Home Buying in Fremont>Question Details

Ravi, Home Buyer in Milpitas, CA

Do we really need a Buyer Agent , when buying a New Home.?

Asked by Ravi, Milpitas, CA Tue Aug 19, 2008

Do we really need a Buyer Agent , when buying a New Home.I have noticed that some builder says that they will give you 3% disccount if we go without buyer agent. I am not sure if that is trap to sell the home with out a professional negotiator with me , or they are really telling truth.

I have narrow down one property in Sunnyvale/fremont , I met the sales guy as well as their lender and we talk about prices etc. Now can I go along with my Agent ,I have read some where on this site than Buyer Agent should be acompany the buyer during their first visit itself.

Any Advice would be appreciated.

thanks
Ravi

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BEST ANSWER
Ravi:

You ask, “Do I need a buyer’s agent?”

The answer is simple. Yes. It’s the law. If you buy direct from a builder, their sales person (read “agent”) becomes your buyer’s agent IN ADDITION to being the seller’s agent. There is no way around this. You WILL end up with a buyer’s agent by default. As has been pointed out below, this constitutes dual agency and is a very difficult situation to be in. I can promise you that the seller’s agent’s first priority is to represent the seller’s best interests, therefore you will have to negotiate on your own without the knowledge an experienced outside agent can bring to the table. One that’s sat in that very chair many times before and knows all the variables.

I have a few questions for you: “Since you will end up with a buyer’s agent anyway, does it not make more sense to bring a buyer’s agent of your own choosing? One with the single goal of representing only you and your best interests? One who has negotiated for buyers before? One who can more than likely get you a better price and terms than the 3% you might ‘save’ by not having them there?”

You also ask, “Now can I go along with my Agent ,I have read some where on this site than Buyer Agent should be acompany the buyer during their first visit itself.”

The answer again is simple: That is correct, and that’s why we keep saying it over and over again on this site. It’s called “procuring cause,” and it will put you into a dual agency relationship with the builder’s agent. It’s what they want.

HOWEVER, in the current market, not all builders are completely hardnosed about this. I’ve been allowed to represent buyers after they visited on their own the first time. There are a few things that can be done to sometimes allow a buyer’s agent to represent you.

Also, if you refuse to sign their dual agency form, there will be no deal. If you tell them that they only way you will proceed is in a sole agency environment, and then vote with your feet, they may reconsider. After all, the number one thing a builder wants is … a sale.

carl@carlmedford.com
Web Reference: http://www.carlmedford.com
1 vote Thank Flag Link Tue Aug 19, 2008
Steve,

I am not saying that every build is unethical, I'm saying it is unehtical to tell a prospective buyer that if they don't have an agent they'll get a better deal. The truth of the matter is that in most cases the reason why the sales agent would say that is because they are incentivized to not have another real estate agent involved in the transaction (ie the new hom sales agent gets a higher commission or bonus). With regards to not having the agent with you on the first visit, I can tell you that in this market no builder is going to jeopordize a sale because they're worried about the agent not being registered. That being said, I would happily accompany a buyer to a builders sales office even with the knowledge that I wouldn't get paid, because in doing so you'd win a client for life. My warning to Ravi would be the following, if you don't need to buy a home now, wait. Builder will offer you a better deal in a few months for several reasons 1) because the market is still deteriorating in places like Milpitas and Fremont 2) because most builder are incentivized to sell homes before the end of their fiscal quarter or year end. We just had the end of the quarter a few weeks ago, so the builders will be more motivated to cut a good deal as we get closer to the end of the next quarter.
2 votes Thank Flag Link Tue Aug 19, 2008
Hi Ravi,

You need an agent to look out for your best interest in negotiating terms and price. Agents have access to the prices the builder sold in the last few phases as well as the neighborhood prices. The agent can justify the price that the buyer should offer based on that information. I am sure the builder/sales office will not try to suggest a lower than asking price to you.

I have helped several clients with new homes and have saved them thousands of dollars on price plus options. I would be happy to do the same for you if you want to call me at 510-279-9580.

