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My wife and I will be building a home from a local builder. The process as presented by the seller seems very straightforward. They will purchase the land, design our custom floorplans, go over any upgrades we desire, then provide to us a estimate on total cost of the home. We then give 2% down as a deposit, with our name included on the construction loan. After the home is finished, the construction loan gets turned into the mortgage, and we go through closing with the title company. We have already been pre-approved by the lender.

Here's why I ask the question. I have a friend who is an agent in town. It seemed to my wife and I that we didn't need an agent, and we didn't see the need for the expenditure. We verified with the seller that if we retain a buyer's agent, they will not cover her commission, and will add it in as a line item to the cost of our home. Essentially, if we want her, we have to pay for her. This would add approximately $10k to the cost of our home.

In a nutshell...do I really need a buyer's agent when building a home? What exactly would they do for me to necessitate an added expense of $10k? Can they catch loopholes in our building contract? Would a real estate attorney, retained as needed, be a better option (no to mention significantly less expensive)?

Anyone have a similar experience?

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Yes, this makes sense for the POV of a tract home builder since they are trying to sell many homes within a compressed l... (more)

civ2k1 (Apr. 19, 2013 @ 3:55p) |

Nope, that point wasn't lost on us. We'll retain one for contract review, closing review, and any other questions we ha... (more)

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I wouldn't want to be on the construction loan. What if the builder skips town with the loan money and you have no deed, no house and no money?

With you having identified the property/builder you need a RE lawyer more than a buyers agent.

I don't see why you'd 'need' a buyers agent. She might be able to add some value by negotiating on your behalf but not $10k worth.

yes I would instead consider getting a real estate lawyer to review the paperwork.

You don't need a buyer agent at this point. There will be no value added. But you can still negotiate, ie, you can ask the seller agent to return part of the commission to you.

joeH1974 said:   I have a friend that I've known for around 15 years. She's upset that we did not retain her as a buyer's agent for building the home
What value has she said she will offer ?
And at what discounted commission percentage ? 0.5% or a flat fee ?

stanolshefski said:   I wouldn't want to be on the construction loan. What if the builder skips town with the loan money and you have no deed, no house and no money?

Either you finance it or the builder does. Guess which way it costs more?

During construction, the loan pays out AFTER the work is done. So in theory, you've always got more equity than you've paid out. Some banks insist on inspecting themselves. These events are called "draws".

I see no reason to involve a buyer's agent.

xoneinax said:   
What value has she said she will offer ?
And at what discounted commission percentage ? 0.5% or a flat fee ?


I can tell you what she'll say: "I work for you for free..."

She's upset she didn't get a commission.

dcg9381 said:   xoneinax said:   
What value has she said she will offer ?
And at what discounted commission percentage ? 0.5% or a flat fee ?


I can tell you what she'll say: "I work for you for free..."

She's upset she didn't get a commission.


Xoneinax: She wouldn't be able to take a discounted percentage. The lowest her firm will accept would be 2.5%.

What kind of street is the land being purchased on? Just wondering since it doesn't sound like a planned community.

dcg9381 said:   xoneinax said:   
What value has she said she will offer ?
And at what discounted commission percentage ? 0.5% or a flat fee ?


I can tell you what she'll say: "I work for you for free..."

She's upset she didn't get a commission.


I can choose to have my name on the construction loan or not...should I not have my name on it?

And thanks for all of the responses so far!

rufflesinc said:   What kind of street is the land being purchased on? Just wondering since it doesn't sound like a planned community.

It is indeed a already developed gated community. The first half filled up quickly during the boom. The second half is slowly being bought out as the lots are heavily discounted compared to the initial rush.

joeH1974 said:   In a nutshell...do I really need a buyer's agent when building a home? What exactly would they do for me to necessitate an added expense of $10k? Can they catch loopholes in our building contract? Would a real estate attorney, retained as needed, be a better option (no to mention significantly less expensive)?

Anyone have a similar experience?


I'd ask her:

"My understanding is that one needs a buyer's agent to help familiarize with the area and locate potential homes that meet my criteria. I'm familiar with the area and have identified the plot of land and will be designing a custom floorplan based on our needs. I'll be hiring an attorney to review the contracts (you should). What can you do for me that isn't already covered"

dcg9381 said:   stanolshefski said:   I wouldn't want to be on the construction loan. What if the builder skips town with the loan money and you have no deed, no house and no money?

