Buyer Beware - New Construction Sites
I wrote an article earlier today about a scammer. I can almost appreciate the creative talents of an obvious scammer like that. But when it comes to the real estate industry, I just want to puke.
I stopped into a new construction site yesterday to evaluate it for one of my clients. There are four people in the room. A guy sitting at the site plan talking to a young asian couple and a woman standing a bit on the side. I see the guy giving the “hard sell” about two and only two “available” lots. I’m standing back and looking at the site plan and I see about 50 available lots. Only two of them have “available” stickers and 6-9 have a sold sticker. So doesn’t that mean all the ones with NO sticker are “available”?
For some reason the young couple doesn’t “get” this, but I just keep my mouth shut and wait and watch. Can’t quite figure out who the woman in the room is yet. The guy tells the young couple something about how Tuesday or Wednesday is the deadline for them to get one of those two available lots. They thank him kindly and leave to think about which one they want, if they want one at all.
When they are out of earshot, I ascertain that the woman is an employee of the builder before I step up and say, “I’m here to help one of my client’s pick a lot. Where are those big electrical towers I saw when I drove up, but don’t see on the map here?” At this point point the woman gets obviously “annoyed”. I continue to ask questions about all of the good lots. The woman keeps trying to push me at the two “available” lots. I ignore her and continue to evaluate the better lots in the development.
As I’m leaving I ask about the other developments nearby. The guy knows nothing. The woman gives me the whole run down of the builders other projects.
Then they tell me that HE is the agent for the SELLER and SHE is the on-site agent for the BUYER. What a JOKE! She is obviously the closer of the two. She obviously works for the builder and knows more about the builder’s stuff than the guy posing as the “seller’s agent”. What a “Good Guy; Bad Guy” scam that is! Nauseating, isn’t it?
I have one final question. What is the commission to a Buyer’s Agent who isn’t “the builder’s hired closer/buyer’s agent”. He says “FULL COMMISSION”. I say, “What is FULL”. She says 3%. I say, what does the buyer get if they have no “Buyer’s Agent”. She says, they get ME. LOL What a hoot. I said so the buyer gets nothing if they have no agent? No price reduction? No upgrades? No something for the builder not having to pay an extra $21,000?? Nope. Nada. Not an option. I ask if the buyer had lost the opportunity to have an agent if they had “signed in” already. They said no. Great News!
So I leave, I go to my client to evaluate the property they will be selling. I tell them there’s an extra $21,000 on the table for us to include and negotiate, if they buy that new construction (which they had asked me about), or even if they buy a different property. My fee will be less if they buy the new construction, of course, because they were the ones who asked me to go there in the first place to check it out. Well, no. They just said they were thinking of buying in there before I even met them, and didn’t ask me to check it out.
So by poking my head into the New Construction site, even though they hadn’t asked me to, I found an extra $21,000 that would have been left on the table. Turned out they will not likely buy there, at least not before considering other options. My gut says if the builder is willing to pay 3% to an agent, even though the agent wasn’t with them when the buyer first went in to the new home sales office, there’s probably something wrong with the place.
Every not lot sold in a new construction site is available. Maybe not today. Maybe they WANT to sell two at a time because it squeezes the buyer more into making a quick decision. But if it Ain’t SOLD…I’ts AVAILABLE, regardless of the little stickers. No sticker equals available.
Posted: February 11th, 2007 under General Real Estate.
Tags: construction, new, real-estate
About the Author: Ardell DellaLoggia
- Author's website: http://www.SearchingSeattleblog.com
- More posts by ARDELL
- Email the author
Comments
2.
Comment
from ARDELL
Time February 11, 2007 at 7:06 pm
As for buyers, I think if the builder is willing to pay an agent 3% then the 3% should be on the table. I feel the same way about listed resale property. If it’s in the price, it’s in the price.
Do you think people use agents now because they somehow “have to” and given the option they wouldn’t? Maybe. But I still think they should have the option. and the fee should be negotiated between the agent and the buyer and not the builder or seller’s profit if they don’t have an agent. Maybe not all of it, but most builders offer something extra.
At least a buyer will know by reading this that they lose something by not have an agent, in some new construction sites. By providing an on side “buyer’s agent”, they didn’t give the buyer a choice. But is a “buyer’s agent” supposed to be a “closer” who doesn’t compare all options in the marketplace? I don’t think so.
