"New Home Builders: What Every Real Estate Agent Needs to Know"

- Dan Rochon

Episode Summary

Protecting Your Clients and Your Commission in New Construction Deals

Something you should always keep in mind when dealing with builders: They are business people first. They are not fans of real estate agents, and they only value you when they need you. Understanding this dynamic can make all the difference when working with clients interested in new construction homes.

Understanding How Builders Operate

New home builders have one priority—their bottom line. Their contracts, processes, and even their representatives are structured to serve their interests, not yours or your client's. Many buyers mistakenly believe that the builder's sales rep is there to help them, but in reality, that rep is working for the builder. This misunderstanding can lead to costly mistakes if buyers aren’t properly informed.

Key Things to Know When Working with Builders:

1. They Don’t Represent Your Client’s Interests
   Every contract is written to favor the builder. Unlike traditional real estate transactions, where negotiations allow for buyer protections, builders craft their agreements to limit their liabilities and maximize their profits. For example, if a home is delivered 18 months late, there is often no penalty to the builder. However, if your client misses a deadline, they will likely face stiff penalties.

2. Builders Try to Lock Clients into Their Preferred Vendors
   Builders often offer incentives like $18,000 in closing cost credits to encourage buyers to use their preferred lender or title company. But where does that money come from? It’s often baked into the inflated price of the home. A savvy agent will help their client explore other financing options to ensure they aren’t overpaying under the guise of a “deal.”

3. Buyers May Visit Builders Without You
   Your clients may visit a new home community on a whim—perhaps on a Sunday when you’re unaware. If they sign in without you, some builders will refuse to recognize your commission. Set expectations early. Provide them with your business cards and instruct them to inform the builder’s rep that you are their agent. This ensures you remain part of the transaction and can properly represent their interests.

4. Commissions Vary Based on Market Conditions
   Builders only pay agents when it benefits them. During a hot market, commissions can be as low as $500. When sales slow down, they may increase commissions to attract agents. Understanding this helps you set realistic expectations for your compensation.

How You Can Add Value

Your role is to shine a light on areas of concern for your clients. While you don’t need to be a legal expert, you should help your clients identify contract red flags and encourage them to consult professionals when necessary.

Ultimately, by educating your clients about these realities, you empower them to make informed decisions and ensure they don’t fall into common builder traps.

If you found this insight valuable, be sure to subscribe to the No Broke Months for Real Estate Agents podcast, where we dive deeper into the strategies that help agents succeed. Until next time—be grateful, make good choices, help someone, and go find that next listing!

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