Meena Gujral
Help-U-Sell Achievers Realty
40083 Mission Blvd
Fremont, Ca.94539
510-279-9580
1 vote Thank Flag Link Tue Aug 19, 2008
Ravi,

Any builder who tells you they will give you the 3% is unethical. They're not supposed to do that, I would be suspicious of a builder who advertises that. I think you would be well served to have a good real estate agent accompany you to help with the negotiations and to make sure you understand all the paperwork and other considerations in a real estate transaction. Most builders do have a policy that they say your real estate agent has to accompany you on the 1st visit, but in reality they won't jeopordize losing a sale over that, so you can insist that you want to work with your own agent. What you need to understand is that the new home sales agent does not represent your interests and they are not going to try and get you the best deal. In fact their job is to do just the opposite which is to get their client (the builder) the best deal.
1 vote Thank Flag Link Tue Aug 19, 2008
If you enter into a purchase agreement with a seller using their agent, that agent has a fiduciary responsibility to act as a “dual agent” to both you and the seller in a fair and equitable negotiation for all. It is unethical and against our professional standards to behave any other way. The agent must provide you with the same professionalism they have committed to with the seller. However, that is a very fine line to walk and not always honored in the buyer’s best interest.

If you are going to consider using their agent you must have an Agency Disclosure signed by you and this agent stating that they are to represent you and the seller in a dual agency relationship and provide you with the same “service” as the seller without bias. This document is a MUST have before signing anything else.

In return for your agreement to use their onside agent to represent you then I would also insist on this 3% allowance to you be agreed to in writing by both you and the seller before you settle your negotiations. Make the builder accountable for these dollars in every way you know how.

Calculate the amount 3% is equivalent to and be sure that they honor their promise, in writing, to award you with that same amount of money to be used towards the purchase of the home. Careful too, when a builder offers upgrades or improvement dollars they can inflate that amount in order to use up the allowance they committed to honor to you. Try to negotiate 3% in actual dollars for dollars savings where you can verify that you are receiving your full 3% discount and not what the builder says something is going to cost you. I hope that helped a little bit. Becomes a little complicated when trying to explain the process in a short paragraph like this. You'll do fine! Good luck.
1 vote Thank Flag Link Tue Aug 19, 2008
Buyers:

While a Buyer can "go it alone" when buying from a Builder, it is much more prudent to have your own Realtor representation. There are MANY points to cover as a Buyer looking to purchase from a Builder (much more than will fit here on a single post).

Please review the following document to arm yourself with the knowledge you will need, and the reasons why you should absolutely consider working with a Builder-savvy Realtor on your purchase.
http://docs.Steven-Anthony.com/BuilderRealtorAgent.pdf

Best, Steve
0 votes Thank Flag Link Sat Jan 23, 2010
I was told the same thing by the saleperson at a new development in the TriValley area...that the builder would be more "flexible" with the price if I did not bring in an agent to represent me. That I would save that 3% that would go to the buying agent. Whatever. My friend had signed a contract with this builder without a buying agent to save the 3% (which is about 21K). He now realizes what he signed with the builder had no loan or sale contingencies, and he is basically stuck with this house in 60 days. He is trying to sell his house in order to roll the money over, but if he is unable to close on it, he may loses his earnest $. He had put in an offer through their sale dept, didn't think it would get accepted, but it did. Oops. I agree, get an experienced buying agent to make sure you're not being shafted. That being said, do not use any old friend or a relative that just happens to have a license, that doesn't ensure they know what they're doing...
0 votes Thank Flag Link Thu Oct 9, 2008
Ravi,
YES, a Buyers agent has to register you as a client the FIRST time you visit KB homes, for them to be able to represent you.
Since you have already been there.....can check if this is still feasible. Did you sign in when you went, sounds like you did..... AN agent can negotiate really well for you, including the 3% and more, as i did for my clients.
Let me know, if you are seriously interested.
Be well and safe, regards,
Nina
0 votes Thank Flag Link Thu Oct 9, 2008
Get a buyer agent! They are your advocate and will use thier expertise and knowledge to protect your interests. The builder is trying to save money and get the highest price for their property and they have to pay the buyer agent ....not You!
0 votes Thank Flag Link Mon Aug 25, 2008
It is always beneficial to have an experienced realtor with you to be the eyes and ears for your purchase and know the details about what you are getting and what you should be getting before you sign a contract. Don't forget that the commission is being paid by the builder / seller whether you have a realtor there or not. The price is still the same.
0 votes Thank Flag Link Mon Aug 25, 2008
Who wins when there is only 1 agent? The fiduciary responsibility will alway lay with the Seller in a dual agency.

Good Buyers Agents will do more than the 3% they get in commish
0 votes Thank Flag Link Mon Aug 25, 2008
Hi Ravi,

If you want to negotiate price and terms of the house, I would recommend getting your self an agent. You really should have your agent (buyer’s agent) even though you are buying a new home.