4.
Comment
from sandy
Time February 11, 2007 at 8:39 pm
ardell, where is this new construction? which city and which general location?
5.
Comment
from shane
Time February 11, 2007 at 10:03 pm
Ardell,
Wow you are bringing up a lot of things in this problem just from my reading here, first is agency, second is offering the general consumer based on equal basis, disclosure and consumer rights. What really bothers me is the possibility of steering.
In Michigan it is allowed for an employee of the builder to sell real estate with out being a licensed real estate agent, however they still must adhere to Federal Fair Housing Laws. Also there is some slight difference in disclosure and agency. I am not sure how it works in Washington State.
I do know that the sale of real estate residential property shares a common area with commercial business practice and that is all business relationships do not have to be treated on a fair playing field when making or accepting an offer or pricing/payment fees for a product or service. In other words as a business I can charge each of my customers different prices for the same service or goods.
Builders are a business and as such can offer different terms on an offer. The question is are they offering different terms based on what terms. Unlike a store with product on a shelf for the general consumer to pay all the same price at the same time, a builder does not have to offer the 3% to each buyer. I would if I was the builder just to make sure that I was not accused of offering only to a certain customer because housing is different then general store stock, if you understand what I am saying. Is it required for builders to be that way in Washington State?
As a builder developer who owns property, as part of the bundle of rights they have the right to sell or not to offer for sell as all property owners do in most cases. Is unavailable the same as “not offered for sale”?
What bothers me is that in a normal residential sale the same owner does not own the competing properties and therefore the market encourages an open and at arm’s length transaction with out the risk of steering. In other words, because I the seller do not own the rest of the properties in the neighborhood I cannot dictate who ends up buying for one reason or another and received a price that the market was willing to pay.
As a builder developer who owns property as a whole with in a development and is not honestly disclosing that all properties are in fact for sale what is the motive at hand, no one knows for sure and at the same time to be honest. By listing only a couple of properties as available as a single property owner I would guess that they are exposing themselves to a lot of potential liability.
If they want to sell one lot over the other that bad then they need to offer a large discount as an incentive to the whole of consumers. Or they need to charge a higher price based on something that make the other “unavailable” lots worth more. But still show all lots that are actually still available for sale or as above not offered for sale.
I would almost be tempted to ask if they hold transfer papers or deeds showing that the other lots are no longer available. If they did not want to present them I would refer them to HUD.
I only hope that all buyers ask the any and all agents Who do you really work for in this deal?
6.
Comment
from ARDELL
Time February 11, 2007 at 10:27 pm
Shane,
I really don’t have a clue what you are talking about. How does only offering two lots of many involve steering and HUD? That’s a stretch.
7.
Comment
from sandy
Time February 11, 2007 at 10:29 pm
I am just wondering if the houses are not on the table because the city hasnt as yet issued permits for them and approved plans? I know of one builder who releases lots in small numbers and has been building many homes in redmond now in the education hill area. True, this does totally squeeze buyers. I would be interested to learn a couple of things: 1. location of the electrical towers in relation to the lots currently on sale from your observation. this can have serious health ramifications as far as I know from my reading. 2. Which city this is located in: redmond? 
then i can almost guess who the seller is 
8.
Comment
from shane
Time February 11, 2007 at 10:32 pm
Ardell,
I am sorry I misunderstood, as only two lots being marked as available only and the rest not marked as sold but still not sold.
9.
Comment
from ARDELL
Time February 11, 2007 at 10:34 pm
Sandy,
I am rather bold in revealing what consumers should beware of in the market place, but I’m sure you can appreciate that I can’t point directly at which development I was in. New construction “close in” is not all that abundant, especially those with lots of lots available. I basically work both sides of the 520 bridge and around the North end of the Lake and over to Lake Sammamish on the Bellevue side.
I will be checking out more of the new construction in that area. My guess is if they have a Buyer’s Agent and a Seller’s Agent in the room, they are probably doing the same thing. Maybe someone should ask the buyer’s agent if they can show other property that isn’t that builder’s. That would be a clue that they are not really a “Buyer’s Agent”, if they can’t show comparison properties that do not belong to that builder.
When did “Buyer’s Agent” become a meaningless label?
10.
Comment
from sandy
Time February 11, 2007 at 10:37 pm
I understand Ardell. Thanks for the posting. I agree completely that this is really ridiculous.
