Buyer representation agreement

Asked by Jacqui, California Sun May 18, 2008

What if I buy a new home and the builder doesn't pay 3% commission? What if they pay no commission at all?

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Jeffrey Schn…, Agent, Austin, TX
Sun May 18, 2008

Not quite enough info to know what the question is that you're asking, so I'll presume a few scenarios based on what you said.

Let's say you have a buyer's agent in your situation. If you had a Buyer's Representation Agreement signed with the agent, it likely said that they get paid a commission and that they would initially attempt to get it from the seller, but if the seller isn't paying one, then you're likely on the hook for it. But the fact of the matter is, no matter what anyone tells you, in every single real estate transaction, since you're the one buying the home, you're ALWAYS paying everyone's commissions.

How could that be? Well, let's say the builder is paying a buyer's agent commission of 3%. Seems like you're not paying it eh? But you're the one who gave the check to the builder for the purchase price of the home, and it's from that money that they payed the buyer's agent commission. So do you really think the builder was paying it? Hopefully you answered no, I paid for it. That's right, you did.

So in the case where the builder isn't paying a buyer's agent commission, even if you have to pay it directly, it's really no different than if the builder were paying one. And most lenders will let you finance a buyer's agent commission if you had to pay it directly.

I would caution you though. If a builder isn't paying a buyer agent commission, you might ask yourself, especially in California, why is that? In almost every market that exists, builders know that realtors are involved in over 70% of the sales and that they are an important part of the equation for success.

When a builder chooses not to pay a buyer agent commission, could it be that they don't want you to have representation? Could it be that if you do have representation you might be better prepared to negotiate? That your realtor might be able to tell you something that might not be so flattering to the builder? That your realtor might be a good source to help you figure out if what the builder is trying to get you to pay for the home really is way too much?

Look at the situation with a healthy dose of skepticism.

Good luck,

1 vote
The Hagley G…, Agent, Pleasanton, CA
Sun Nov 9, 2008
The builder will usually pay the commission, and your agent will usually accept what's paid by the sure top get it in writing!
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Dorene Slavi…, Agent, Torrance, CA
Sun Nov 9, 2008
If you have an agent, and are looking at a new home, there is usually an arrangement made between your agent and the builder. The commission is often much lower then normal.
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