buyer?s agent for new home purchase?

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patsox1975_IHB

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Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.
 
[quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>
The only big pro would be if the agent agrees to contribute a portion of their commission (a good agent will give this to you in writing...I can give you a copy of the form that I give my buyers). A con would be that a crappy agent would just get in the way and try to push you into the transaction even though you think the price is too high. Honestly, there is very little work that the buyer's agent does on the new home purchase side. That being said, a good buyer's agent should be able to help his buyer/s by arming them with information like closed comps and listings via a CMA report to back up the buyer/s offer to the builder. You can go either have the agent negotiate for you or you can negotiate with the builder directly. The process of negotiating with a builder is a lot less informal than it would be with a seller of a re-sale property. Let me know if you have any questions.
 
[quote author="patsox1975" date=1249605024]Thank you for your response. I'll talk with the agent about commission split.</blockquote>
The one problem that you'll run into in today's lending environment is that lenders are not allowing buyer's agents to contribute a portion of the buyer's agent commission to their buyer's escrow. So I've had to go via a backdoor route where the seller credits my buyers for recurring and non-recurring closing costs what I was going to credit them and they reduce the buyer's agent commission by the same amount. The only little wrinkle is that the seller's contribution can only go up to whatever the recurring and non-recurring closing costs are. With new home purchases, your agent will most likely not be able to contribute a portion of their commission towards your escrow so you'll have to do it outside of escrow (this is against the rules though and some agents may not be comfortable doing that).
 
Understood. I would have been OK with settling it outside of escrow. But I already screwed up by signing in at the open house without my agent. Thanks once again.
 
[quote author="patsox1975" date=1249637676]Understood. I would have been OK with settling it outside of escrow. But I already screwed up by signing in at the open house without my agent. Thanks once again.</blockquote>
Glad I could help. Feel free to ask me about anything that pops up during your home purchase process.
 
[quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>


Buyers agent on a New Home purchase is a waste of time and only makes the buyers agent money. Once the deal has been written up the buyers agent has nothing to do with the purchase anymore and they are out of the process period and gets paid when the deal closes. Yes negotiate directly with the builder as you will get a better deal, buyers agents more often than not are inexperienced and will screw up the deal enough where i have seen the builder and the buyer ignore the agent. Unless this agent has sold new homes for 5 years then they are worthless and have no business representing you as they do not know what they are doing.
 
[quote author="OCCOBRA" date=1249842695][quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>


Buyers agent on a New Home purchase is a waste of time and only makes the buyers agent money. Once the deal has been written up the buyers agent has nothing to do with the purchase anymore and they are out of the process period and gets paid when the deal closes. Yes negotiate directly with the builder as you will get a better deal, buyers agents more often than not are inexperienced and will screw up the deal enough where i have seen the builder and the buyer ignore the agent. Unless this agent has sold new homes for 5 years then they are worthless and have no business representing you as they do not know what they are doing.</blockquote>
Agreed, the only way I would use a buyer's agent for a new home purchase would be if they gave back most all of their commission because it really is no work on their part.
 
[quote author="OCCOBRA" date=1249842695][quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>


Buyers agent on a New Home purchase is a waste of time and only makes the buyers agent money. Once the deal has been written up the buyers agent has nothing to do with the purchase anymore and they are out of the process period and gets paid when the deal closes. Yes negotiate directly with the builder as you will get a better deal, buyers agents more often than not are inexperienced and will screw up the deal enough where i have seen the builder and the buyer ignore the agent. Unless this agent has sold new homes for 5 years then they are worthless and have no business representing you as they do not know what they are doing.</blockquote>


Gotta agree. An extra person involved will just get in the way.
 
[quote author="awgee" date=1249867336][quote author="OCCOBRA" date=1249842695][quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>


Buyers agent on a New Home purchase is a waste of time and only makes the buyers agent money. Once the deal has been written up the buyers agent has nothing to do with the purchase anymore and they are out of the process period and gets paid when the deal closes. Yes negotiate directly with the builder as you will get a better deal, buyers agents more often than not are inexperienced and will screw up the deal enough where i have seen the builder and the buyer ignore the agent. Unless this agent has sold new homes for 5 years then they are worthless and have no business representing you as they do not know what they are doing.</blockquote>


Gotta agree. An extra person involved will just get in the way.</blockquote>


I'll cast a dissenting vote:



When viewing from the perspective of <strong>"What does the buyer's agent do in bringing value to the client <span style="color: red;">in buying from a builder</span>?"</strong> your opinion appears to be valid. As previously pointed out, taking advantage of the builder's incentives instead of leaving money on the table makes sense for any reasonable buyer and broker.