11.
Comment
from ARDELL
Time February 11, 2007 at 10:38 pm
Shane,
Correct. Steering is something else entirely. But I think I know where you are getting at. Like someone who knows someone might be able to get one of the better lots, as my client would as I pressed further, but those who walk in off the street are compelled to buy only the two with available tags. Kind of sticking the unrepresented buyers with the worst lots. Is that what you mean?
12.
Comment
from ARDELL
Time February 11, 2007 at 10:45 pm
Sandy,
My biggest concern with the towers is the “Eiffel Tower House”. On resale when there’s an mls photo with the “Eiffel Tower” in the back of the house, it is almost impossible to sell. The biggest problem with new construction is the best lots are great, but the worst lots do not discount as severely as buyers of resale will discount them when they try to sell a poor location.
We talk a lot about who is going to lose money if the market goes flat or down. The person buying new construction without paying attention to resale value of the home, are the ones who always get hit the hardest. People will buy new almost anywhere. But they forget when they go to sell it…it won’t be new anymore. Just a house in a bad location.
P.S. I know you are a good guesser
13.
Comment
from sandy
Time February 11, 2007 at 10:51 pm
Ardell, well said. I find your posts extremely useful in terms of content and refreshing in terms of how candid they are.
Absolutely I hear you regarding the power towers. Thats is an absolute no-no regardless of how close it is to the “zone” or how in the “zone” it is. It has some serious health effects.
14.
Comment
from shane
Time February 11, 2007 at 11:02 pm
Ardell,
Yes, Sticking… that is what I ment should they have walked off the street. I liked what you were saying about “Good Agent” and “Bad Agent”, something not right there.
15.
Comment
from James Hsu
Time February 11, 2007 at 11:03 pm
Okay, …I’ve worked at a couple new construction sites as the “buyer’s agent” before and my experience was vastly different than what you described here.
A few things from your description that I do find odd as well…. The guy claimed to be the agent for the seller (aka the builder) and the lady was the “buyer’s agent.” In my experience, the listing agent (in this scenario the guy) does not hang out and work the floor. As the listing agent, he should be the most knowledgeable person in the room of the competition around them. Maybe he didn’t want to tell you of other places which would be more places for you to direct potential clients and that’s why he acted dumb. Poor business practice in my opinion. Something you’d do if you didn’t believe in your product vs the competition.
Now, …as the on-site buyer’s agent. In my personal experience and the experiences I’ve heard from other agents who’ve done this… the whole purpose of it is to try and capture the people who come in without an agent. In my circumstance, I was not paid for my time there. Other situations, the agents may get paid a nominal door fee for each house that sells regardless of who the selling agent is …kinda as a thank-you for being there…(this door fee could be anything like a hundred bucks or more…nothing you could live off of). My particular situation..there was no door fee. Buyer walks in off the street without an agent, …if they were interested in buying and I was able to represent them in the deal…I’d get the SOC. There are times where it is beneficial (if you aren’t represented) to use an on-site agent vs going out and finding another agent. The on-site buyer’s agent *should* be more knowledeable about the homes, knows the ins and outs of the builder and have built up working relationship with the builder and thus they would bend a little more for you. Other times, the on-site agent is just there on a whims notice and knows nothing about the homes. But… …again … at least in my situation…. just cause the buyer is unrepresented, doesn’t mean all of a sudden now there’s 3% available to the buyer. If the on-site buyer’s agent was a paid employee of the builder, ..then there’s a conflict of interest since the on-site buyer’s agent cannot work for the buyer to the buyer’s best interest. …so I’m assuming that most agents that call themselves the on-site buyer’s agent…is not an employee of the seller/builder. They may be from the same agency of the listing agent, but they should still each be representing their side. Now if the buyer who comes in without an agent …doesn’t want to be represented, …builder may require them to use the on-site agent. Builder/listing agent may not want to work with a solo buyer. It will be difficult enough to work with a ton of different …hopefully professional agents …let alone a solo-buyer who will potentially need a lot of hand holding. In that situation, then it’s between the on-site buyer’s agent and the buyer to negotiate any rebates.
