Why do I need a realtor?

E

El_Guapo

500+ Posts
We're contemplating buying a house directly from a builder. What good is a realtor going to do me in that situation?

I understand the builder will pay the commission, but so what? Wouldn't the money be better spent on an inspector or engineer type to check the construction site every once in a while? Plus, if we didn't have a realtor, shouldn't the builder (in theory, anyway) be willing to drop the purchase price a little, so that with the savings we could hire, say, an inspector?
 
I don't think the realtor would do any good in that situation. Yes, the builder should reduce the price by giving you the 3% he would have given to your realtor. Another option is to have him use the money for upgrades.
 
My realtors never did much for me when I bought except send me prospects. I wouldn't sell a house without one, but I can't imagine any benefit to one in your situation.
 
If you completely trust your builder, then go for it. But, considering you are about to make the single largest purchase of your life, it might be nice to have someone to watch your back for you during the process.

And good luck if you think a builder is going to "rebate" the 3% to you.
 
If the house is still being built, you would be far better off hiring an inspector or architect than a realtor. If you have already located the property, they have no service to perform. The contract comes straight off the web, the title company takes care of the appraisal, survey, title insurance, and the 867 documents you have to sign. If you are worried about the contract language or how to structure your contingencies, I would guess you have a lawyer buddy who could give it a gander.

And, actually, the builder should be willing to make a price concession of 3% if a realtor's fee was contemplated. Or, at a minimum, 1.5% to split the difference.

I can't emphasize how important it is to get the house inspected while it is being built. There are very few builders who are worth a ****. In Houston, there are only about 3 I would ever consider hiring.
 
I am a Project Manager for a homebuilding company here in Houston. Heed the previous advice. A realtor will serve you no real purpose. If you are concerned about the process, hiring an inspector will help to alleviate your concerns during the various construction stages, and any builder worth his salt would concur. Those who distrust inspectors, are afraid of what they will find. My two cents.
 
For the love of God, do NOT use a real estate agent in this situation. They are not able to protect your interest in any meaningful way. Get the seller to lower the price by 3%, or at a minimum by 2%. Go to the Texas real estate commission's website for applicable TREC forms (which is all the realator does). The Link

Residential real estate agents (especially for buyers) should go the way of the buggy whip.
 
NEGOTIATE!

have the builder apply the 3% he would have paid your agent to the closing costs, putting the money in yoru pocket effectively.

The Builder should be willing to negotiate. You might be able to get part in upgrades and part in closing costs.

make the contract CONDITIONAL on your approval of the outcome of the inspector to YOUR SATISFACTION. not to some level of acceptability but to "your satisfaction."

Ultimately if the builder won't negotiate then you can always walk away. If you are UNWILLING to walk away then you really never had any power to negotiate in the first place....
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I was going to say, the only reason to have a realtor on the buy side is if they'll do the sell side for free. At the end of the day, you only pay 3% commission on the sell side to that buyer's agent.

That is the ONLY reason to have a realtor with you on the buy side with a builder.

Realtors do serve a purpose, that is marketing and finding buyers or prescreening the market for potential purchases. Helping with paperwork or watching the builder is not where the value of their services are. If you already know what you want to buy, the realtor is only good for marketing the house you want to sell.
 
I think H4life is dead on balls accurate here.

NEGOTIATE. A friend of mine shopped around and he used an independent realtor ONLY if they agreed to pay the remaining 3 months on their apartment lease. He got what he wanted. Why would the realtor pass up 6k when he only has to pay 2k.

Furthermore, it wouldn't surprise me at all if the builder would allow you to get extra upgrades or take off some of your closing costs if you agree to you their lender or their realtor.
 
When i bought my house, the market was still tight, and the builder wouldn't negotiate. I wouldn't expect him too, either, since the next person to walk in would have gladly paid more.

So I told them my realtor was Erealty.com. Got 1% cash back at closing.
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I am a real estate broker, but not a Realtor. To be a Realtor you have to be a member of the National Association of Realtors. I am not.

Negotiate with the builder first. Maybe they will knock 3% off the price since you don't have a Realtor. However, don't be suprised if they don't.

Here's why. Realtors bring a lot of buyers to home builders. Builders pay the Realtor's fees out of the funds paid by the buyer. If a builder had a reputation for knocking 3% off the sales price for buyers without Realtors, everyone who used a Realtor would feel they paid 3% extra for their home.

