Do Realtors Get A Commission On New Construction?

Posted by Florida Realty Marketplace on Tuesday, June 30th, 2020 at 3:12pm

Do realtors get a commission on new constructionMost of the time the answer to this popular question is yes. However, there are a bunch of factors that go into what gets paid to a Realtor and what builders offer.

While some home buyers looking at homes for sale in Clermont Fl are wondering if they will have to come out of pocket, most are asking for another reason. Generally speaking, when a home buyer asks, “do Realtors get a commission on new construction?” they are typically asking because they want a discount. We’ll cover if that’s a good idea or not as well. Then, we need to understand how builders make money and where their money goes.

Do I have to pay a Realtor’s commission?

The answer 99% of the time is going to be no if you’re the home buyer. In almost every instance a new construction seller will include a buyer’s agent commission in the sales price. The other 1% of the time is with what we call “hostile” sellers that claim that they openly hate real estate agents. In these cases, it’s important to talk with your agent as to what will happen. In the end, it’s unlikely you’ll have to pay any commission even in that scenario.

How Do Builders Make Money?

You might think that builders build a home for less than they sell it for and you’d be right. That’s the big picture. However, there is more to it than that. How a builder makes their money often depends on whether they are local or a tract builder.

This is important to understand. Knowing how builders, build can often reveal how the commission is built-in, planned for, and often not given to the buyer.

Local Builders Vs Tract Builders

Track builders are you big name builders that come in buy up hundreds of acres and build homes that are usually predefined. They buy the land cheap, develop the land themselves, have a national marketing team, and in some cases don’t even hire licensed real estate agents to sell their properties.

Selling homes is a numbers game for them. As such they’ve built in the cost of a Realtor in their sales. However, some of these builders know the value of an agent and will encourage you NOT to use one. The reason is that an agent will often slow down their process by asking questions that protect the buyer.

Tract builders aren’t bad. Buying a home from them is like buying one from a department store. Just like the department store, there might be coupons or discounts, but they aren’t there for personalized service. Department stores have employees and deal with mass production, just like a tract builder. This is important because having employees do the construction keeps costs low and profits even higher. Essentially, a tract builder typically has built-in costs that won’t change no matter what you negotiate so bringing a Davenport Realtor is always a good idea.

Local Builders can appear to be like tract builders. However, there is often some key differences. Local builders often don’t have the funds to buy the land. They buy from a developer that bought it, put roads in, and then sells lots to a builder for a profit. The builder often hires subcontractors to do each job and then has to organize their schedule. Because of this juggling and trusting smaller businesses to finish the home, the builder often is either way ahead or way behind. Like the tract builder, the local builder has included commission in the price. However, unlike the tract builder, the local builder doesn’t have a huge budget. The local builder will likely pay a real estate agent to market the property, which (usually) by default means there is a commission for a buyer’s representative.

Can I Get A Discount Without An Agent?

In almost every case the builder includes a buyer’s agent commission for the sale of one of their homes. This means you can bring an agent with you to view these new construction homes and get represented. However, if you want to try and save the commission you might end up paying more in the long run.

In most states, the seller’s agent isn’t just “supposed” to represent the seller, they have a legal duty to get the very best deal possible for the seller. Legally speaking, the selling agent (the agent you meet at the new construction place) can’t give you a better deal. Instead, they are obligated to get you to pay the maximum.

Contrast that with buyer’s agents, who also have a legal duty to represent the buyer. In many cases, a buyer’s agent will insist on closing costs, discounts, upgrades, and inspections. None of which will be on the table for discussion if you don’t have an agent.

It’s true, some builders do offer a “bonus” if you come without an agent. However, it’s almost always less than what they offer to pay the buyer’s agent. On top of that, you’ll likely only get any other discounts by jumping through their hoops such as being forced to use their lender.

In the end, whether Realtors get a commission on new construction or not should be the concern of the agent and less of the home buyer. Home buyers should focus on getting the best possible representation before buying.

Leave A Comment

Format example: yourwebsitename.com

What's Your Home Worth? Find out now, for Free.

Let's Go