Ok…the guest registry. Most new construction sites will have a registration policy. This is designed mostly to protect the on-site buyer’s agent. Here’s the situation. Buyer walks in off the street. On-site agent shows them all the different models, talks through the upgrades and lot choices, etc. Buyer leaves, comes back with spouse to look through everything again. Leaves..comes back again however many times. Buyer finally decides he likes what he sees…leaves, writes the deal with some other agent. Now, ..the most-likely-unpaid-buyer’s agent showed the homes, …basically sold them the home, and another agent gets to collect the SOC. That’s bad business as the builder who depends on these site-agents to staff the site. Registration policies are all similar, ..it’s some variation of the point that if the agent writing up the deal wasn’t involved in showing the house at some defined point in the early goings (sometimes sites will allow an unaccompanied first visit), then the commission to that agent is drastically reduced. I’ve seen it typically down to 1% but i’ve seen it as low as …i think 0.25%. (might have only been 0.5%), but anyway, you get my point. The balance would be paid to the on-site agent. You are incorrect in that the buyer doesn’t have a choice if there’s an on-site agent. An agent can register their client in person or over the phone or the buyer can register their own agent when they’re there. That was the majority of the case. I’d be happy to still help show the homes, but if the buyer keeps coming back day after day with questions and showings, …I do have to draw a line somewhere and recommend they have the agent they registered come with them.
The part about only showing two lots available when a bunch of other lots have no sticker showing sold or available. This is called a phased release. Phases could be big chunks of a dozen lots or small like a lot or two. For a $700k house, ..my guess is the phases aren’t too big since it’s not common to crank through $700k houses. It’s ..in my opinion…a builder tactic to control the development. The incentive to buy early in a development is usually they are priced lower. The side-effect is…you may not get the best choice of lots. Trade-off. Buy lower price and get so-so lots…. or buyer later at higher price and take a shot at a better lot. In my experience…builder didn’t even have permits yet for the “unavailable” lots …often didn’t even know what floorplan was going to go on there. I was given a one week heads-up in the development i was at of just where the next phase was gonna be. So… don’t know about Ardell’s situation, quite possibly the whole thing is shady like she described (i’m still scratching my head at how dumb the seller/builder’s agent acted), but usually ….there is a reason for the builder’s insanity. Oh… another reason for a phased release is money. Builder can only build X number of homes at a time and get them sold before bank will lend them more money to build the others. The big big builders..this isn’t a problem …some smaller builders or newer builders ..this is definitely the case. To some extent, ….yes….no stickers means it’s available…but to be more precise…it means it WILL be available. ..just not right now.
Lastly, … the on-site buyer’s agent is trying to sell people a house in the development. If the homes there aren’t what the buyer wants, and if the buyer really is unrepresented…now you have a lead ..and the secondary goal is to see if they’d still work with you…afterall, you are still an independent agent. ….So I disagree with your statement that by providing an on-site buyer’s agent, they didn’t give the buyer a choice. Buyer always has a choice…just have to follow a simple procedure of registering who you’re working with.
So how do you avoid the supposed situation that Ardell ran into. Easy, …with any new construction development …1) ask about the site’s registration policy and follow it. 2) ask the person staffing the site who are they representing. A builder may have a listing agent that staffs their own site..this would be likened to a listing agent hosting an open house for their own listing. 3) if you have an agent, let them know ..no need to be shy about it. If the on-site agent pressures you to use them, (which is just sleazy practice in my opinion), ..stay your ground. or if you want to avoid any awkwardness, schedule a time with your agent to go look.
I had 9 clients that bought new construction last year and I previewed and/or showed at least a dozen more and none of them were as you described. All the sales staff…whomever they represented…were all very professional and very happy to work with me. Likewise, when I was working a site, I’d be just as professional with agents coming in. Although, I’d be a little bit put off if the first thing out of your mouth was a veiled accusation that we’re trying to hide the power lines since they aren’t on the map. I didn’t make the map. Sorry, maybe I’m reading your telling of the exchange in the wrong way. But, …however you asked it…as the site-agent..I am representing the development and thus should remain professional at all times.
16.
Comment
from ARDELL
Time February 11, 2007 at 11:04 pm
People like new, Sandy. And the only place there is land is somewhere that no one wanted to live before, like under the electrical easement.
There are many studies that say this is safe depending on what type of lines they are. Some give you reports that say living there is like sitting too close to the TV Hey, cell phones were supposed to kill us off long ago.
I worry more about the resale value. But people will buy a new house just about anywhere.
