Profile picture for tsmaryj

Does a realtor get the standard commission (3%) from builders?

I'm about 75% sure we will build but want to look at existing homes first.  If I work with a realtor and end up building, first would my realtor get a commission from the builder, if so how much, standard 3%? Second, can they negotiate a better price from the builder? It seems like when I have gone through spec homes the base price to build is set in stone.
  • March 18 2011 - Woodbury
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Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (28)

Profile picture for Louis W

first do you have a buyer agency agreement with your agent???  If so read it and see what obligations you have. 

 If the builder is offering a fee then yes your agent may be entitled to the fee being offered based on any stipulations of that compensation.

If the builder is not offering compensation then based on your buyer agency agreement you may be obligated to pay  based on the amount you and your agent agreed to in your buyer agency agreement.

Don't be afraid to ask these questions of your agent and have your agent ask the builder and or the builders agent.

As to price negotiations it is based on the desirability and demand of the property you are looking at.  What stage you get in at and what if any options / upgrades you may be looking for.  If the home is built and ready for occupancy there may be some flexibility but again it is market driven.



Good luck

  • February 07
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RE agents list houses for sellers that want too much for their shack, spend money advertising it, and spend time selling it. It never sells and RE agents don't get paid.

Looky lou buyers have agents show them a hundred homes and never buy, so they don't get paid.

If someone walks in the door and buys a house that day, it makes up for all the unreasonable sellers and looky lous.

That is the current model in real estate at this time. Should RE agents charge an hourly fee instead? Sure, but a lot of people used to getting "free" service would be upset, so no one wants to do that even though it would be fair to everyone. When a real estate agent therefore "discounts" a commission for someone for easy work, they are really just enabling the unreasonable people.

  • February 06
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Not every builder has an Real estate agent working for them. When I worked for a builder I was not an agent, I was an employee of the company that paid me 1.5% per sale. Now if the buyer came without an agent then we could negotiate the price better because we were not paying a commission.
  • March 23 2011
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Profile picture for Connie Klemme
there is no standard commission anywhere.  that would be against the law to have such a thing.   yes a Realtor can negotiate with your builder for the price and the commission, and for details, upgrades etc.  An agent can also help track and remind everyone of the terms in the contract to keep it on track and inline with the agreements made.
  • March 23 2011
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Profile picture for NY Broker
standard commision??  everyone charges different prices according to their , history and results.  commisions can range from 2% - 7%
sellers get what they pay for.
  • March 22 2011
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    HPVANC, woops, i didn't know that, i apologize to the board.  Now that i look, it is written on the bottom of this form.  LOL  Newbies!!!
  • March 22 2011
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Whenever I see commission percentages, "standard" commission, prevailing commission or any of the like in print I cringe.

As Norm D Plume pointed out - it is against the law for two Realtors to discuss commission fees together or in a public forum.  The Sherman Anti-Trust Act refers to price fixing.

Commissions are negotiable. Builders are negotiable. Add ons are negotiable.  Even after the house is finished if you do not like some of the finishing you can negotiate again.

  • March 22 2011
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Profile picture for hpvanc
Glenn,

While I agree with the content of you post, links to advertising websites or websites that you own are not allowed under Zillows Good Neighbor Policy

Keep posting we need an alternative to commissioned based real estate agents on both sides of the transaction.
  • March 22 2011
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Answer to question #1 is probably.
Answer to question #2 is it depends on what is being offered.
Answer to question #3 is probably.

Now, my question to you is, when will you be interviewing Realtors to hire one?
  • March 22 2011
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Why not ask your Realtor to charge you for the tasks and services that are provided for you and pay them a reasonable fee for same.  Perhaps $125.00 for functionary stuff and $175.00 for Fiduciary.  Then, since your agent is already paid, your agent can simply ask the sellers side to reduce the final cost of the home by the percentage that they expected to get as they would have been already paid for their time and expertise.  You, as the buyer can absolutely eliminate the risk of the Realtor working for free and then you, the buyer can get the reward of the commission reduction in your contract.  check out [promotional hotlink removed by Zillow moderator] to learn about this.  We are a free initiative to assist in effectuating a change towards choice and transparency in real estate.  Moreover, why would anyone allow a negotiator, under the current model of real estate to be paid by the opposing negotiator in a transaction?

Glenn Freezman
  • March 22 2011
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When you use a Realtor you have the best chance to obtain a great price because the Realtor is always acting in your best interest.


I'll just toss this out there, but when  a member of the NAR uses the term Realtor without the little registered sign after it, aren't you in fact placing the term in the public domain?


  • March 21 2011
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Profile picture for kristisar
O.o No, I'm not. I've been quite up front about that. But good try.
  • March 20 2011
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Profile picture for Lady Chattel
krististar is a REA using an alias to try and look like a regular guy batting for the home team.  Gimmie a break. 

Yes, the commission is negotiable.....but few people know this or understand this.  I sold one house for 5%, the agent balked at the request and said they would need their broker to approve it.  Of course it was approved.  I rationalized my request because home prices had gone up such that the commish was higher than in years past and the amount of work to sell my home was little or none or even the same.  House went under contract in 3 hrs after the sign was staked in my yard. 