Either you finance it or the builder does. Guess which way it costs more?

During construction, the loan pays out AFTER the work is done. So in theory, you've always got more equity than you've paid out. Some banks insist on inspecting themselves. These events are called "draws".

I see no reason to involve a buyer's agent.


It seems that it's a joint loan "with our name included on the construction loan". Following my rule of no joint credit ever, I'm not sure it makes sense.

Let her know it's an additional cost to you and because of how far along you guys are, it would be tough to renegotiate anything. You can say that you will make an effort to use her in the future though.

The sellers commission doesn't magically come out of thin air. Any commission paid by the seller is going to come out of the money they would be willing to reduce the price no matter what.

The "friend" is pissed that she isn't getting $10k of your money. I would seriously reconsider how good of a friend someone willing to take $10k of my money for basically nothing is.

joeH1974 said:   My wife and I will be building a home from a local builder. The process as presented by the seller seems very straightforward. They will purchase the land, design our custom floorplans, go over any upgrades we desire, then provide to us a estimate on total cost of the home. We then give 2% down as a deposit, with our name included on the construction loan. After the home is finished, the construction loan gets turned into the mortgage, and we go through closing with the title company. We have already been pre-approved by the lender.

Here's why I ask the question. I have a friend that I've known for around 15 years. She's upset that we did not retain her as a buyer's agent for building the home. It seemed to my wife and I that we didn't need one, and we didn't see the need for the expenditure. We verified with the seller that if we retain a buyer's agent, they will not cover her commission, and will add it in as a line item to the cost of our home. Essentially, if we want her, we have to pay for her. This would add approximately $10k to the cost of our home.

In a nutshell...do I really need a buyer's agent when building a home? What exactly would they do for me to necessitate an added expense of $10k? Can they catch loopholes in our building contract? Would a real estate attorney, retained as needed, be a better option (no to mention significantly less expensive)?

Anyone have a similar experience?


LOL. She is no friend!

joeH1974 said:   I have a friend that I've known for around 15 years. She's upset that we did not retain her as a buyer's agent for building the home.

Some friend.

Ask her how much she would charge you directly for her "services" and what she would provide. I want to hear how she would justify her $10K fee.

Then get a real lawyer.

If you go into a home builders office with your buyers agent on your initial visit, they will give her a % finders fee for your business.

If you are even considering bringing her in during the negotiation process, chances are they would have had enough built in profit from your deal to make up for her % anyways.

Well, I'd say that pretty much answers my question whether or not I need a buyers agent.

what you might need an agent for is to have her run a CMA of what the your house would appraise for using current sold data. Then compare price builder wants and price to homes sold and to homes available for resale. If similar resale homes are available for $50k less or if the appraisal comes in $50k less then you might be overpaying for this 'deal'. I would not hire her for this home purchase but ask her to show you similar homes if available and if she can find a better deal then hire her. let her show you home under a sellers agent agreement where you would not be paying the commission. Be upfront and tell her about the current offer you have. If she is smart she would check to see if you are over paying on you current deal and if she find that you are over paying and you are able to renegotiate for a lower price only then she might be worth $10k. Remember if the land prices have fallen so have the prices for existing homes. The agent at this point can only help you determine if you are over paying or if the house will appraise by the bank giving the mortgage.

Also how can you say you are buying this home when you do not have the final cost. After you get the final cost from the builder, are you planning to negotiate with him to improve the deal. What resourse do you have to prove to the builder to reduce his price. Also having your name on loan paper is not a good deal unless you would also be on the deed as a co-owner.I might ask her to show other homes so you have something to compare to your deal but make sure to exclude this home unless she can get it out of them.

joeH1974 said:   Well, I'd say that pretty much answers my question whether or not I need a buyers agent.

