How Do Realtors Get Paid on New Construction?
When it comes to purchasing a new construction property, many people wonder how realtors get paid in these transactions. Unlike traditional home sales, where realtors typically earn a commission based on the final sale price, the payment structure for new construction is slightly different. Here’s a breakdown of how realtors are compensated in new construction deals.
1. Builder’s Commission: In most cases, the builder or developer pays a commission to the realtor representing the buyer. This commission is typically a percentage of the base price of the home, excluding any upgrades or options.
2. Co-op Commission: Sometimes, builders offer a co-op commission to realtors who bring in potential buyers. This commission is separate from the builder’s commission and is paid out of the builder’s marketing budget.
3. Buyer Representation Agreement: To ensure that the realtor is compensated for their services, buyers and realtors often sign a buyer representation agreement. This agreement outlines the realtor’s role, responsibilities, and commission structure.
4. Negotiating Commissions: In some cases, realtors may negotiate their commission with the builder. This can depend on factors such as the market conditions, the builder’s policies, and the realtor’s experience and relationship with the builder.
5. Builder’s Incentives: Realtors may also receive additional incentives from the builder, such as bonuses or higher commission rates, for selling a certain number of homes or meeting specific targets.
6. Buyer-paid Fees: While rare, there are instances where the buyer may be responsible for paying the realtor’s commission directly. This typically happens when the builder does not offer a commission or when the buyer chooses to work with a realtor not affiliated with the builder.
7. Dual Agency: In some cases, the realtor may represent both the buyer and the builder, known as dual agency. In such situations, the realtor’s commission may be negotiated differently, and it is crucial for all parties involved to understand the potential conflicts of interest.
FAQs:
Q1: How much commission do realtors usually receive on new construction?
A1: The commission can vary, but it is typically a percentage of the base price of the home, excluding upgrades or options.
Q2: Do buyers have to pay the realtor’s commission directly?
A2: It is rare, but there are instances where the buyer may be responsible for paying the commission if the builder doesn’t offer one or if the buyer chooses a non-builder affiliated realtor.
Q3: Can realtors negotiate their commission with the builder?
A3: Yes, realtors can negotiate their commission based on various factors, such as market conditions and their relationship with the builder.
Q4: Are there any additional incentives for realtors selling new construction homes?
A4: Builders may offer bonuses or higher commission rates to realtors who meet certain targets or sell a specific number of homes.
Q5: What is dual agency?
A5: Dual agency occurs when the realtor represents both the buyer and the builder. The commission structure may be negotiated differently in such cases.
Q6: How do realtors ensure their compensation when representing buyers in new construction deals?
A6: Realtors and buyers often sign a buyer representation agreement that outlines the realtor’s role, responsibilities, and commission structure.
Q7: Is the commission paid only on the base price of the home?
A7: Yes, typically, the commission is based on the base price of the home and does not include any upgrades or options chosen by the buyer.