I think non-representation works just as well when getting a rental......I pay $600.00 less than the rental house next door........they had an agent show them the house and tell them what a deal it was......now they want to rent my house if I find a house to buy this summer.  Laughable really. 
  • March 20 2011
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Profile picture for klarek the realist
You do realize the only possible way to know you're are paying less without an agent is to have a price negotiated and agreed upon by both parties, and then to say 'oh hey guys, changed my mind, go ahead and give me 3% more off since I'm going to not use an agent now' and then have them agree to it, right?

You make an offer for x amount.  If they are in agreement with their agent to pay out 6%, offer them x * 97% if they renegotiate the contract with their agent.  Make it 98% if you really want to entice them.  It won't cost them anything even if it's 97%, and their agent will still get their 3%.  There's absolutely no justification for them double-dipping on the commission simply because you don't have an agent.

Because without having a firm price to base it off of, that 3% is basically an imaginary figure.


It's not an imaginary figure.  Offer them $300k for the house, or $291k if they reduce the commission obligation for the agent that doesn't exist!  Or, if they opt for the full commission option (their agent will do their best to convince them to NOT drop the commission, even though they are getting 3%), come back with your own agent, one that will kick most of the commission back to you.  You've already found the house.  They don't need to take $9000 just for being a name on a paper in the transaction. 
  • March 20 2011
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It is illegal for a realtor to take a commission from the builder if he does not tell you. I was a G.C. for many years what is in the realtor's best intrest is to make you a life long friend and do what is best for you his clint and not go behind your back and make a little extra money.. If you are happy with them and the builder they will both be better off..Nothing is better than a happy client that will tell people about them. If you want to talk more click on my picture for contact info.

Kindness regards, Shawn Anderson
  • March 18 2011
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The commission is always negotiated and is never a set fee. When you use a Realtor you have the best chance to obtain a great price because the Realtor is always acting in your best interest.
  • March 18 2011
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Profile picture for kristisar
You do realize the only possible way to know you're are paying less without an agent is to have a price negotiated and agreed upon by both parties, and then to say 'oh hey guys, changed my mind, go ahead and give me 3% more off since I'm going to not use an agent now' and then have them agree to it, right? Because without having a firm price to base it off of, that 3% is basically an imaginary figure. Who says an agent couldn't have helped you get that 3% more off? Ahh, right, you the realist, who seems to believe agents are only out to drive up home prices and couldn't possibly be trying to help anyone else. I haven't paid specific attention to your posts in the past, but I don't remember any of them being particularly positive, or even neutral. And science class taught me that what isn't positive or neutral is by default negative. There are a number of people who post on this site that sound as though some broker/lender/seller/etc screwed them at some point, so now they don't trust the whole system. Calm down. There's not a single individual in the world that this or any industry has singled out 'to get'
  • March 18 2011
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Profile picture for klarek the realist
I'm sure it happens sometime somewhere, but Ive never known any of my family or friends to write a check to their buyers agent.

Okay, think about it.  One person comes to the table with money (the buyer), three people walk away with checks (seller, 2 agents).  YOU are paying for both agents.  The money you pay goes to the seller who then has to pay all the misc costs.  If you negotiated a 3% lower selling price, stipulating that they only pay their agent what they were going to receive had you come with an agent, then there would be a zero dollar difference in what you're paying them.

It's an accounting gimmick that NAr has pushed for a while because it knows that buyers can find houses by themselves without agents, and that's a large threat to their revenue stream.

Why are you so negative about getting a little help along the way?

I'm not negative at all, I just know how the game works.  It's totally rigged against you, yet you think you're being helped.  Believe what you want, but just because you're drinking the NAr koolaid doesn't mean I'm being negative.
  • March 18 2011
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Spec home prices are NOT set in stone and are negotiable.  Builders have more risk because they already are paying for the land, model homes, sales staff, etc., than a regular home owner.  It's best to try to negotiate either a pre-dirt price (house in the future that the builder contracts for about 10 houses and gives those contracts to the bank forr a loan, usually 12 months out for the house to be built) or an inventory home (home they already built and can't sell, they are paying interest on that loan!).

Definately bring along your buyer broker.  The builder already assumes that payout.  If not, the builder negotiates less with you and they pocket the broker fee as well.  A win-win for the builder.