17.
Comment
from James Hsu
Time February 11, 2007 at 11:08 pm
dang! ..10 posts popped up from when i started my post and when i finished it…
Ardell…your “check” to see who the on-site buyer’s agent really is representing is perfect. If they are employed by the seller/builder, then they cannot / should not be calling themselves the buyer’s agent.
18.
Comment
from ARDELL
Time February 11, 2007 at 11:08 pm
What seemed odd James, is that the young couple in the room were talking to the guy when I walked in, and the woman was off in a side office. If she was a “buyer’s agent” and he was the “seller’s agent”, why was he doing all the taking when I walked in? I think she is the closer and because she writes the contract, she calls herself a “buyer’s agent” and steps in when it is time to write the contract.
19.
Comment
from sandy
Time February 11, 2007 at 11:26 pm
Question is are there older homes near this electrical easement or lines or towers? Or is this tower/lines etc bang in the middle of the new construction.True though new is attractive, even to me. This is because many of the resale homes are very old, some times shoddily upgraded too with a high asking tag. Now that is bad……
20.
Comment
from James Hsu
Time February 11, 2007 at 11:37 pm
Ardell, yah in that scenario, …would seem as you said, the other person as the closer. What I wanted to point out is …from my exposure in previously working new construction and representing buyers of new construction …what you ran into is (hopefully) the minority. …althouuugh, i haven’t walked into a new construction sales office as a buyer yet. Perhaps they don’t pull that scheme cause i’m either with my buyer or I introduce myself as an agent right off the bat. Hmm..very curious, ..maybe time to send in some “undercover” buyers to see how prevelant this practice is. I know at least 4 builders in Snohomish county that does NOT practice that kind of sales tactics.
21.
Comment
from Alan
Time February 11, 2007 at 11:55 pm
I have heard that some developers offer “buyer’s remorse” clauses where the buyers get a refund of any price changes in an equivalent house over a period of time. I’ve only read about these in news articles and I do not know if they actually exist.
If a developer is offering these clauses (because it makes the decision to buy easier) then they have a very strong incentive not to negotiate away $21k because then they have to pay that $21k to all of their other previous customers.
Instead they offer “free upgrades” or “new cars” for the same price of the rest of the houses in the development.
22.
Comment
from EconE
Time February 12, 2007 at 12:01 am
I’ll stay out of the commission part of it and focus on something else.
This builder is trying to artificially control supply and demand. In a way…he is acting as a mini-cartel. Think about diamonds. The only reason they are so expensive is that there is a controlled supply. DeBeers is quite powerful and basically are a cartel in a way. There have been many instances throughout recent history where both Australia and Russia threatened to flood the world with diamonds…DeBeers put a stop to that from what I understand.
So…basically…you don’t have a choice…if you want a diamond…you are going to pay through the nose for it…there are no alternatives. (don’t bring up CZ…lol)
In this case however…there are different builders…and different lots.
It seems similar with some of the Downtown condominiums also.
23.
Comment
from sandy
Time February 12, 2007 at 12:04 am
some of it may be due to the city regulating the approvals of plans etc like james outlines. but yeah builders arent saint
24.
Comment
from shane
Time February 12, 2007 at 12:29 am
James - Post 15
Thank you because I found your post to be educational and full of possibility that I did not think about. I was thinking on a bigger builder scale and did not even think about phases. I will make a mental note of that for future reference. I agree with your views on agency and disclosure.
Hats of to Ardell for this learning experience!
25.
Comment
from EconE
Time February 12, 2007 at 1:29 am
one quick question about a quote from James - Post 15
“The incentive to buy early in a development is usually they are priced lower. The side-effect is…you may not get the best choice of lots. Trade-off. Buy lower price and get so-so lots…. or buyer later at higher price and take a shot at a better lot.”
How long could this person potentially sit there in a lone house before others are built….and during this time even after another house or two is built…how would this affect resale value if the person needed to relocate and by this time there were only two or three houses on the land? It would seem like a ghost town to me.
26.
Comment
from ARDELL
Time February 12, 2007 at 8:25 am
I remember my cousins Terry and Terry (Terrence married Teresa) bought one of the first houses of a large new development year’s ago. Their biggest inconvenience was going to the post office to get their mail. It was a very, very long time before a mail carrier would begin delivery into the new housing complex.
27.
