Don’t miss out on your commission if a client chooses a new build

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The framing of a large wooden structure atop a huge slab of concrete.

05/27/2016 | Author: Editorial Staff

New home sales have seen a resurgence of late, and Texas is building more new homes than any other state. With that in mind, now is a good time to make sure you’re taking the appropriate steps to protect your commission when a client buys new construction.

Pat Strong, a Texas REALTORS® University instructor who teaches the “New-Home Construction and Buyer Representation” class, has some suggestions on how to do that.

Know if the home is on the MLS. Builders may choose to list some homes on the MLS but not others. For homes that are listed on the MLS, the service will define compensation. If the home your client chooses is not listed on the MLS, you will need another agreement in place with the builder to secure your commission.

Register with the builder. Accompany your client on the first visit, as some builders require buyer’s brokers to follow a set registration procedure to receive compensation in the event that your client chooses the builder’s home that's not listed in the MLS.

Use this form if the home is not listed on the MLS. The Registration Agreement Between Broker and Owner (TAR 2401) explicitly deals with broker’s fees.

Strong’s next  “New-Home Construction and Buyer Representation” class is scheduled for June 8 in Austin.

Categories: Business tips, Buyers
Tags: buyers, business tips, buying, new homes


Doris Snipp on 02/01/2017

In the end, it is greed. There are reputable builders who hire sales teams that practice integrity. There are those who do not walk their talk. Those who do, their product is generally always superior. Their sales manager and front office stay firm in their policies. Perhaps they realize that 75-85% of their homes are sold by Realtors.  My transactions are heavy on the new home side.  I began by visiting every builder in my area, on their slow day. I asked them what made their product better?  I followed the sales person around on weekends and listened to what he said to buyers. I dropped in on them on a routine basis. I found I could share what their competition offered, that convinced by buyer to choose the competition. I found many times they had not researched the competition in their neighborhood. I never understood why you would not. I went in to all the builders as soon as I had a prospect. I signed the prospects in and ask sales to be on the look out. My feeling m, which I shared, was no matter what I say, they will peek without me. I gave prospects my business cards with their names on the back to give to sales persons who would approach them. I cautioned them not to talk pricing unless I was with them. I explained it would lower my chances of obtaining,  either a large discount or more amenities or closing help.  I ask the builder to let me know if my clients came before I could show his product. This would allow me to work with him to find the right home to fit their needs.  In the event, they didn’t care for the house, I shared with the builder their remarks. I took three construction courses. One was the Certified New Home Sales by Dennis Walsh. Great online course. I took his Residential Construction course also. I then ask a local builder if he could hold a 1/2 day class for Realtors, including a field trip to a build site. All of this allowed me to know what each builder truly offered a buyer. For sales to come to know the Realtors better. I could share my new knowledge with my clients. The sales staff began to respect my efforts.  I was earning my fee. I made a construction time line for each building stage. In visited each home during each stage, sending photos to the buyers. I stopped on each visit to say hello to the sales person and shared the purpose of my visit. As I knew their product so well, I gained a relationship. I have lost a few clients to the “sign now for a lower price without a Realtor”.  However sharing in my buyer packet, I give each client,  was a section on purchasing a new home. It detailed the process, construction stages, discounted inventory (and the probable reason for the discount).  The sheet ends with the reason you can’t get a better deal than I can, is because Realtors sell approximately 80% of the builders homes. You, a buyer, are good for one sale, I and my company are good for many. However, you might get a goo price because he sees a chance to unload a home he can’t move. He knows I will recognize the reason he is giving such a “good discount”.  He can only sell his company’s product. Using a Realtor means you can see all the builders and their product.  This allows you to sort out the hype and find which offers you the best for your needs. As I know all the ins and outs of each builder, such as community, builder reputation, the floor plans that seem to stay high on the resale lists, etc.? I explain those issues can make me threat to his selling his product.  This should be an assurance to you of making the best choice available. An informed decision.  Really learning your craft is the best way to hold your client.  Get those designations, they are packed with in depth knowledge.  They will make a difference in your income.

Dee Pardue on 12/27/2016

I recently had a prospect who had met with me about selling their home.  I did a full market analysis and they said they would be in touch next spring to list and start their home search. I stayed in touch and sent market updates, but they called one day and said they needed to list their home right away. They had bought new construction and the builder said if they do not use a Realtor they got a significant discount.  They signed the contract without talking to me or getting my advice and later agreed they probably paid too much. The builder pressured them to buy that day or the deal would go away.  This happens a lot.  I didn’t realize they would be looking at new construction or starting their search earlier than they had said, so I didn’t have the conversation about this coming up.  About the only way to combat this is to offer a discount as well if they locate a new home and show me as their agent.  At least I can rationalize I didn’t show them a bunch of homes and I have limited involvement at that point.

Richard on 11/22/2016

I agree with Paul,  we have had builders not pay attention to the Buyer Rep, and we have to take them and the Builders to mediation.  Whats worse are the agents in the DFW market who are rebating back 3%, and telling customers to buy from them after they go see the houses with another agent . 

Elana Ingram on 06/03/2016

I am happy the builders I have dealt with included the commission in the sales contract.

  I also, accompany my clients on visits with new builders and ask about commission upfront.

So far, no problems.

Paul on 06/02/2016

We have Builders in the Dallas Ft Worth Market giving Buyers realtors cards to list for zero percent, they also do not care if a Buyers Rep form has been signed, after all it does not affect them ( unless you take them to court or mediation)

Sanjeev on 06/02/2016

I have also noticed that builders are telling the client that you can get a break from realtor’s commission as well and reduce your price or pay for your closing costs, if the buyer visited the builder first and found you later! I wonder if there is any recourse for this?

Carmen on 05/28/2016

We have some fair builders here. However, the buyers rep. Seems to only be enforceable if the broker decided it is. Getting that form signed is safer.  Never think that-the buyers rep is the answer.  This business has little protection for our commission and time.

Doris Snipp on 05/27/2016

Ah! If it was just that easy. Getting most builders to sign the form in the Houston market is tough. We have experienced builder sales persons giving the buyers another Realtors card, with the remark, “they will sell your home for free if you use them as your agent.”. Your buyer rep form means nothing to a builder and many times very little to the buyer. Most Brokers will not intercede in your behalf.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

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