However, when viewing from the bigger picture of <strong>"What does the buyer's agent do in bringing value to the client?" </strong>I think there is an opportunity to do more than just be a pass-thru or a caddy, personally.



Many buyers are already very savvy and not everyone will need this "value," but those that do often <em><strong>really </strong></em>need it.



-IR2
 
[quote author="IrvineRealtor" date=1249869879][quote author="awgee" date=1249867336][quote author="OCCOBRA" date=1249842695][quote author="patsox1975" date=1249577523]Any pros and cons on using buyer's agent when buying a new home? I have worked on a couple of offers (that didn't work out) with a buyer's agent. I'm wondering if I should negotiate directly with the builders or through buyer's agent.</blockquote>


Buyers agent on a New Home purchase is a waste of time and only makes the buyers agent money. Once the deal has been written up the buyers agent has nothing to do with the purchase anymore and they are out of the process period and gets paid when the deal closes. Yes negotiate directly with the builder as you will get a better deal, buyers agents more often than not are inexperienced and will screw up the deal enough where i have seen the builder and the buyer ignore the agent. Unless this agent has sold new homes for 5 years then they are worthless and have no business representing you as they do not know what they are doing.</blockquote>


Gotta agree. An extra person involved will just get in the way.</blockquote>


I'll cast a dissenting vote:



When viewing from the perspective of <strong>"What does the buyer's agent do in bringing value to the client <span style="color: red;">in buying from a builder</span>?"</strong> your opinion appears to be valid. As previously pointed out, taking advantage of the builder's incentives instead of leaving money on the table makes sense for any reasonable buyer and broker.



However, when viewing from the bigger picture of <strong>"What does the buyer's agent do in bringing value to the client?" </strong>I think there is an opportunity to do more than just be a pass-thru or a caddy, personally.



Many buyers are already very savvy and not everyone will need this "value," but those that do often <em><strong>really </strong></em>need it.



-IR2</blockquote>


A buyers agent in a New Home transaction is paid a referral fee that is paid out of the marketing budget so there is no money left on the table either way. Builders sell with same incentive and do not take offers unless the property is standing inventory. Why because they have the time to wait for a buyer. A builder will hold the line on price and incentive till the remaining homes unsold become standing inventory. This is the time for negotiation and the only time that a buyers agent may help but the buyers need to move in 30 to 45 days but the buyers agent will never be part of the paperwork ever and only get a referral fee when the home closes period. Like i said unless the agent has sold new homes for at least 4 or 5 years or been in the business for a long time they more often than not piss off all the people involved and waste everyones time. Builders like to stay consistent on price and incentive and not jerk people around as a lot of their sales are referral sales they do not want to lose.
 
[quote author="OCCOBRA" date=1249933933][quote author="IrvineRealtor" date=1249869879]

I'll cast a dissenting vote:



When viewing from the perspective of <strong>"What does the buyer's agent do in bringing value to the client <span style="color: red;">in buying from a builder</span>?"</strong> your opinion appears to be valid. As previously pointed out, taking advantage of the builder's incentives instead of leaving money on the table makes sense for any reasonable buyer and broker.



However, when viewing from the bigger picture of <strong>"What does the buyer's agent do in bringing value to the client?" </strong>I think there is an opportunity to do more than just be a pass-thru or a caddy, personally.



Many buyers are already very savvy and not everyone will need this "value," but those that do often <em><strong>really </strong></em>need it.



-IR2</blockquote>


A buyers agent in a New Home transaction is paid a referral fee that is paid out of the marketing budget so there is no money left on the table either way. Builders sell with same incentive and do not take offers unless the property is standing inventory. Why because they have the time to wait for a buyer. A builder will hold the line on price and incentive till the remaining homes unsold become standing inventory. This is the time for negotiation and the only time that a buyers agent may help but the buyers need to move in 30 to 45 days but the buyers agent will never be part of the paperwork ever and only get a referral fee when the home closes period. Like i said unless the agent has sold new homes for at least 4 or 5 years or been in the business for a long time they more often than not piss off all the people involved and waste everyones time. Builders like to stay consistent on price and incentive and not jerk people around as a lot of their sales are referral sales they do not want to lose.</blockquote>


<em>Westley: Who are you? Are we enemies? Why am I on this wall? Where is Buttercup?

