pros and cons of using an RE agent with new construction. (Allen: sales, real estate)

[mom2gurls]

What are the pros and cons of using a realtor with new construction? Since the agent needs to get paid for selling a home in a development, does that affect the negotiating power (I know there isn't much now in the area), that one may have? I am not sure I see the value of using an agent, when I will have to use the sales staff anyway? On the other hand, maybe the agent can explain what is considered poor construction or not. Existing, I understand. But for brand new construction...what are the advantages and disadvantages, how does if affect the purchase price (can RE agents negotiate a better deal?), and I have heard that agents will "steer" towards a neighborhood, which is why you might have an area that has a predominately one community over the other. I know that is illegal, but I have spoke to a few and they say it can happen.

From personal experience, did you or didn't you use an agent when you built? Any insight would be helpful in this regard.

[sericrafter]

Cashback, cashback and cashback.

Do your own research. Decide where and what you want to buy, negotiate on your own. Just find one of the realtors with top sales in that community (very easy, ask the builder). Some builders pay a higher percentage to the realtors with more sales. And you will be surprised to find these high volume new construction realtors pay back most of their commission back to the buyers, either as purchase price adjustment or towards closing costs. I got nearly 4% off my purchase price. So, yes I used an agent, but never met him. Talked to him over phone, agreed upon a percentage, gave his name to the builder. Illegal? Trust me, builders and realtors are in bed and know exactly what they are doing, morally questionable but its all good in the books.

Realtors on this forum, sorry this will tick you off, forgive me.. having an agent for new construction might help you a little bit if you have no clue about the area. I have friends who had full participant realtors for new construction and only thing that happened was a big fat check going to the agents.

As a buyer you need to be on top of things yourself. Get 3rd party inspections during the construction if you are worried about the build quality. More importantly, be on top of everything during construction, does not matter who the builder is, construction workers come from the same pool in this area. Mistakes and missed options are bound to happen, so be involved. Agents will sell you on this exact point, but you can do a better job than an agent.

[ritholtz]

This cash concept is very puzzling thing to me. Builder itself encourages you to go with realtor and tells you how much you can save. But they do not want to reduce the price for that much amount and work with you directly. I guess, it makes sense if you already decided everything. It looks like a trap to me.

[aexchange]

Honestly, if you are going to go with a new build, you often times won't be able to negotiate on price for anything other than an inventory home. If you want new construction, customized to your tastes, working with a realtor does make sense especially if they are rebating a portion of the final purchase price back to you at closing. Depends on the builder and how skilled/involved they are, but having the right realtor can save you several thousand at the absolute minimum.

[Granny Fats]

Some builders/developers will not work with RE agents! Very surprising to me, but they state it helps keep the houses nicer for the price.

[AllenEllen]

How much commission builder's sales people get?

[frenzyrider]

Originally Posted by ritholtz

This cash concept is very puzzling thing to me. Builder itself encourages you to go with realtor and tells you how much you can save. But they do not want to reduce the price for that much amount and work with you directly. I guess, it makes sense if you already decided everything. It looks like a trap to me.

Multiple reasons for that -
1) Builder pays from their marketing dollars and not as cost of sales. Implications you ask? Sales metrics. If they had to lower the price of the house for an equivalent commission then it effects their sales metrics - sales price / sqft. But if the dollars came from marketing, the sale price remains the same (higher number) and another metric - sales price (after commissions) only gets affected. It is just the "wallet" type that pays for the house.
2) By Texas Real estate law, any commission can only be paid to RE agent and not some Joe Bloe individual.

This is just my understanding.

[frenzyrider]

Originally Posted by AllenEllen

How much commission builder's sales people get?

Some have a ladder approach. 3% to 5% based on how many houses you sold. This is one reason why you will see cash back differs from agent to agent. Another reason a cash back may differ will be if the agent him/herself is a broker. This is usually how the 3% gets allocated. Let's say an agent from Keller Williams represents you. 1% will go to the agent, 1% to the broker company, and 1% to Keller Williams.

On a different note, I don't think one should go after agents that provide cash back even in new construction. A genuine realtor should help you out through a new construction as well. There are a ton of things that are important to look at during the construction phase. A good realtor will even do a drive-by on your lot to see if everything is going on good... But it is hard to get a really good realtor. In the absence of one, take cash from whoever you get and READ your contract on what are the terms for the cash back.

[AllenEllen]

One of my friends had 1.5% cash back on a spec home that he found himself. Builder's sales guy arranged it through his realtor friend. That realtor made some free money so I'm guessing he gave sales person some cut.

[frenzyrider]

Originally Posted by AllenEllen

One of my friends had 1.5% cash back on a spec home that he found himself. Builder's sales guy arranged it through his realtor friend. That realtor made some free money so I'm guessing he gave sales person some cut.

By law, no kickback can be given...