The Truth Behind Builder Incentives

There was a really good question on the Yahoo Group for the upcoming Mueller Austin new home community. The poster asked a question that I hear every now and from buyers who are looking to save money when purchasing a new home. They asked if the builders give incentives if purchasers did not use agents.

MY RESPONSE:

"Builders calculate real estate agent fees into the price of the home and pay for your agent. The best builders encourage you to get representation, especially since it's "free". Standard Pacific, for instance, likes it when buyers are informed and have their own representatives because it takes the liability off them and makes the sale go more smoothly.

Unscrupulous builders try to force buyers to use their mortgage, title company, and have no agent/lawyer because you won't have anyone on your side. I've represented many new home buyers and have caught extra fees, addenda that I would not want them to sign, etc."

Here's how the rebate works for some builders:

1. The buyer rebate is actually less than what they've already budgeted for, so the builder saves money by giving you a lesser percentage back. Even better, now you have no one to represent you or you have to pay out of pocket later.

2. Another option is to "rebate" the full agent fee, but just add the cost to your loan from their mortgage or title company using junk fees. This way, the buyer feels they're saving money, but it's coming back through the companies the builder owns anyway.

Again, this is just my take from experience. Really good builders often want buyers to have representation because, otherwise, it's a lawsuit waiting to happen. In this case, the builders responded that they were not offering "incentives" and were paying agent fees for buyers regardless.

Send more questions! We can respond privately or post responses here.