Commission is negotiatble, but not your concern. BUT all builders assume a buyer broker fee. At 5% interest, I would suggest protecting yourself by bring along your hired "gun" (your broker) ,and go get the best price with the house you want!
  • March 18 2011
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Great question. A new home is a great way to go, if you plan to live in the home for a while.Your agent could negotiate a slightly better price, but don't expect to a huge drop. Most builders can offer a lot of incentive which can eliminate the need to ask for more. Incentives and commissions will vary from builder to builder. Just shop and compare.Point to look out for is in your next new home is Energy star rated home. See who offer the highest or best energy savings. In the long run that can help save you the most money every month years to come. Look in to a KB Home if available in your area or go to www.energystar.gov
  • March 18 2011
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Profile picture for kristisar
Really? I'm sure it happens sometime somewhere, but Ive never known any of my family or friends to write a check to their buyers agent. Pretty sure that comes out of the sales price. So whether they negotiate $150000 (for example) with or without an agent, they are going to pay that amount. Why are you so negative about getting a little help along the way?
  • March 18 2011
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I worked for a builder for many years and we always had it set what we paid the Realtors which was 2.7%. Also make them work for you and negotiate the price of the home. You can, for the most part, get a better on an inventory home than you can on one that thats not built yet. Don't worry about the base price so much, add all your options and then negotiate that price. They can come off the price more if you pick more options.  Good Luck
  • March 18 2011
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Profile picture for klarek the realist
Why not use their knowledge, since it doesn't cost you anything?

Who do you think is coming to the closing table with the money?  The buyer.  It costs them directly, but the terms are largely set by the seller.  So not only is it untrue that it doesn't cost the buyer anything, it's also a huge conflict of interest.
  • March 18 2011
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there is no "standard" commission. There is the Sherman Anti-trust Act.

If an agent suggests there is a "standard" commission, run away quickly.
  • March 18 2011
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Profile picture for Joe Houghton
You are absolutely doing the right thing by asking questions like this and exploring all of your options.  As you will notice you will often get several different and often opposite opinions/answers to any given question.  I would absolutely recommend that you look at as many existing homes and spec homes as you have the time and energy for.  It will be time very well spent.  I often relate home buying to job hunting.   If you put in the work and do everything in your power to get the best job/home for you, you will love yourself and your home/job everyday.  If you just "settle" you might always wonder "what if I only....."  My advice is to research real estate agents, call and interview them and be up front about your intentions.  Most of the time builders are happy to work and pay real estate commissions and if they are not it is a huge red flag.

A good Realtor will help you analyze absolutely everything in the design, build, spec and lot selections, as well as price negotiations, and resale implications.  If a builder offers you a "discount" if you don't have your own representation I would be leery.  Sellers will often act like their number one priority is to save you money.  You just have to ask yourself why is this builder in the business they are in... to give you the best deal possible or to make themselves as much money as they can with little or no interference from a third party? 

Most home buyers don't know how to protect themselves, negotiate for themselves and navigate through the building process much like a good realtor doesn't know how to do the average home buyers' job the way they do.  If you don't don't have a professional on your team you are the one that has to try and play "bad cop" and this often will get in the way of you accomplishing your objectives.  It is easy to assume if the builder doesn't have to pay a Realtor commission they will pass that "savings" along to the buyer, but be very careful how you view this.  Many sellers/builders want you to believe that you will save money, but what often happens is they give you a perceived "discount" but end up getting away with many other up charges and practices that are unethical and sometimes fraudulent.

The bottom line is a good Realtor will cost you nothing and likely save you thousands. 

Please contact me anytime if you would like more advice. 
  • March 18 2011
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Profile picture for kristisar
Wow. Please do not allow one persons negative experience convince you that is how its always done. 1st off, the commmission could be higher or lower than 3%. I've seen 2.5%-5%. Second, a bad agent will do no more work on a new build then they would on a resell. A good agent absolutely could and should have tried to negotiate with the builder, as well as ensure the punch list gets completed. These things shouldn't even be something you should have to ask for with a good agent. So get a referral and/or conduct some interviews. Why not use their knowledge, since it doesn't cost you anything? If you have a particular price in mind, offer that price! Your agent can't make you offer more
  • March 18 2011
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Profile picture for klarek the realist
The game is rigged against all non-industry folks, particularly buyers.  I have friends who after being rejected on an offer will have a copy express-mailed to the seller (or bank) just because they cannot trust that the seller's agent actually submitted the offer.  Beyond that, the propping up of home prices is really disgusting.  How many people ought to overpay for a house when this is all said and done?
  • March 18 2011
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Profile picture for Lady Chattel
Your agent will get 3%.  Builders have their own agents representing them, they will do ALL the work, your agent will do literally nothing, perhaps make an appoint to arrange for a home inspector, but some won't even take care of those details.  When we bought new construction we did not have an agent and negotiated 3% off the price of the house, arranged all the inspections, had a lawyer look over our sales agreements, and even managed to get the house punch list items fixed before we closed. On previous home purchase I used a REA and NOTHING got fixed before we closed and they insisted we pay list price so no, they will not negotiate for you. Not that they can't, but it isn't really about them getting a bigger paycheck (cause a few thousands is really just a paid lunch)......it is about maintaining ALL the house prices in an area.  REAs also are homeowners and flippers, they want to protect their own ASSests.  If your agent has a home in the neighborhood you want to buy it is in his/her interests for you to pay the max for that home. 

The fraud in the MLS is just being unraveling.  The price manipulation and actual number of sales reported is being adjusted DOWNWARD due to fraud and blatant manipulation of numbers.  The internet allows you to check tax records for sales purchases, it allows you to see charts and trends, and if you have a brain YOU are capable of buying a home. 
  • March 18 2011
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