Statistically speaking, a vast majority of the new home communities in the United States offer closing compensation (also called co-op commissions or referral fees) to outside buyer agents. This can demonstrate just how much value homebuilders themselves place on the Realtor community and how much of their future success they believe rests with this important group of individuals.

There is, of course, that percentage of production and custom home builders who offer no more than an appreciative "thank you" to agents who bring them buyers; these are builders who are either not convinced of the value of general agents, operate on extremely slim profit margins preventing them from entertaining them, or are selling houses like hotcakes, diminishing the value of compensating outside brokers. In some areas of the country, the local market conditions dictate whether the builder will co-op at any given time, giving them the reputation of foul-weather friends to the Realtor community. For those builders who opt not to network with outside agents, they risk disenfranchising an industry whose livelihood depends on their homes, whether the homes are new or in the re-sale mode a few years hence; a price they must sometimes pay for their unwillingness to include the Realtor community in the "big picture."

For those builders that do co-op, however, the relationship can be one of mutual benefit and support. It can also be an advantage to many homebuyers who would never have found the builders' homes without someone to show them all the possibilities in the buyers' target area.

The common question then arises: "If I find a new home on my own, without an agent, shouldn't the builder be willing to discount the price by what they would normally pay that agent?"

The answer, if you ask any new homebuilder, would be a flat-out NO. To those homebuilders who structure their bottom lines to include broker compensation, their overall home prices are usually based on the normal percentage of homes they would customarily expect to sell with the aid of brokers. This more global figure, allowing for some broker compensation, is considered part of the cost of doing business, somewhat like a marketing expense. For every home they sell without paying outside broker compensation, the unpaid fee may be held in a general fund, from which they will pay for others that include the compensation. If you again liken this to a marketing expense, it would be as if the builder was eliminating advertising and promotions one week in order to spend more the following week. In other words, it all comes out in the wash . . .

So what are some of the benefits of using a broker/agent to represent you in a new production home purchase? For one, it's free representation - kind of like having an attorney to guide you, communicate your needs, and interpret the process, even though their advice is not legal, nor are they paid by you. The "liaison" aspect of using a buyer's broker or agent is especially handy if you are moving in from out of the area. It is difficult for most consumers to have total confidence in a homebuilder based primarily in pictures, floor plans, homebuilder Web sites, or even a quick weekend tour of model homes. Local real estate agents know builders by reputation, by the areas in which they build, and may have even sold some of their previously- new homes in the re-sale mode. This important information makes them familiar with how the builder backs up its product and how the builder's homes hold up over the years.

Another aspect of the liaison role would be to perform reconnaissance, keeping you posted long distance on the progress of the home, supplying you with regular updates during construction. The on-site agent representing the builder, with potentially dozens of homes under construction at the same time, will have little time to concentrate his or her efforts primarily on your particular home. Having someone checking on the status of home you ordered up may afford you some long-distance peace of mind. Mildly tech-oriented agents can even take digital photos and e-mail them to you on a regular basis so you can "spy on" the home's progress.

If a misunderstanding arises between you and the builder, your concerns may fall on less-than-sympathetic ears as one of many buyers who may be going through some of the same things you are. Your broker, on the other hand, potentially represents a large pool of future buyers to the builder. Word can spread very fast within the Realtor community when a builder is under-performing. By the same token, if the reasons for the builder's problems are supply, demand, weather, or uncontrollable elements that are being experienced by other area builders, having an outside, objective explanation given to you in laymen's terms can sometimes help calm your fears, even if it can't change things for the better.

"People like to feel that they have someone on their team," says David Fletcher, president of RealMatchhomes.com, a Web site set up for Realtors to network with buyers primarily seeking new homes in the Florida and Texas areas. "Agents and brokers who make new homes a large part of their inventory to home buyers seem to have a better overall sense of the market," he admits. "Knowing what to realistically expect from new homebuilders goes a long way towards giving buyers what they need to purchase a new home with confidence."

Published: November 28, 2000

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