Agreed. Please hire an RE lawyer to review the contract though...as suggested many times so far. Don't pretend like you didn't read that

We were working with a realtor as our buyers agent when we found a house under construction, that was about half finished, that we loved. Our realtor turned into a life-saver for us. Our builder was swamped with other projects, didn't pay much attention when he accepted our offer, and then later regretted what he claimed was a highly unfair deal for him, so he began trying to recoup some of the lost profits to which he felt he was entitled by screwing us over on markups and extras everywhere he could. We had paid a few of the subs directly to avoid the contractor's ever-increasing markups on change orders, plus we had some urgency to move away from an increasingly neurotic and threatening neighbor living next door to our old house, so we felt that we were sufficiently committed to the new house that we couldn't just walk away from the deal or afford the time to take the contractor to court. There is no way that we could have devoted all the time necessary to negotiating out every detail that our buyers agent handled for us - we had already exhausted most of our vacation time and the added time and stress of handling everything ourselves would have been overwhelming or would have cost us many thousands of dollars. Our situation with a builder who turned out to be highly adversarial was not typical, but I can assure you that our buyer's agent did not "get a commission for doing nothing" - she put in dozens of hours on our behalf. We've got zero regrets that we had a buyer's agent. One might not be that necessary in all situations, but at a bare minimum, one should have a real estate lawyer check everything out and make sure that all the subcontractors and material suppliers have been paid and lien waivers have been recorded.

I think a good realtor could provide the protective services that lousygolfer describes above much in the same way that an RE lawyer could. The problem is finding a good realtor, especially if you have never used one before.

LordB said:   The sellers commission doesn't magically come out of thin air. Any commission paid by the seller is going to come out of the money they would be willing to reduce the price no matter what.

Normally, but not always. I have a friend that works for a large local builder and if there is a buyer agent or not it does not affect the price they are willing to accept for the property. If $150k is the lowest price they will take there is no consideration made if there is a commision that needs to be paid to the buyers agent or not. So in this case not having an agent is just letting them keep extra money. Doesn't make a lot of sense, but the larger the corporation the less things they do make sense.

vipercon said:   LordB said:   The sellers commission doesn't magically come out of thin air. Any commission paid by the seller is going to come out of the money they would be willing to reduce the price no matter what.

Normally, but not always. I have a friend that works for a large local builder and if there is a buyer agent or not it does not affect the price they are willing to accept for the property. If $150k is the lowest price they will take there is no consideration made if there is a commision that needs to be paid to the buyers agent or not. So in this case not having an agent is just letting them keep extra money. Doesn't make a lot of sense, but the larger the corporation the less things they do make sense.


Yes, this makes sense for the POV of a tract home builder since they are trying to sell many homes within a compressed location and period of time.

When a seller is just selling 1 home at a time (individual or custom/private builder), they are generally more willing to take a price reduction in lieu of no RE agent (not concerned about comps, they just want to sell that *one* house). A tract home builder has a vested interest in ensuring homes are priced at a certain level to avoid a problem with comps, thus they are less likely to reduce the sales price. That's why instead of reducing the price, tract builders would rather cover closing costs or include upgrades to the home.

nullterm said:   joeH1974 said:   Well, I'd say that pretty much answers my question whether or not I need a buyers agent.

Agreed. Please hire an RE lawyer to review the contract though...as suggested many times so far. Don't pretend like you didn't read that


Nope, that point wasn't lost on us. We'll retain one for contract review, closing review, and any other questions we have.

civ2k1 said:   vipercon said:   LordB said:   The sellers commission doesn't magically come out of thin air. Any commission paid by the seller is going to come out of the money they would be willing to reduce the price no matter what.

Normally, but not always. I have a friend that works for a large local builder and if there is a buyer agent or not it does not affect the price they are willing to accept for the property. If $150k is the lowest price they will take there is no consideration made if there is a commision that needs to be paid to the buyers agent or not. So in this case not having an agent is just letting them keep extra money. Doesn't make a lot of sense, but the larger the corporation the less things they do make sense.


Yes, this makes sense for the POV of a tract home builder since they are trying to sell many homes within a compressed location and period of time.

When a seller is just selling 1 home at a time (individual or custom/private builder), they are generally more willing to take a price reduction in lieu of no RE agent (not concerned about comps, they just want to sell that *one* house). A tract home builder has a vested interest in ensuring homes are priced at a certain level to avoid a problem with comps, thus they are less likely to reduce the sales price. That's why instead of reducing the price, tract builders would rather cover closing costs or include upgrades to the home.


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