Homebuilders who pay co-broker commissions could be in for accelerated absorption rates if they hold their current commission positions.

In all my years, I have never seen the opportunity so ripe for homebuilders to solidify their relationships with Realtors. How? By the only thing that matters to homebuilders: access to qualified, motivated home shoppers.

General real estate agents may not see the commission listed in MLS but will see it on the builder's website and other promotions. Builders know that how they respond to the new NAR settlement will either enhance or seriously hurt , if not destroy, their brand among Realtors in their markets.

Before the internet, news could take a week or so to get around the Realtor circuit that a builder was no longer paying or had seriously reduced commissions. In many cases, broker sales stopped overnight.

Today, the news could travel the circuit within minutes. Some builders will take this business risk and lower their commissions, and maybe more than some will regret it.

Here is what Bing’s AI Copilot says will impact home builders.

“The recent NAR settlement could have implications for home builders who pay commissions to Realtors. Let’s explore how this might impact them:

1.  Commission Costs: Home builders often pay real estate agents (Realtors) commissions for selling newly constructed homes. With the repeal of the commission-sharing policy, there may be changes in how commissions are structured. Builders might need to revisit their commission agreementswith Realtors and adjust them based on the new landscape.

Author's Opinion: Home builders, especially the first responders,  who let the local Realtor community know they are continuing their current commission policies will reap the rewards.

2.  Negotiations: As commission rates potentially decline, builders may find themselves in negotiationswith Realtors. Lower commission rates could lead to discussions about how much Realtors will be compensated for selling new homes. Builders might need to balance attracting Realtors to sell their properties and managing costs.

Author’s Opinion: Realtors are not likely to negotiate commissions, especially within communities where a commission difference could affect appraisals and cause sales prices for the same floor plan to be different.

3.  Adaptation: Homebuilders must adaptto the changing real estate market. If commission rates decrease, builders may need to explore other ways to incentivize Realtors to promote their properties. This could involve offering additional perks, bonuses, or marketing support.

Author’s Opinion: This has possibilities as long as the commission is competitive. We have long recommended that bonuses, incentives, buydowns, and other incentives be modified without much ado, but builders must be careful when a commission reduction is announced.

4.  Consumer Impact: Any commission rate changes may also affect home prices. If builders pay lower commissions, they might pass on some of the savings to buyers. Conversely, if builders maintain higher commissions, it could impact the overall affordability of new homes.

Author’s Opinion: Builders first cut back on their most costly incentives, like cash contributions to mortgage costs. Then, upgrades..

“In summary, the NAR settlement may prompt home builders to reevaluate their commission structures, negotiate with Realtors, and find creative ways to incentivize property sales while considering the impact on consumers.”

Production builders don’t need an interruption in the construction process, build-out schedules, losing subcontractors, or any other issues that may arise due to slower-than-projected sales.

Some things will not change.

Builders are moving to automated sales, where buyers can shop directly and stage their new homes.

No matter the technology, home builders will still draw unqualified and unwilling shoppers to their websites.

Home builders know that their competition is not the builder across the street.

Their real competition is for the Realtor’s clients, many of whom (more than 50 percent, according to BDX studies) would be happy to look at new homes if the Realtor suggested they do.

Builders will continue to pay Realtors for one reason:

They need qualified, motivated home shoppers, like those sitting in the Realtor's car as the Realtors drive by the community entrance to see resales.

Realtors must commit to becoming as professional in working with new home shoppers as they are with resale shoppers. After all, many resale shoppers turn to new construction because they cannot find what they want in a tight resale market.

•  Builders may turn to third-party new home sources like New Homes Source and include their commission in those ads.

•  Many Realtors will start looking for ways to serve new home shoppers better.

•  Builders who intend to reduce commission should hasten slowly. The consequences could be costly.

•  The demand for new home construction will continue to be strong for the foreseeable future.

•  The home builders will figure it out. They always do.

•  They have no choice. Absorption rates matter.