With so many buyers, investors and sellers out there, this is the first step for many into the world of real estate. Even if you consider yourself a real estate veteran, there’s always new information to be reminded of and to catch up on. Therefore, we’ve decided to write a series titled “Myths of Real Estate," with the intention to post articles on topics that confuse real estate rookies. This week’s topic is:
The Relationship between Realtors and New Construction
Whether you’re buying, selling or investing, it makes no difference. Too many people are being tricked and mislead by a question that never even crosses the mind of the average homebuyer. What is this question of such monumental importance? It may seem simple, even naïve, but before you buy a freshly built home, you should always ask yourself, “Who is paying my agent’s commission?” Yes, it seems like an obvious enough question and if this were any other sort of transaction you would be right in thinking that you’ll pay your agent and the builder will pay his. But in real estate, this assumption can get you into plenty of trouble. And here’s the most important thing to remember: 99 times out of 100 the builder is responsible for paying the commissions of both agents. This crucial piece of information is too often never even heard by many homebuyers. Many assume that an agent’s commission will be an unnecessary cost added on to a freshly built home. But the truth is, the skills and expertise of your Realtor have already been paid for, courtesy of the builder. And with this bit of information in mind, doesn’t it seem like having your own representation would be a smart idea? Of course, if you’re a smart shopper you might think to yourself, “If I buy my home from the builder without my own agent, surely he will give me a discount on the price. After all, he no longer has to pay my agent a 3% commission fee.” If only, if only. Despite how friendly and kindhearted your builder might be, he will not give you a discount out of sympathy. As you probably know, houses are expensive to build and the builder wants to put every penny he can back into his own pocket. Similarly, don’t let the builder’s agent lure you into a false sense of security. While listing agents may also be nice people, they will not give you a discount either. The builder has hired his own agent to get him the best deal possible. Furthermore, the listing agent is oftentimes legally bound to work for the best interests of the builder alone. So let’s recap.
- The builder is responsible for paying your agent’s commission.
- The builder will not give you a deal if you buy unrepresented.
- So what’s the next step? Finding the right agent for you of course!