not save any money when purchasing a home without representation, information like this would be a moot point.
Well done Nevin!
Great post, Nevin. There are so many things that builders do in playing nice guy that it would make the normal buyer's (once every 7 years or so) head spin if they knew. Anyone selling any product knows that you go on and on about the features. Buyers need to research what a product doesn't have or do.That's where disappointment come in.
Nevin, thanks for writing such a great post; this is information that needs to get out to the public, and you did a clear, concise job doing so. Re-blogged and submitted!
Nevin - AMEN!!! Not only is it wise to have a Realtor when buying new construction but it's also a good idea to have your own lender as well. JMHO
Craig -You'd think NAR would have done something about this by now...
Glenn- True. I think those who read have less issues! Amazing how lazy people can be with such important things!
Lottie- You're welcome and I thank you for suggesting and re blogging!
Donne- Especially if the lender is you or I! LOL I agree. This way they cannot be swayed by the builder.
The agent on duty works for the seller. That agent is not going to provide you with recent comps to let you know what homes are being sold for. Buyers don't realize that Realtors® can save them tens of thousands of dollars on a purchase. Consumers are duped into believing that they shouldn't use an agent to represent them.
Did you ever read "Rich Dad, Poor Dad"? In that book, they say that people think nothing of giving a 15% tip for poor service at a restaurant, but balk at paying a real estate agent to help them with what is possibly the largest purchase of their lives.
Tammie - You are so right
Melissa - Stupid is as stupid does!
Hi Nevin . . . great post. Wonder if I can do a spin off post on this same topic?
Nevin, I drafted a post similar to this, but this was so dang good, I only used 2 paragraphs of it for the re-blog because this is great! *kisses Nevin on top of his shiny bald head*
FANTASTIC POST!
Carla - Go for it!
Andi - Thanks! LOL
Nevil, I think I will tour some new construction over the next few days and take some pictures of why you might want to have an agent on a new construction home. Great Blog!
Hi Nevin,
Great Post.
Last 12 months we have had 3 situations in which buyers had the option to go direct to the builder and in all 3 cases, afterwards they told me that they where glad they did not
case 1 builder build the house in the "wrong place by 5 feet" builder re-negotiated and included almost $ 20,000 in extras
case 2, builder installed wrong fence in the wrong place, builder replaced fence and included about $ 3,000 in extra's
case 3, builder was late on everything, all the way along, and this potentially caused big issues to the buyer, builder accepted responsibility and re-imbursed buyers and included extras.
My point, it is not about negotiating commission discounts into the purchase price (who really pays the commission anyways????? hint it is not the seller) For the buyers in the end it is all about getting what they negotiated for, and if that is not happening, for the builder to take responsibility for their mistakes, rather than trying to (and often being able to) walk away from it.
Happy selling
Nevin - Having been a builder for 4 decades--both as a small builder and working for a corporate giant--I agree that it makes little difference in price. When in the corporate world I negotiated on behalf of the builder and didn't care whether or not the buyer had an agent. With our own real estate company, we still paid a commission, regardless of which pocket it went in.
And in those cases where a builder may agree to take a bit less for not having an agent, the customer loses the protections that come with their own representation. As a builder I would say that buying from a builder without having an agent is akin to buying without having the home inspected; both expose the buyer to hidden dangers.
Someone hit the "suggest" button before I could get there. What a great post. Builders in this area DO take advantage of Buyers. Case in point ~ MY CLIENT paid almost $35,000 less than her neighbor. They settled within 4 days of each other, but my client had a premium lot and a 3 level bump out with a fireplace. The neighbor did not. I also negotiated on her behalf a chunk of closing costs.
Nevin: You rock! I was just about to post something on this, but more slanted towards how important it is NOT to sign in at a New Homes project unless you are there with your agent. Now I can just reblog yours. Thanks!
Nevin, what a great post & congratulations on the feature! I have been fortunate enough to have clients call me to represent them when they have wanted to buy a new home from a builder. ~ Susan
Karen - That is certainly the case in some situations. i can only speak of my experiences. In my experience the agents I've worked wioth have negotiated a lower purchase price with their commission than what the builder was demanding. I don't think there is a one size fits all. In my opinion a good Realtor should be working a builder down on price and asking for upgrades at no additional cost. I do appreciate the seperate point of view and your experiences you have shared. Keeps everything accurate and balanced for our readers. : ) Thanks!
Damon - LOL Ihave my own experiences with new home builders. We had one called Forecast Homes in Sacramento. Load bearing stud wasn't touching the footplate in one of the bedrooms. Off of the footplate by about 2 inches. When I approcahed the contractor he told me (get this) It'll drop and touch when we put the tile roof on. We immediately pulled out and got our earnest money back. Few years later the home was for sale so my wife and I snuck into the side yard and sure enough the wall and ceiling in that area was bowing and had prominent cracks in the wall. I'd love to see your pictures!
Peter and Linda - Well said!