A friend of mine bought a $385,000 house from Trendmaker Homes in Houston two years ago. He picked the builder. He picked the lot. He picked the floor plan. He negotiated the price, the upgrades, etc. He did everything directly with Trendmaker.

Just before signing the contract, the issue of a Realtor came up. Trendmaker offered to pay my firend's Realtor 3% of the sales price ($11,550) for representing the buyer. Trendmaker would not consider dropping the price.

I steped in and collected the commission for doing little more than signing the contract. I returned the commission to my friend, less $1,000 for my time.

Bernard
 
Guapo -- some realtors will agree to take no commission on the sale of your current home if you allow them to take the 3% commission from your builder on the purchase of your second home. The realtor will usually require that you be willing to pay the 3% to the buyer's agent in the sale of your home (the contract may require 3% even if the buyer has no agent). When you buy your new home, the builder pays your realtor the 3%. Your out of pocket cost is 3% in a 9% transaction.

Of course, if the builder is willing to negotiate and give you the 3%, then this concept used by some realtors is not the best option.

Example:

Home 1 (your existing house): $100K sales price. Typical commission 6% or $6000 ($3K to each realtor) all paid by you.

Home 2 (your new house): $200K sales price. Typical commission 3% or $6000 ($6K to your realtor) all paid by the builder. This of course does not factor in the builder's bonuses, etc. for its sales person, but that is irrelevant to you.

If you take the realtor's deal, you pay $3000 to the buyer's agent in the sale of Home 1, saving $3000. Nothing is paid to your realtor in the sale of Home 1. Since the builder pays the commission on the sale of Home 2, there is no cost/savings there to you, but your realtor gets paid $6000. That's why he's willing to forego the commissions on the sale of Home 1. Sounds great and is a decent option.

If the builder will negotiate and you take the realtor's deal, you save $3000 on the sale of your home and piss away $6000 in cash back? closing costs? upgrades? decreased purchase price?

Depending on your needs and the status of negotiations, the realtor deal can be good and can be bad.

If you need cash, saving $3000 is better than reducing the purchase price of Home 2 by $6000. However, paying closing costs is like cash in your pocket, so that would make the realtor deal not worth it. Also, remember, upgrades are where builders make their money so if the builder gives you $6000 in upgrades, that includes several thousands of dollars in profit for the builder.

Depending on the negotiations with the builder, one side being $6000 cash back or some equivalent (closing costs), the other side being no negotiations causing you to take the realtor's deal saving you $3000 in commissions, your overall savings in this deal based on the numbers above could be between $3000 and $6000.

The realtor program is certainly something to consider. First, talk to the builder.
 
Tropheus,

I see what you're saying, but my understanding from the realtors I've talked to was that they still want 3% for the sale of my house. Maybe I misunderstood the arrangement.

You're saying it's common for the realtor to give up the entire commission on the selling side in exchange for the 3% on the buy side? Of course, I still have to pay my buyer's realtor 3%, which is better than paying my own realtor 6% and having them split it. But if my realtor still wants 3% on the sell side, the way I see it I'm still out 6% either way because I've got to pay my buyer's realtor 3%. And if that's the case, to hell with letting him represent me on with the builder, cuz I don't want to give up that negotiation point for what I see as minimal if not dubious value, at best.

Again, maybe I didn't quite understand what the realtors were proposing. Once we get closer to that point I'll have to pin them down specifically.

btw, when did this all change? And why is it not a conflict of interest for one party to pay for the representation of the other?
 
Sure it's legal, it's all negotiable. You can ask your realtor to accept a flat fee, 1%, whatever. 3% is a customary fee, but it is not a legally regulated fee.
 
I'm not sure you're aware of this, but a lot of builders pay way more than 3% to the buyer's agent. I have a realtor friend that always tries to put people in new homes because some of them give up to a 7% commission. Thus, you should try to find out if they are offering up any bonus commission as it will help you with your negoations.
 
Insurance agents are heavily regulated by TDI, statute, and regulations. Realtors aren't.

It would be no different if I signed you up to a 40% contigency fee and the case settled for $10,000.00 after one phone call. I get $4,000,000.00 for 5 minutes of work. Unfortunately, the has never happened.
 
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