Making money is important to every real estate agent; but nobody likes to talk about money.
Inquiring about how you will be getting paid for your work may be an uncomfortable issue for some agents to bring up.
When working with homebuilders, it’s important to talk to the builder’s sales staff about how you will be compensated for your role in a new home sale.
So, how do you broach the subject of compensation without coming off as pushy or tacky? In this article, we’ll give you the tools to make sure you’re creating a good relationship with builders and getting compensated in new home sales:
What is a Real Estate Agent’s Value in New Home Sales?
According to the National Association of Realtors’ 2014 National Association of Realtors Profile of Home Buyers and Sellers, 88 percent of homebuyers used a real estate agent or broker to purchase their home — that share has steadily increased from 69 percent in 2001.
So, it’s no wonder that for many builders, real estate agents play an important role in new home sales. In a 2013 Sales + Marketing Ideas magazine article, “Realtor Programs That Work,” writers Jennifer Gore and Tasha L. Jones assert that “[b]uilders who actively promote long-term Realtor relations credit 50 percent or more of their sales to Realtors.”
That’s certainly true for Arizona-based builder Maracay Homes. More than 70 percent of the builder’s sales involve a real estate agent. “We love our relationships with Realtors and the transactions that we get from agents,” says James Attwood, sales manager for Maracay Homes in Phoenix. “We know that many people who are ready and willing to buy and move forward with a home purchase are working with Realtors.”
In the same way, many builders are creating Realtor programs to incentivize agents to work with them. Aside from getting the opportunity to make a commission on a new home sale, many Realtor programs offer agents exclusive information such as current builder promotions, available inventory, sneak previews of new communities and more. The biggest incentive of these programs, however, are the bonuses offered for multiple sales.
Maracay Homes’ Realtor Reward Program, for example, starts at a 3 percent commission. That percent tiers up as an agent sell more Maracay Homes, up to 7.5 percent in one year. “We heavily incentivize Realtors who have multiple transactions for us, because we know Realtors who have brought clients in the past – there’s a level of trust there.” To be eligible, agents must register for the program.
From a buyer’s perspective, an agent helps them to navigate the buying and building process alongside the builder’s sales staff. Debbie Drummond — a Realtor with Simply Vegas since 2003 — does this by helping to check in on the building process for her buyers, making it easy to navigate and comfortable for her clients.
How Can I Ensure I Will Receive a Commission?
When you first visit a builder, be sure to ask for their policy on working with and compensating agents. This policy should outline the specifics of the builder’s program, including mutual responsibilities, timelines for compensation, how to register a buyer, rules and calculations for compensation and handling disputes, to name a few.
Also ask the builder questions to understand what you’ll be getting paid for. For example, in some cases, a builder will not pay a commission on upgrades, so that’s an important question to discuss with a sales rep. Don’t be afraid to ask for clarity on anything that might not make sense to you.
Here’s the most important thing to remember when it comes to getting paid in a new home sale: you must register your buyer with the builder at the beginning of a transaction, simple as that. If your client goes into a builder’s sales office before you take them in and register, you may not receive a commission.
Attwood says registering buyers with builders is an important step in ensuring a commission in a new home sale. “Agents need to make sure they are taking their clients to the new homes sales office and registering them,” he says. “When they register clients, they are essentially registering themselves as the Realtor for that client. If that client comes back without the Realtor and purchases a home, that Realtor is already part of that transaction and we honor that.”
Drummond agrees. “It’s very important that you establish with a builder that you have brought (the client) to them.
“In order to help establish that, I go with clients to the model home and I always have my business cards,” Drummond explains. “I make it a point to give the sales people my card, depending on how closely I think the home matches my clients’ needs.”
Drummond says she doesn’t insist on making clients register at every builder they visit – only those that the client has a genuine interest in. “You have to walk a delicate line in those cases and use your instincts,” she says.
When Will I Be Paid?
How quickly you will be paid for the sale depends on what type of home is purchased and can range from three to six months for a production home and up to a year for a custom home. If you are helping clients purchase a quick move-in home, then the timeframe will be much shorter.
“New and pre-home construction is broken into several parts,” says Andre Shambley, managing partner in Decorus Realty in Sunny Isles Beach, Fla. “The process can take anywhere from several months to more than a year, depending on the scale of the (home).”
Shambley points out that some builders typically pay half of a commission when a buyer signs a contract and makes a deposit prior to closing, so be sure to ask builders if they offer such a program.
And, when clients sign their purchase agreement with a builder, be sure that your commission is part of it and that the commission rate is what was agreed upon.
For more on when you will be paid, read our article, “When Will You Get Paid For a New Home Sale.”
How Do I Build Relationships with Builders?
Before you start going into a builder’s sales office and start registering buyers willy nilly, you should do your homework. Establish a relationship with the builder. In fact, the first time you meet with a builder’s sales staff should not be when you bring in a client.
“Take time and go look at the model homes on your own before you start bringing in clients,” Drummond says. “Be professional, give them your card and make sure your clients know that they shouldn’t go registering with a builder unless you’re with them.”
As part of your research, find out what a builder has to offer, when new communities may be opening and what other plans they have for the current community and ask other Realtors who have worked with the builder about their experience, suggests Drummond. Once you find a builder you’d like to work with, go down to their sales office.
Because she has built relationships with builders, Drummond says she’ll often call a builder before she takes clients in to let them know they’re coming. That way the builder can pre-register the clients so they can spend more time viewing homes and asking questions.
She says that it’s also important to demonstrate not only to your client, but to the builder, the value you bring into a new home sale. “I will go with (clients) into the design center,” Drummond explains. “You actually do earn the commission by helping clients keep an eye on their home while it’s being built so they’ll know that you have their best interests in mind.”
It’s OK to ask about agent commissions when you meet with a builder’s sales team. Don’t be afraid to ask them if they have an agent commission policy in writing — if they do, ask for a copy.
“If an agent is unsure about a builder’s commission policy and how they handle commission percentages, they should talk with the builder over the phone or schedule a face-to-face meeting to get clarity, confirmation and documentation,” says Anthony West, a Realtor with John Moffitt & Associates in Kansas City, Kan.
By keeping the lines of communication open with a builder’s sales team and making sure you register your buyer with builders, you’ll be well on your way to paid commissions on newly built homes.