John - Glad to have a builder chime in! I agree completely. I'm not saying all builders are bad but who is and isn't? An agent is likely to know because word travels fast in the real estate community. Thanks for stopping by!
Ellie - Now that is what I'm talking about! Negotiate for the client. Awesome! And thankjs for trying to suggest ; )
Cece - LOL Glad you liked this! You can tell them that I'm a lender not an agent and therefore it isn't just an agents opinion! Thanks for stopping by : )
Nevin - Great post. I used a Realtor when I bought a new construction 3 years ago in another state. He checked the building process and kept me updated on the progress. He was with us at closing and I even got a referral fee. The builder paid the commission and whether I used a Realtor or not, the price was the same.
Nevin, buyers in Florida have the right to hold their deposit in an escrow account, not the builder's general account. Unrepresented buyers will not know this and the builders have forms that waive this built into their contracts. If a builder goes out of business during the building process, their deposit is gone. That is just one reason why it is good to have your own agent representing you. Great topic!
Nevin - Great post. Whatever type of home buyers are buying, it makes sense that they are represented by an agent. I think buyers oftentimes do think they'll be saving money if they deal directly with the builder .... but an agent knows the ins and outs of the business better....and why wouldn't you want to have someone on your side to be your guide through one of the largest purchases you'll probably ever make in your life?
Amen! Same opportunity goes for using the builder's mortgage company - especially when the builder says they will only pay closing costs if the buyer uses their "preferred lender".
Great Post! Had to re-blog. So many people today think they are genius' because they saw on TV how to make all that money! But, there is just so much to know. I wonder if they watched an appendectomy on medical TV if they would go out and try that on their own. I doubt it because it would be quite painful. Well..... if they screw up a real estate deal or let a builder get to them it can be pretty painful too!
Hi Nevin -- One can never be too careful, and even more so in both these current economic challenging times as well as builder quality that could slip due to these pressures.
Nevin the advice here is on the mark. Prior to my real estate career I purchased new construction without and agent, what a mistake.
Agree with Sharon post 29.
Many Florida Builders put the deposit into their own account, and use their own forms. Buyers will never see that deposit again, and they have signed a contract that is stacked against them.
A good Realtor would recommend that Buyer get Legal Counsel before signing a Builder's Contract, and place the deposit money with a Title Attorney or Title Company.
Great and informative post.
Nevin,
You have hit the nail on the head on this one for sure.....and may I add....PLEASE get an inspection people....you want to find out all the things that need to be fixed before your warranty expires....and if you don't and go to sell, guess who will pay for those repairs?
This comes back to the image we have as not being contributory to the success fo hte transaction. That comes from having more of us considered as "bad" than "good".
Our job is to be the change we want to see in the world since having a bad Realtor represent you with a builder is as bad as having no Realtor.
Nevin, there were many years when neither a home inspection nor a Buyer's Rep were customary on transactions.
I think that Buyer's sometime think they end up paying more for the house if they have a Buyer Agent represent them. Obviously this does not hold true unless it is spelled out from the builder that he won't allow it. The Builder gets the same for the house either way typically. People need to rethink and be logical, as representation is the name of the game. This is exactly why numerous agents don't like to practice Dual Agency.
Many Manhattan New York buyers have had similar thoughts on going 'direct'. However, it is hard for buyers to know all the ins and outs of the builder since at the sales office, only the positive of the building will be discussed.
Nevin...those that have not learned to "purchase" a second set of trained, caring eyes, will live to tell the story on what it cost them one day.......Biggest investment of your life and you are cutting corners? I don't think so...Great post for the most........thank you Nevin...
Nevin, buyer representation is a must. Someone has to look after the buyer's interest whether it is a resale home or a new home. These are the same people who don't think they should pay for an inspection because the house is new. This can also be a big mistake.
Had this happen just recently in Ottawa, Ontario Canada. Young couple being transferred did their homework online set up an appointment with the agent for the builder but then their mortgage broker suggested they call me. Here's what I was able to do:
1. I found out that (a) a multi-lane bus route was going to be built behind their home; (b) - huge hydro towers were going behind their home and the last item - a 4 or 6 apartment building next to their unit.
2. Found them a nicer unit - less money - closer to schools and daycare and the closing date worked better for them.
The first builder representative never disclosed any of the information - BUYER BEWARE - and how can you when you are new to the area.
As a person who sold new homes for many high profile builders in the San Diego community, I know that builders do have a bottom line, and many times when agents would walk in after their clients had been into the community and register with out an agent, and demanded that they get a commission -was always a issue.
If a builder is co-operating with agents, they have a rule, that you must accompany your clients across the sales office threshold to have them register, & it must be the first visit to the builders -- not so hard to do -- so why do agents not follow this simple guide line.
Susan _ Hi there and thank you! Yes I am witness to clients calling on your professional services to represent themon a new home purchase. I spoke to them a couple of weeks ago and they said they will be ready to go in a few more months.
