Should I use a Realtor if I'm Buying from a Home Builder?
“If I’m buying a new house directly from the builder, why do I need a Realtor?” Well, according to Houston Realtor® Patrick Welsh, an unrepresented buyer can be at a real disadvantage by deciding not to use an experienced real estate professional.
“As a Realtor, many people think I’m just trying to salvage a commission by recommending that a buyer retain my services for a purchase from a builder. All too often buyers think that they don’t need a Realtor to represent them since they can find the builder all by themselves, drive right up, negotiate the deal and move in!
My job is to represent the buyer’s best interest and help them through the transaction with the least degree of hassle and frustration. And our goal is to get the buyer the most value for the least money. I’ve heard many a buyer say they don’t need an agent before a transaction, but I’ve never had a represented buyer say to me at the conclusion that they were sorry they had me at their side representing them. The least important part of our job is driving the buyers around to look at houses (although it is important); our real value comes later in negotiating and working through the process on behalf of our client.
Representation. The builder representative at the model home may look and sound like a real estate agent there to help you. However, the builder rep is a salesperson for the builder, and as such represents the builder’s best interest. I love the analogy I heard recently that when a buyer deals directly with that rep (saving the builder the buyer’s agent commission) it’s like the buyer paying for the builder to not represent them. Real estate agents and Realtors are licensed professionals bound by law and professional ethics while builder reps are not constrained by those requirements.
Negotiation. Sure the buyer can negotiate effectively. Buyer negotiations can be effective, as long as the buyer knows what incentives are typical and customary, how to compare alternative financing, who pays for what (title costs, appraisals, inspections, additional warranties, surveys, closing costs, etc.), what upgrades cost and how to apply builder concessions, and many other issues. Realtors make it look so easy by asking questions that the buyer doesn’t know to ask.
Inspections. This is a big one. As a buyer’s Realtor, I insist that my client always get a home inspection. The number and severity of new home defects often rival resale home problems. The builder rep is not likely to make any such demands of the buyer. This issue alone justifies our involvement in the transaction. Buyers will often think that the new home warranty will take care of all their problems. That is simply not the case. Here is a real world example. On new, high end property, my inspector flagged a number of items including the incorrect installation of the air conditioner systems located in the attic. The builder argued that everything was in order. After our insistence of a problem the HVAC contractor admitted the error and repaired the problem. Turns out the mounting brackets used to dampen the vibration were installed upside down, thereby focusing the vibration to the structure rather than reducing the vibration. That family might have lived in the home a lifetime with unnecessary noise and vibration were it not for the inspector.
Buyer Agent Cost. That typical 3 percent commission comes from somewhere right? Nobody charges the buyer the commission; the seller pays it. Reputable and honest builders absorb this cost as part of their expense base. There are occasional builders that skew prices to compensate, but this is considered to be both unfair and unethical. In fact today, many builders are paying bonuses and incentives to agents above the standard commission structure. As Realtors we are very often sought after components of the real estate transaction.
The Sequence. This can become a bit tricky. Builders can become resistant to buyers who show up at the builder site and let them think they are unrepresented by a Realtor. The best process is to either shop with your Realtor or at least immediately inform the buyer’s rep that you are working with an agent and that you are represented. Maybe offer the agent’s card or at least name and company as you ‘register’ with the builder. This insures that the agent is ‘in the loop’. It is strongly recommended that you do not do the paperwork or contract without your agent being present to review and advise.
My comments here are not meant to encompass all of the benefits of having a Realtor represent a buyer, nor all the buyer issues that could arise. This is just a brief overview, and there is much more to it. However, I hope this serves as a short course for buyers to give them cause to consider what is in their best interest.”
NTREIS data last updated January 27, 2020.