selling New Homes
What are your responsibilities?
How do you get paid?
On February 11, 2002, Peg Ritenour,
VP of Legal Affairs for the Ohio Association of Realtors® spoke to
95 members of the Builder/Realtor® Alliance Committee (BRAC).
She explored some of the situations
and accompanying responsibilities of the Realtor® when cooperating with builders.
Builder Reps
Some builder representatives have a real estate license, are Realtor® members of the Board and are subject to the same real estate laws and Code of Ethics that you are.
However, builder reps are not required to have a real estate license. Also, a builder representative may hold a real estate license, yet not be functioning as a real estate salesperson, but as an employee of the builder. If acting as employees of the builder, they are not required to adhere to the laws of agency (i.e. complete an agency disclosure form).
Ways to work with a builder…
Referral – all you do is refer the buyer to the builder in return for a referral fee. The buyer deals
directly with the builder, you are not required to complete an agency disclosure form and you have no fiduciary duty to the buyer or seller.
Represent the buyer – In this case, an agency relationship is involved so an agency disclosure is required and you owe full fiduciary duty to the buyer.
Buyer's expectations – you need to address with the buyer. In addition to negotiating the contract and probably assisting them with financing options, do they expect you to:
• Assist them in the selection of a builder, location
• Assist them with negotiations throughout the sale – which
issues will the buyer expect you to assist with and which
issues will the buyer address directly with the builder?
• Participate in walk through(s)
• Attend closing
Builder Expectations – the same applies here…Do you bring the buyer through the model home, negotiate the contract and then show up at closing (leaving the buyer to deal directly with the builder throughout the build process)? Where does the builder expect you to participate during the entire process?
Represent the Builder (seller) – In this case, you have an agency relationship with the builder (seller), provide them with the agency disclosure form and represent them as is your fiduciary duty.
When you are working with prospective buyers, you have the same responsibilities you would as a listing broker/agent. As such, you would treat showing a model home in the same manor as showing your open house. If the prospect simply walks through the model, asks questions about features and floor plans, and/or asks for some paperwork to take home and peruse, no agency disclosure form would be required.
However, if the prospective buyer wants to discuss their ability to buy the home, their finances, prequalification, upgrades, etc., then real estate law would require that you provide them with the agency disclosure form and proper explanation.
Getting Paid for Selling New Homes
Commission on a new home LISTED in the MLS
If the property is listed in the MLS, Realtors® may assume they will be paid the listed commission amount if they were the procuring cause of the sale. If a commission dispute arises, brokers can arbitrate this through the Board.
Compensation on a new home NOT LISTED in the MLS
In many cases, new homes are not listed in the MLS and therefore, there is no obligation on the part of the builder to pay compensation to you for providing a buyer. There is no law that requires the builder to pay a Realtor® regardless of whether or not you have ‘registered your buyer' or are the procuring cause of the sale.
For this reason, you need to discuss compensation with the builder (or the builder's rep if they are so empowered). Any agreement with regard to compensation should be documented in writing. As payment is not required under these circumstances, it would be prudent for you to make sure you identify the builders expectations of you during the entire process (see above.)
If you choose not to address compensation in writing, it is the builder's call as to whether or not they will pay you a commission. In this case, your recourse, should the builder choose not to compensate you, would be to:
1. Get the buyer to pay your commission
2. Ask the builder to arbitrate or mediate the dispute
3. Sue the builder – This, of course, would be difficult unless you have a clear agreement regarding compensation and you have met all the terms to earn that payment.
The CBR provides members with a buyer registration form to help get you started on the right foot. Click here for the form (pdf version).
As a thank you, the BRAC presented Peg with a handmade stuffed teddy bear named “Agency”.
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