Rosalinda - Thank you for sharing this! To any new home buyers reading this here is proof of how important it is to get representation. Rosalinda is herself a Realtor and even an experienced Realtor requests representation from another Realtor because that agent is local to the area and can guide her. For us loan officers locality really is not important. For agents it is extremely important.
Frank & Sharon - WOW! I wasn't aware of this and I'm a real estate investor and have bought many new construction homes. Tricky tricky!
Coleen - My thoughts exactly! Hey I understand that people want to save money but where do you draw the line? Thanks for commenting!
Ken - I think this is steering and is a RESPA violation. Totally unethical
Jeanne - So true. If I had this magic method making me millions then why would I pitch it on TV?!
Chris - Correct. I warned a friend who wanted to buy new construction. Now she has the builder in court trying to recover $70,000 in repairs she had to make due to the builders negligence. She refused to be represented by an agent. Later she found out that some of the local agents tried to steer clear of this builder.
Jennifer - Love to hear about your experiences!
Fred - That lost deposit in some cases is more than an agents commission aren't they?
Bernadine - Thanks
Lori - That's a biggie too. In some parts of the country I suspect that the city inspectors are paid off by the builder. Either that or they are negligent themselves.
Nate - That goes for our industry as well. People don't focus on the great experiences as much as they do the negative.
Cheryl - Wow, I never knew that. Was is customary nationwide or local to your area?
Don - I think greed clouds people's judgement- period.
Eileen - So true. I think sharing true but scary stories about people being burned in a transaction where they weren't represented may be a productive marketing strategy.
Richie - Thanks!
Michael - So true. I bet buyers reading these comments are thinking, Oh you just say that because your an agent and want to get paid. Not so. We're like parents watching their kids do something that will get them hurt!
Irene - I think this story should be a blog post with plenty of details and then should be featured!
Lorraine and Loretta - I think your comment is a different issue than non representation. There's an idea for you to write about. Probably get featured too!
I disagree with you that the agent must accompany their clients. Agents can't always control their clients behavior but may have already spent hours with them. Although the agent may not have procured the buyer in this one instance I think if they are being represented and have not asked their agent to be released from their agreement then I think it is unethical to not pay their agent.
Sometimes clients might be going somewhere and drive by a new development and say, hey want to take a look at these really quick? Their agent may not be there when they make this on a moments notice decision. Ethical builders ask the customers if they are working with an agent and when they say yes I'm being represented I have known the builder to ask them to write down their agents name. Personally I think this is the best policy.
Carla - thanks for blogging this important topic.
I have listed many short sales for clients who extremely overpaid for their houses that they bought without Realtor representation. Whether it's new construction or not, a good buyer's Realtor will point out prices of comparable houses, and will emphasize major or subltle floorplan or location issues that severely diminish the resale value of the house.
Nevin--thank you, thank you, thank you! You are so right! I'll have my Clients call you next time when they think they are getting a "great deal" by going direct with the Builder. :)
We run into this all them time and when the Buyers then become Sellers they sometimes find out their great deal was not so great when they can't sell their house for what they expected.
Thanks,
Mario
Thanks, Nevin. I like the way you identified how important we realtors are in helping people buy new construction. People don't always realize how many ways we help them and that we are not just glorified drivers.
Nevin -I've heard this song before, and it always leaves a sour taste in everyones mouth. I had a visitor at an open house last year who ended up buying a Fsbo because he thought he was saviing money. he ended up paying appraised value, but didn't have an inspection and missed a lot of deferred maintenance in his haste to save money. It cost thousands more in the end than it would have if I had represented him.
Absolutely excellent post. I am going to reblog!
Great post Nevin. I'm going to re-blog this information for wider distribution.
Great post! A buyer will most likely get a BETTER deal with agent representation. How many homeowners show up at the house after closing and realize there are no blinds, garage door openers, etc? The agent would have asked for those things in the contract.
The best comment was the one about knowing the comps of other sold homes in the neighborhood and what the concessions were.
Nevin: Love the post. I bought new construction years before I became a Realtor and my agent at the time was one of those who did just show up and didn't offer any substance to the deal. We learn from these experiences, whether we know it at the time or not, and become better for them. I love your points - thanks for bringing this topic to the forefront. I will be re-blogging as well. Thanks - Carrie
Now lets talk about builder financing :)
Dave - I say don't go to court without your lawyer! Same thing.
Mario - I have heard of this many times before! Have them call me, I'llset them straight.
Ellen - People sometimes just don't "get it"
Brewer Group - Guess he got what he asked for. Why don't people listen?
Yvette - Thanks!
Gabe - Thank you!
Kathy - LOL Don't you love it when the seller tries to take half of the house with them? Until you tell them they can't!
Carrie - Thanks!
Joe - No kidding! We have it now
Realtors are problem solvers and problem solvers are sometimes hired not for what they do but for what they know.
Home inspections are another thing that people buying new construction think they can skip. Not a wise move.
Victor - Agreed! Look at lawyers for example
Jim - Not getting a home inspection is crazy!