Home Builder Discounts with no realtor (RE market, commission, contract, closing) - City-Data Forum

polousa · 09-10-2007, 01:04 AM

Hi,

Is it legal for a Texas Home Builder to suggest to a buyer that they would get a bigger discount if they do not use a realtor even though the buyer already has one?

thx. in advance,

Zmehappy · 09-10-2007, 05:04 AM

I'm not sure about the legality of offering a bigger discount for non-realtor representation in Texas. But I do know that if a builder wants to shoot themselves in the foot with the local real-estate agents it's easy to do so by offering such discounts. Pretty good chance the builder will be blacklisted by the entire community of agents the builder does business in.

I'm both a builder and broker, and word travels fast for building companies that have double pricing. I always suggest one sales price on a new home. If the buyer has the agent representation, the builder should look at the commission cost as a marketing expense. If the buyer doesn't have the representation, the builder just offset their marketing expense.

jimj · 09-10-2007, 05:56 AM

I would have to wonder if the builder is afraid of a realtor catching them pulling a fast one on the buyer.... Good agents can see things in a deal that an emotional buyer may not. IMO I would keep the agent.

Zmehappy · 09-10-2007, 06:07 AM

Quote:

Originally Posted by jimj

I would have to wonder if the builder is afraid of a realtor catching them pulling a fast one on the buyer.... Good agents can see things in a deal that an emotional buyer may not. IMO I would keep the agent.

I would have to agree Jim. Plus if the buyer proceeds without informing the builder of the agent, I'm sure the builder is going to be getting a call from the agents broker some where along the line. That's never a pleasant discussion.

SaraSatin · 09-10-2007, 06:16 AM

I think it might be more simple than that, the builder is trying to save themselves money. I almost bought a new house (cancelled the contingency contract when it expired instead of extending because resales were getting cheaper). The builder pays the agent if you have a buyer's agent and my builder offered to put more towards closing since we didn't have one anyway. However, the amount they would have paid the agent was a little over $7000 in commission, and they only offered to put $1500 more towards closing. They were being cheap - if we had bought with them we would have asked for more than that be added to their closing contribution.

shellytc · 09-10-2007, 06:29 AM

One has to weigh out the savings versus the risk of going it alone. Your agent knows the comps and what the other builders are offering and can (many times), negotiate the same or better deal. Plus having that person in your back pocket as you make decisions on lots, upgrades, and more can be invaluable. Read some of the stories on this site about folks thinking they would save money with a builder, only to end up with a horror story.

I know that site agents will steer unrepresented buyers to the least desireable lots, etc. They need to dump them. And they will tell you, you are getting such a great deal.. when in fact they have negotiated deeper discounts.

JMHO.. Shelly Constantz

magellan · 09-10-2007, 07:56 AM

Quote:

Originally Posted by SaraSatin

I think it might be more simple than that, the builder is trying to save themselves money. I almost bought a new house (cancelled the contingency contract when it expired instead of extending because resales were getting cheaper). The builder pays the agent if you have a buyer's agent and my builder offered to put more towards closing since we didn't have one anyway. However, the amount they would have paid the agent was a little over $7000 in commission, and they only offered to put $1500 more towards closing. They were being cheap - if we had bought with them we would have asked for more than that be added to their closing contribution.

It doesn't quite work that way where you can attach an agent commission to each new home sold, that can be passed around to different parties. Most builders (doing more than 100 homes or so in a particular area), allocate a certain percentage of their entire sales and marketing budgets for "buyers' agent" commissions. In most markets, I think it's something like 35-50% of homes that are sold through an outside "buyers agent", and the rest are buyers who just work with the builder's staff without a buyer's agent (where no outside commission is paid).

As others have said, a builder can "cut off his nose to spite his face" and become blacklisted by the Realtor community by pricing their homes differently depending on if the buyer has representation or not.

bfa · 09-10-2007, 08:08 AM

I worked with a big national builder for 2 years. I would always qualify the buyer upfront, and make sure they weren't working with an agent. Then we knew what we could offer them.

But never, never would I tell a buyer that we could offer them a better deal without a Realtor. And there are MANY buyers that ask that up front, I would always say, those are marketing expenses, you are going to get the best deal either way! (Ha)

A builder that loses the support of the Realtor community is in for trouble when it comes to selling homes!

polousa · 09-10-2007, 10:09 AM

Thanks all for your quick response...This will help me a great deal in negotiations.