Builders And Realtors ® Is There A Shared Purpose

Dated: 12/17/2017

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A prospective homeowner has many options available to them when considering the purchase of their new home in South Walton County. What agents tend to focus on is existing home sales as it presents the buyer with the greatest option for seeing the completed product and what they can do to make it theirs. This also applies to builders “spec” homes where homes are substantially completed, and many times staged by designers. Both options allow real estate agents to transact a sale sooner rather than later and earn a commission typically.

In some home searches, real estate professionals have shown prospective buyers everything available and nothing quite fits the bill for a buyer. The options available then are less expedient such as:

  • Wait for more suitable inventory

  • Buy a home in a developer community

  • Build a custom home

To the real estate agent all three options left available have implications that entail greater risk of not making a sale. There more time to close usually, the less probability of making a purchase and potentially not earning a commission.

For the buyer, waiting for more suitable inventory and building a home in a developer community are not that great of a risk but postpones their purchase. In building a home, picking out finishes and maybe not being around to monitor the build is very stressful for a buyer and not an option for them. But as an upside, a new built home will be personalized to their taste and have a floor plan that meets their needs. It maybe cookie cutter or maybe not depending on the development or building options available.

However, building a custom home is a unique opportunity for both buyers and agents. Agents and buyers tend to part ways to soon in this process and shouldn’t. Buyers and many agents tend to identify a lot to purchase and part ways at the lot purchase leaving buyers the task of locating a suitable builder and then entering into a building contract on a custom-built home along with a long list of other unfamiliar but essential actions along the way.

Why does this separation of buyer and agent occur? The reasons for many disengagements at this point are because it is less structured and not realtor friendly in many cases. Builders have an established profit margin they want on each project. Buyers look at the lowest build costs and want the best deal.  Realtors are not all familiar with the process and builders tend to want to take over control. More times than not this squeezes the Realtor out of the process as the Builder does not include a commission structure in his price to the buyer and the buyer does not want to pay a commission over ride. Not being paid for their time and contributions to the process drives real estate agents to be reluctant to help buyers further with the selection process, financing options, negotiating a building contract or the monitoring of the build process.

Builders are not all one way or another either, as they are all over the board on how they engage with real estate agents and buyers. Some builders do respect and involve the role of real estate agents, others simply tolerate real estate agents, and some will flatly refuse to work with an agent. Real estate agents that have successfully navigated this process develop a rapport and have a sales commission agreement understood with those preferred builders. These preferred builders that work with real estate agents understand the importance of the front-end sales team at providing business to the builder and in turn also deliver a high-quality product that meets or exceeds the customers’ expectations. Ecstatic customers that drive referrals are what builders and agents both desire and that common ground and purpose.

It also behooves a real estate agent with clients looking for building lots to have a written representation agreement in place as buyers do tend to shop builders by driving through communities or ad hoc and random. A representation agreement is not in place to penalize the buyer but to ensure that everyone is all on the same page when it comes to expectations and focused on the result of a quality home built to a customer’s desires when it is expected.

Custom builds present a whole new array of impediments:

Lot selection in South Walton: (examples)

  • Size of lot (buildable less easements and restrictions)

  • Utilities available

  • Wetlands and environmental

  • Preservation of habitat

  • Coastal Dune Lakes

  • Flood zone

Custom Building: (Examples)
Who is financing the build, the builder or buyer?

  • Lot purchase – builder lien, builder owns, buyer owns?

  • Draftsman/architect on plans

  • Selecting finishes - does the builder have a designer or not?

  • Building plan modifications

  • Final plans

  • Bidding the home (cost rollup)

  • Negotiating the building contract

  • Construction loan financing

  • Obtaining building permits

  • Builder progress payments/draws if applicable

  • Who pays for and controls third party items like a pool

  • Changes to designs and finishes

  • Inspections and builder warranty

  • Construction delays from weather or changes

  • Interim rental housing if necessary

  • Selling another residence

  • Utilities and connections

  • Closing on the home with a new home loan

In summary, there is an active and valuable role in the process that a knowledgeable real estate agent plays in the custom home building process. Navigating the buyer through this complex process to completion of the home while acting as an intermediary with the builder is not a simple task.  Clearly the pitfalls are many and not all building contracts and services offered by builders are similar. Buyers too are simply not aware that they have choices and options available. Trained real estate agents do have a role and place in this process thereby earning the commission on a custom-built home just as they would a more traditional resale or tract built custom home. The disconnect sometimes is simply not that logical in the bigger picture. It is up to real estate agents to be fully knowledgeable of the custom-building process, align with preferred builders and fully engage to help their buyers through this process.

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Steve and Shirley Linahan

Working together as a husband/wife team is very exciting. We are able to use our individual skills as well as our combined experiences to advise our clients with their real estate needs. The key to ou....

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