As the spring market heats up, home buyers will examine all options. Many will consider new construction, often visiting the projects and
sales reps or calling the information lines. Seemingly innocent inquiries which often result in them being unrepresented by a buyer’s agent if they move forward. Builders love unrepresented home buyers. Not using a buyer's agent when building a home is the single biggest mistake new home buyers make and it will result in problems over the build.
What is Procuring Cause
Every home buyer should work with an experienced buyer’s agent. The buyer agent fee is almost always paid by the seller, there is no reason to be unrepresented.
The National Association of Realtors (NAR) says procuring cause means the agent who earns the commission is the one who led to the completion of the sale. Deeper than that is a laundry list of questions; “who, what, where, when, how” and more, all poised to establish who played the major role in bring the buyer to the property.
Builders write their own rules and their own contracts, there is no obligation to use the GAR forms. Builders consider themselves procuring cause if
- a buyer reaches out to them directly in person or via other means
- a buyer fails to complete a buyer’s agent info form
- a buyer changes agents between initial contact and time of offer
- an agent fails to “register” a buyer with them and the buyer writes an offer
In their eyes, as the procuring cause, many builders will not agree to have the buyer's agent compensated by their broker. Builders want control and simplicity. Buyer agents can be a nuisance to them if they get too involved with the build, ask questions, and visit the site too often.
Buyer Agent Discount
The biggest myth surrounding new construction and buyer’s agents involves commissions. Not using a buyer agent has zero impact on the purchase price of the new home. The agents on site work for a brokerage that represents the builder, they are typically independent and not affiliated with the builder. The brokerage and builder work under a set contract; each transaction is charged X% of the final sale price. The buyer broker is paid from that X%; if there is no buyer broker the listing broker keeps the entire fee. The builder pays X% either way.
Doubt that? Negotiate the deal and once done, tell that site agent to write a stipulation into the contract that reduces the purchase price the same amount that a buyer broker would receive. If it’s not written into the contract it is unenforceable, see what the response from the agent is. Buyers that fail to use an agent do nothing except remove any scintilla of control during the build and provide the listing broker with two commissions. Check out this video - builder would not provide an engineer letter stating the repairs were properly done. We fought this and other issues, our buyer received every cent back and moved on to a different home.
Agency & New Home Buyers
New construction home buyers that enter into a contract without an agent are completely unrepresented buyers. The site agent is the listing agent; they are contractually obligated (legally) to represent ONLY the builder’s best interests. When, not if, things get sideways the agent will listen, be considerate and note all of the concerns. The ultimate answer will always be whatever works best for the builder with a coating of “ we understand, but…”.
There is no logical reason to enter into a new construction contract as an unrepresented buyer. Buying a home is a massive life and financial event; building one adds additional time, stress and emotion. Having an experienced professional advocate typically costs nothing and is an invaluable asset.
Posted by Hank Miller on
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