Inigo Montoya: Let me 'splain.

[pause]

Inigo Montoya: No, there is too much. Let me sum up. Buttercup is marry' Humperdinck in a little less than half an hour. So all we have to do is get in, break up the wedding, steal the princess, make our escape... after I kill Count Rugen.

Westley: That doesn't leave much time for dilly-dallying.

Fezzik: You just wiggled your finger. That's wonderful.

Westley: I've always been a quick healer. What are our liabilities?

Inigo Montoya: There is but one working castle gate, and... and it is guarded by 60 men.

Westley: And our assets?

Inigo Montoya: Your brains, Fezzik's strength, my steel. </em>



<strong>Let me sum up...</strong>



OCCOBRA - I agree with your reasoning, but let me give three scenarios:



<span style="color: blue;">1. Buyer wants to purchase one specific new home from the builder and works without a broker. </span>

Result - Buyer pays best negotiated price (arbitrarily) at $500K and gets the home.



<span style="color: blue;">2. Buyer wants to purchase one specific new home from the builder and works with a broker.</span>

Result - Buyer pays best negotiated price (remaining) at $500 AND an additional $15K is generated (3% from marketing budget) for buyer and broker to split as they see fair.



This myopic view looks only at the negotiations on price/incentives. It overlooks many of the other qualities that having an agent can bring.



<span style="color: blue;">3. Buyer wants to purchase a home (in general) and works with broker.</span>

Potential results - Buyer finds out that builder is unlikely to be solvent at year's end. Buyer finds that same floorplan is available closer to their workplace at 10% less on resale market. Buyer is made aware of price markups in builder's "design center." Buyer learns that there are two dozen identical properties that are scheduled for foreclosure in the next month. Buyer is made aware that on Tuesdays every trash truck in the city drives by en route to the landfill around the corner. Buyer is educated that the builder 2 minutes away is offering an additional bedroom for same price. Heaven forbid, the buyer might be made aware that given all of the economic indicators, this might not be the best time for them to buy at all.

Do you believe any of these issues would be brought to the buyer's attention w/out representation on their side? The ONLY outside voice for a buyer without an agent would be that of the paid employee of the builder, with a "sign here and close as quickly as possible" mentality.



Like I stated before, some buyers have already done all of their due diligence, and would not need further assistance. They may have determined that this particular builder model is the one that suits their needs best. These clients would still benefit by getting a piece of that marketing cheese that would be inaccessible without a broker's license.



-IrvineRealtor



<em>Miracle Max: Have fun stormin' da castle. </em>
 
IR2 - I think what you fail to realize is that you are the only realtor who will advise a client that now may not be the best time for them to buy. I think you fail to understand that you are the only realtor who is willing to put his commission at risk by suggesting to the client that the current deal may not be in their best interest. A payback in commission is almost irrelevant when considering the the aforementioned factor.



If I thought I had a knowledgeable, trustworthy advocate in my corner, I would not even want any part of the commission kicked back. That advocate would be worth every penny they made.
 
[quote author="awgee" date=1249945482]IR2 - I think what you fail to realize is that you are the only realtor who will advise a client that now may not be the best time for them to buy. I think you fail to understand that you are the only realtor who is willing to put his commission at risk by suggesting to the client that the current deal may not be in their best interest. A payback in commission is almost irrelevant when considering the the aforementioned factor.



If I thought I had a knowledgeable, trustworthy advocate in my corner, I would not even want any part of the commission kicked back. That advocate would be worth every penny they made.</blockquote>


Much appreciated, but not true. While this blog likes to drag out the worst cases and focus on the bad seeds, there are many, many excellent agents out there that understand what it takes to stick around.



You'll note in all of my posts, I don't think I've ever disparaged another agent. Some practices, yes, but not practitioners. In fact, I can think of only two instances where I've been insulting here: once likening a poster to a bunghole (in a poor attempt at humor and which I apologized for later) and once to someone who was rude to ISM (when she advised parents to teach their kids to "find a mommy" when lost).



Hopefully my presence here lets some see the other side of the curtain and sheds some light on a realtor's perspective. I benefit by cultivating future business. There is great opportunity here.
 
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