Cap on Real Estate Commissions?? (sales, house, buying)

[newtonorthcarolina]

I have a very upset acquaintance (I'm not naming names) who is building a home in a North Carolina development. He/she used an agent to help find the property, and after officially buying the lot, it came to his/her attention that the agent received commission on the full value of the home, not just the lot. This was expressly outlined in all the paperwork signed.

Once brought to his/her attention, this acquaintance of mine was outraged that development did not put a cap on the the amount of sales commission the agent could receive. His/her argument is that the agent really only sold him/her on the lot, not the home. If he/she decided to build a home worth $50 million (obviously, I'm exaggerating here), why should the agent get a commission on the full $50 million instead of on a reasonably capped amount?

What is typical in NC? Is it typical for the agent to receive a commission on the full sales price of the lot AND on the full cost the home being built? OR, is it typical for the agent to receive a commission on the lot and a commission on the home up to, but not exceeding, a specified cap? If capping is common, what's a "normal" cap amount?

I realize this is a bizarre question, but I'm curious.
THANKS!

[MikeJaquish]

Is your acquaintance building the home through an independent builder in a separate contract after buying land? Or is this a package deal with an exclusive builder or an approved builder in the subdivision?
If the latter, the builder's Listing Agent is rewarding the Buyer's agent with a share of the commission the Builder paid the agent to procure a Buyer.

Since "This was expressly outlined in all the paperwork signed," it seemsg that it is all above board. That disclosure was made during the contract seems to be clear enough.

Oh, and as far as "typical" goes, there is no such thing.
Would it be better if the Listing Agent kept the entire commission?

[newtonorthcarolina]

Thank you Mike for your quick response! It is my understanding that this is a package deal with an approved builder in the subdivision.

So, if I'm understand you correctly, I've gleaned two conclusions from your response:

(1) The buyer's agent doesn't come out of buyer's pocket either directly or indirectly since the buyer's agent's commission (for clarity's sake let's say 3.5%) is a split of the Listing Agent's comission (let's say 7%). If there were no buyer's agent at all, the listing agent would keep the full commission amount (the 7%).
(2) There is no established practice of "capping" in such situations to keep the buyer's agent from receiving a percentage of the full sales price of the lot and the house being built.

Did I understand you correctly? (I apologize, my personal experience with real estate matters is rather limited!)

Thank you for your response, it's helping me understand the situation much better.

[MikeJaquish]

Originally Posted by newtonorthcarolina

Thank you Mike for your quick response! It is my understanding that this is a package deal with an approved builder in the subdivision.

So, if I'm understand you correctly, I've gleaned two conclusions from your response:

(1) The buyer's agent doesn't come out of buyer's pocket either directly or indirectly since the buyer's agent's commission (for clarity's sake let's say 3.5%) is a split of the Listing Agent's comission (let's say 7%). If there were no buyer's agent at all, the listing agent would keep the full commission amount (the 7%).
(2) There is no established practice of "capping" in such situations to keep the buyer's agent from receiving a percentage of the full sales price of the lot and the house being built.

Did I understand you correctly? (I apologize, my personal experience with real estate matters is rather limited!)

Thank you for your response, it's helping me understand the situation much better.

I believe you have a grasp of it.
Commonly:
The commission is built into the house as an expense for the builder, as part of his marketing. If the listing agent brings the buyer, he may keep it all.
Of course, this is all negotiable and contractually determined between the Agent and the Builder. It can be different, as different as the listing agent and builder negotiate within the law.
Your friend has little to worry about. The overall price of the transaction hasn't been materially altered.
Your friend should put the Buyer's agent to work through the process to bring value to the buy side.