Think of Your Builder as a Professional FSBO

Written by Posted On Sunday, 25 September 2005 17:00

Let me ask you a question.

If you had a prospect in your car who wanted to see the FSBO home they passed on the way to see your listing, would you show it to them?

What if the FSBO said they would not pay a certain commission but would pay a lower one? Would you still show the home? The answer in most cases would be, "Yes, I would show it. I would rather have some commission than none."

If this is true, then why does the local homebuilder become the "greedy" homebuilder when he lowers his commission? The resale FSBO may be a lot greedier than the builder ever thought about being, let's be honest here.

On the other hand, let's say you make $10,000 commission on a builder's home. The price of lumber and labor forces the builder to raise prices say 10 percent. Is $10,000 no longer good enough or is the builder being greedy if your commission doesn't ride with the increased price of the homes the builder will sell in the future? How much have your costs gone up lately?

I am not talking "sides" here. I am just laying it out as I see it. Times have changed. Opportunities to make money from selling new homes haven't. But the way we think as agents must.

In a recent new homes seminar, here are some comments that were made to a panel of new homes sales managers from the agents in the audience.

"Why do builders' cut commissions? Don't they understand that many times we have to divide our commission with referrals?"

"Their land is paid off. Why do they have to keep raising prices? Why don't they try to keep prices down?"

"Would someone explain to me why they cannot pay us a decent commission? They are a bunch of morons."

I wanted to ask these agents how many new homes they had sold in the past year, but didn't. My guess would be anywhere from zero to maybe two, if that. It is time for real estate agents to realize that builders do not exist to pay them a commission. They are in business to make a profit, against tremendous odds at times.

Can you see how these comments in a sales meeting could poison the entire group? That's why you need to focus on what you want and not let any one else steal your dream. If you want to sell new homes, sell them.

I can tell you from experience on the builder's side of the table and being active in the Florida Homebuilders Association that builders care greatly about "price" and are constantly pushing the line between maximizing their profits and hurting sales. It's their business.

I don't know what the market is in your area. There are no doubt many builders paying smaller or no commissions in today's market. But there are many who continue to pay commissions, knowing that there will be a time when sales won't be as good as they are today and in those times it is their relationship with Realtors that will help them stabilize their sales pace.

Let's look at it another way.

Let's say you want to take your family on vacation in next month. It is going to cost $2500. You don't have the $2500. You have a prospect for a new home, but the builder is no longer paying $8,000 commission. He is only going to pay $5000. You are on a 50/50 split.

You know your prospect would buy that builders house if they saw it. Would you show it? I can promise you one thing:

When you look at your family enjoying their vacation, you will forget all about the fact the builder didn't pay you enough.

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David Fletcher, NHCB

David Fletcher is a co-founder and CEO of New Home Co-broker Academy LLC., an online e-commerce business. Visit David's website to take his famous 3-hour online course, How To Build  A New Homes Niche, to become a certified New Home Co-broker (NHCB). More than 5,000 graduates. Content is based on his long career and onsite sales success working with both builders and Realtors to list and sell more than $3 billion in new construction. If you are a broker who wants to offer your agents a way to add new homes to their resale inventory and home shoppers, this is your solution. 

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