Pingback
from Is Freakonomics Right for the Wrong Reasons? | Rain City Guide | A Seattle Real Estate Blog…
Time February 12, 2007 at 9:47 am
[...] But then when the Freakonomics boys tried to ascertain why that is, they went into some sideways mode of properties for sale, time on market, etc… Take the article I wrote yesterday as an example. Do you think an agent would fall for the tactics of the builder, and buy his worst lot because it was “the only one” for sale today? Hell no. [...]
28.
Comment
from James Hsu
Time February 12, 2007 at 6:28 pm
EconE,
How long could the first buyers be alone in the deveopment before other homes are sold and occupied …I think it depends on the builder and their ability/desire to get the homes built and sold.
The factors that I’m aware of that would drive the builder to build out at a steady pace is holding costs …not only of the land, but also of their sub contractors. I have no clue how agreements between builder and their subs are written, but if the builder has to go idle for whatever reason (waiting for permits or curing problems with the city) …then I imagine they’re still paying for the subs..regardless if they’re doing work. So it’s in the best interest for the builder to keep a steady pace of construction. If this isn’t the case with the subs, ..they’re still paying interest on the unimproved lots.
The flip-side to this is…if they build out too fast and flood the market with too many new homes (a concern of mine up here in south snohomish county) then the builder has got not only holding costs of the land, but now they’re paying interest on the homes themselves. It’s a game of balance for each builder …balance between how fast they want to build and how fast they think they can sell.
The early phases of a development is usually testing the market. Release a handful …good idea to mix in the good lots with the average lots (or they’ll throw in a thing called lot premiums) …at a price and see how they do. If they sell too fast …. raise prices. Like you said in one of your posts …builder’s trying to create a mini-cartel. If you’ve got a highly desirable development, you can keep turning the price dial up gradually.
Now…it can backfire and this is where the buyer and hopefully the buyer’s agent needs to make an educated purchase decision. Two developments about a mile apart from each other came onto the market last year at basically the same time. Both developments had similar homes. Both off of major streets, Plat A was next to more commerical/multi-family areas while Plat B was closer to other residential. Plat A came on market probably average $30k more than they should have. Plat B came on maybe $10k under where they should have. Plat A floundered and prices fell. In that situation, any early buyers just got screwed. Poor decision…especially with a very similar development so close at a lower price. So…don’t take my …buy early in the development for the lowest price statement as law …you still have to be smart about it.
As for your question about reselling while the development is still slowly being built out. It depends. From a buyer’s perspective…let’s say the builder now has 5 other lots available and your house just came on the market. You most likely can’t price yourself at the builder’s current price…for one..you have a house that’s been lived in, whether or not the builder’s warranty is trasnferable becomes a question cause all the other homes will … most likely..have some sort of warranty ..will yours? and the fact the new homes are …well…new and yours is used ..maybe just for 6 months but it’s still not the same as brand spankin new. …so if prices haven’t climbed much since when you bough it, …i can imagine it definitely negatively impacting what you can sell yours for. I know of someone who bought a house in a high-end new construction development (lesson on how NOT to flip homes) and put it on the market for $50k more than when they bought it …right after they closed on it. Sat for I think 6 months till their $50k premium was whittled down to only a $15k premium …it was barely enough to cover just the excise tax ..let alone the 3% SOC they were paying plus whatever the listing agent was gonna get. Their problem, ..they purposely tried to create the situation you described EconE. They bought early and then wanted to sell while the builder still had a bunch of unbuilt or in-progress lots. Now…why would anyone in their right mind pick a resale that is obvious someone is trying to flip over something that is priced the same or maybe even lower (depending on any buyer bonuses the builder might have) but new. So it sat and sat and they ended up taking it off the market…selling the house they lived in at the time and moving into the house they tried to flip…and then having to underprice the house they lived in just to sell it quick …I guesss 6 months of double payments took a toll.
As for the mail issue ….in my development I was #3 or 4 to move in of 50+ homes and our mail was being delivered right away. ..just had to pick up the keys from the post office. In fact…I haven’t heard of any of my clients having to go to the post office to get mail..but then again…none of the developments were bigger than like…40 or 50 homes… so I don’t about some of those 100+ communities.
29.
Comment
from Amit C
Time February 14, 2007 at 7:05 pm
Interesting information for most buyers.