All discounts and closing cost credit should remain the same in spite of having your agent. To the best of my knowledge, builders not necessarily give you discount because you don’t have an agent. On the contrary, they benefit if you don’t have an agent in terms of sales price (They charge you more) Agents can get you price reductions; they know what the market is like out there. Builders don’t want their price reductions, so they probably discourage an agent with you.

When you met some one at the sales office and also met their lender, have you registered your name there? If you have not yet registered your name then you can select your buyer’s agent. If you have already registered, builders may not allow you to be bring your agent.

It’ true, an agent must accompany buyers at the time of the first visit to their development in order to negotiate on their behalf and getting paid.

If you have any other questions please feel free to call me at 510-381-2105
or email me at CharoBhatt@gmail.com

Good luck to you,

Charo Bhatt
Web Reference: http://www.HomesByCharo.Com
0 votes Thank Flag Link Tue Aug 19, 2008
So nearly every builder is unethical, Steve?

I'd settle for classless ... many builders have incentives tied to being a teacher, fireman, policeman, etc. ... community heroes. But these aren't available if you use an agent (or so they say) because they have to pay the agent's commission. So they say, I say, because a good buyers' agent can negotiate that incentive back into the package for you and you don't have to forego independent representation.

Dual agency discussions in this thread are accurate but not when it comes to new builds. It's abundantly clear, on paper and otherwise, that the builder's agent is not representing you. They're representing the builder. Without an agent, you're on your own.

There are a handful of builders who will allow you to bring an agent into the equation after the first visit but that's the exception, not the rule. And if you've had multiple conversations with the builders' agent, at this point you're almost certainly on your own.
0 votes Thank Flag Link Tue Aug 19, 2008
Ravi:
To answer your question, to be "safe", you should only go to the builder site with your Buyer's Agent. Also, I see a couple of comments below regarding a possible Dual-Agency when dealing with a builder. As a licensed agent, we have certain Fiduciary duties to our clients. These duties can be boiled down to Loyalty, Obedience, Diligence, Disclosure, Accountability, and Confidentiality. Acting as a dual agent presents the following conflict: How can one provide full disclosure, yet maintain confidentiality? Simply put, an individual agent can't, which is the case with a builder site. Basically, a dual agent cannot place one client in an advantageous position over the other. So, don’t expect any special “inside-information” on pricing, etc.This is the primary reason why having your own Buyer's Agent is better.

-Steve
0 votes Thank Flag Link Tue Aug 19, 2008
Hi Rav,

It depends on the development. I have represented several buyers in the purchase of new Townhomes, Condos etc. In most cases, the agent does have to register as the representative of the buyer at the first visit. It sounds as if you are beyond that point since you have met with the sales and loan staff. I would have recommended that you use a buyers agent, not only to negotiate the price, but also to look over the contract, warranty, etc. to make sure you are getting the best possible deal. Please let me know if I can answer any additional questions for you.
0 votes Thank Flag Link Tue Aug 19, 2008
Hi Steve
Is that means we should never visit a property without our Agent Or we should just visit the property but not to discuss anything with the sales people.

Thanks
Ravi
0 votes Thank Flag Link Tue Aug 19, 2008
What a buyer wants is an Agency relationship. Your interests are protected when a separate agent represents you as the buyer, not the seller - in this case. The agent for the builder has a fiduciary duty to represent the builder to the best of their abilities. Unless you tell the builder that you are represented by a Buyer's Agent, they may assume that you want them to represent you if you. Of course, they will want to limit their costs any way they can. Also, I can't imagine that they would tell you that you would get better representation by using another agent. Read the fine print about dual-agency in the builder's paperwork. If your agent can't accompany you, tell them you are represented at that first visit. I would suggest you try to negotiate the 3% WITH your own representation. Your agent can advise you on how to get the property you want with the best possible terms. That is what your own agent will do for you.
Web Reference: http://mariansbennett.com
0 votes Thank Flag Link Tue Aug 19, 2008
Ravi, since you have already contacted the builder and their loan agent the builder will not pay a commission to a buyer's agent you bring to help you negotiate. Builders require that the agent register their client in order to have the builder pay a commission.

Best Regards,

Steven A. Ornellas, GRI, ABR, e-PRO, CMPS, RE Masters, MBA
REALTOR® / Mortgage Banker-Broker / Certified Mortgage Planning Specialist

Steven Anthony Real Estate & Financial Services
Expect Excellence. Get What You Expect.â„¢
Cell: 510.461.6011
http://www.Steven-Anthony.com SteveO@Steven-Anthony.com
0 votes Thank Flag Link Tue Aug 19, 2008
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