Who Needs A Realtor? My Builder Just Cut Me A Great Deal!
I wonder how many people have walked away from closing on a builder home whistling, thinking they just got a great deal because they bought their home without a Realtor ... only to find out later they had severely overpaid? I know it happens because I have had to break that news to sellers on numerous occasions when those same homes came back onto the market.
Smaller, custom home builders might or might not have a listing agent representing them on their new homes, however higher volume production builders (like Paul Taylor, Drees, David Weekley, etc.) always have someone on site working for them. Whether you are dealing directly with the custom builder himself, the custom builder's agent, or a production builder's representative, always keep this in mind ... they are there to drive the best deal they can for their company, not for you! It's like buying a car. If you go in unprepared, they are going to take full advantage of the situation. That is their right to do so and there is nothing wrong with it.
It is not the builder's responsibility to do the homework for the buyer in arriving at a price for the home. It is the buyer's responsibility to educate themselves on how that home measures up to the other surrounding homes in pricing and features. And if the buyer doesn't have the experience or comparable sales information, they had better have an agent standing right there with them who has both. If not, they are opening themselves up to a real potential (if not probability) of overpaying.
Some buyers will always believe they will get a better deal if the agent's commission is left out of the transaction. There is no convincing them otherwise, so we don't even try. New home builders are quick to promote this belief by saying "We'll give you a better deal if we don't have to pay an agent." The builders don't want the buyer to have representation. They know if they control the negotiations, they are always going to come out on top. Who can blame them for wanting to negotiate directly with the buyer?
You may remember when a popular airline, after a fatal crash, sent letters to relatives of the deceased advising them not to seek the help of an attorney. They said they were going to do the right thing for the families, so there was no need to get attorneys involved. Buying a home isn't near the same level as this, but the principle is the same. Trying to try to talk someone out of bringing in an expert for advice and opinions pretty much speaks for itself.
If you think you have negotiated a great deal with a builder, keep in mind, one of the favorite strategies of a homebuilder is to mark up their homes dramatically on the front end, then offer a big discount to the buyer. This way the buyer thinks they are really getting a great deal. The buyer walks away believing "I really beat them up because they came down $20,000". But if the home was overpriced by $50,000 to begin with, what does the math tell you?
Californians Beware
You might be interested to know we see more Californians falling into this pricing trap than any other state, hands down. Chances are, they have already sold their home for a huge profit. They cannot believe how inexpensive the homes are here compared to where they came from. They see a home they couldn't touch in California, so they get excited, get in a hurry to buy, and consequently, they don't worry too much about negotiating. They see the list price and the builder tells them he'll drop it significantly for them if they don't bring in a Realtor. The builder is happy and the buyer is happy until they are ready to sell. That's when they get their education from the Realtors on this market, not California's.
So what is Your buyer agent supposed to do for you?
If the buyer agent is going to stand there with his hand out, do nothing, and expect to be paid, any buyer would (and should) resent it. But what most buyers don't realize is there is so much more to what a good buyer agent does than just negotiating the price. We are not there to beat up the builder on pricing. We are looking for a fair market deal for our clients. We are there to advise the buyer on what we think should or should not be provided by the builder in the way of amenities and upgrades the buyer might not even consider. We know what the standard of finishout is with other homes in that price range and what is an upgrade. Quite often we have to advise our buyers that they are pressing too hard on a certain issue or request and they need to rethink their position. We are there to help the buyer review the inspections and work through any repair issues. We are there to assist the buyer with finding the right lender, if needed. We make sure everyone is doing what they are supposed to be doing while the home is under contract.
How Do Builders Feel About Buyer Agents?
Most builders tolerate buyer agents as long as we are bringing our clients to them. They don't necessarily like having to pay us a commission, but they know we usually have the buyers. They can't make it without us. But once the initial introduction is made, they want us to disappear. They are quick to tell us we will get paid when the home closes, but in their eyes, we have done our job and earned our fee, so we can just ride off into the sunset. How would you feel if you were a buyer and were dropped off on a builders doorstep while your agent skates away on you to their next deal?
One of our experiences with a poor Building rep
We recently had an unfortunate experience with a builder's representative for a production home company. Surprisingly to us, they have a good reputation and we had never had problems with them before. The builder's rep is new to this area, doesn't know us, and obviously hasn't been educated on how we actually go to work for our clients. He made every possible effort to leave us out of his meetings with our buyer. We tried to impress on him the importance of our attending the meetings, but this kept happening. When it finally came to a head, his comment to our agent was "you should just keep your mouth shut and be grateful you are getting a commission at all!" Unfortunately, that is exactly what he has come to expect from other Realtors, and he assumed we were no different!
Of course, there are also builders and builder representatives who understand our role in the process. They respect our right to be there for our clients and attend the meetings. They don't have a problem with us wanting to make sure our clients are being treated fairly and they have nothing to hide. They know us and realize we are going to be fair and not try to drive a one-sided deal. We can be a builder's greatest ally if we think they are treating our clients fairly, but if we suspect that the builder is trying to take advantage of our clients, we will make sure our client understands what is happening and then leave it to them whether it is best to look for another home.
Good Cop, Bad Cop
Many buyers prefer to have their Realtor speak for them so they can maintain a good relationship with their builder while still getting the deal they want. Think "good cop, bad cop" where the Realtor is the bad cop. A good, experienced Realtor knows how to handle difficult situations. There isn't much a builder can throw at us that one of us hasn't already seen. We are going to stand their ground for our ground for out client on what is the right thing to do. A builder with a strong personality can steamroll a buyer in no time if they are allowed to. Have you ever walked away from buying a car and wondered if you were taken because you lost control of the negotiations? Believe me, that happens on homes too. We have three seasoned buyer agents who are not going to be intimidated or back down from anyone when it comes to protecting our clients.
Realtors Should be the Voice of Reason
And finally, a Realtor is not going to become so attached to a home (as the buyer might) that it clouds their judgment. They will always be the voice of reason and not let emotions get in the way of a sound financial decision. These are all reasons why some builders don't like to see buyers walk in with buyer agents.
A good Realtor will earn every penny of their fee and much more. They will save the buyer time, money, and a lot of headaches by the time all the dust settles. So if a builder tries to convince you not to bring in a good, experienced, Realtor professional, take that at face value and give us a call.
Tom Grisak Estate Homes Realtors, Inc - Texas License # 0329533
Your Realtors for Allentexas, Fairviewtexas, Lucastexas, McKinneytexas, Murphytexas, Parkertexas, Prospertexas