If I would guess which property it is from the clues of other being available and 8-9 sold, I would think Camwest’s Tyler Creek in Redmond.
30.
Comment
from Marc Brinitzer
Time February 15, 2007 at 7:18 am
I haven’t seen builder-paid buyer’s agents here in Sacramento, and that sounds like scammy, used car sales tactics to me.
On the other hand Ardell, in a slow market a builder isn’t going to build all of their lots at once. There isn’t much that’s worse for builders than standing inventory. So they (at the least the privately held companies) will slow the pace of building to minimize standing inventory. Some lots will be more desirable than others, and if I were the builder, I’d sure mix in the dogs with the good lots and try to control supply and demand to create urgency.
EconE, you can’t blame them for that. Just wait to buy that diamond. If consumers could keep their pants on and wait, demand would fall and prices will be reduced to stimulate sales. That’s what happened here with the market slowdown. Otherwise, shop around. There is always a builder more motivated to move homes. If you have to have it now, you pay the price.
One other thought on registration, just to play devil’s advocate. The builders in our area require registration on the client’s first visit in order to avoid the scenario where a buyer plugs in a friend or family member late in the game for an unearned commission. Even when the agents are good, they have little to do given the way builders price. They have an annoying (to the builder) tendency to look busy and justify their commissions by stirring sh*t up during the transaction, ultimately creating an unhappy client for the builder. Would you want to pay a commission for that?
31.
Comment
from ARDELL
Time February 15, 2007 at 11:18 am
Marc,
Since CA is not a “Designated Agency” State, you wouldn’t see that there. It can be used effectively, but only if the “builder paid Buyer Agent” is free to promote any property on market equally with the builder’s product, and even recommend that the buyer NOT buy the builder’s product. That’s where the concept fails, if the Buyer Agent is not free to do that.
But in the end it becomes a “Buyer Agent” like Redfin, where the Buyer Agent doesn’t necessarily discuss IF the buyer should buy it in the first place. So it may be “of value”, but not a 3% value to the buyer.
I totally agree with you on the builder part in your Par 2, what I don’t get is why a consumer looking at a 50 lot site plan, who is not in a hurry, doesn’t seem to see more than 2 available lots. I just say, well I want one of these five that are not available, and stop in often and wait until one of the better ones can be had…which is someday…just not today. I don’t question the builder’s tactics, I’ve been around the block and know how that goes. I question a consumer not understanding that “as tactic”.
As to “there’s always another builder to…”, not really. Limited close in “land” issues. If there were plenty of land to build on, yes. But Seattle Area, both in Seattle and in “the Zone” near Microsoft…no real vacant land to speak of. No “builder after builder” scenarios like further out in Monroe and Sultan and some other further out areas.
On your last paragraph, the buyer is paying the commission, not the builder or seller (new mindset) so yes, the buyer WOULD want to pay a commission for THAT. The seller does not get to pick the buyer’s agent, nor does the seller get to have the buyer’s agent do what the seller would want a buyer agent to do. Otherwise, how can you call that person “a buyer’s agent”.
The system as it exists now wants to rationalize that a “Buyer’s Agent” exists for the seller’s benefit and is paid by the seller. That has to stop. It makes no sense at all, and never did. The Buyer Agent Fee in the price is the fee for buyer representation. The Seller can take it out of the price and sell to buyer direct at 3% less, or let the buyer use it for a buyer’s agent of buyer’s choosing. But calling someone hooked up with the builder that buyer’s agent, is deceiving, unless that agent is free to say “don’t buy this builder’s house”, which would be a difficult position for that agent to be in, if they are hired by the builder to be in that space.
1. Comment from Brian Brady
Time February 11, 2007 at 5:17 pm
Ardell,
I completely agree with you on this. Allow me to compare real estate brokerage to securities brokerage. Elliot Spitzer made securities firms disclose their interests in a particular offering (which reflected their bias). That didn’t make the offering any less attractive (or unattractive), it just made the bias transparent.
Don’t you think that ought to be disclosed in this case? Perhpas the builder should disclose that they offer a 3% fee to a licensed agent or will add it on to the incentive package. They should further disclsoe that they have no fiduciary resposnibility to the buyer; they are just representing the seller as their exclusive agent.
What do you think the result might be? Would people use agents? If they opted against the agent, would they in essensc proceed as a “truly informed consumer”?