How to construct a safe and lucrative builder relationship

One good experience often leads to future business

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For years, real estate agents and builders have partnered to help their clients design and build the perfect home.

Recently, however, concerns that agents are not fairly compensated for their services have continued to grow: After all, managing builder-client relationships can be incredibly difficult and time-consuming if expectations are not clear and communication falls apart.

With these issues in mind, here are a few things we, as professionals, can do to improve communication between the parties and to better leverage our business relationships with builders.

Unless your client has a particular contractor in mind, you need to do your due diligence before introducing them to a builder. Take into consideration the type of home your client is looking to build, the geographical areas they are considering, and the price range that they can afford. After assessing these factors and researching builders who match those criteria (or touching base with professionals you’ve worked with in the past), I recommend presenting no more than three or four top candidates, so as not to overwhelm your clients.

Once a builder has been chosen, the meetings can be quite easy. Usually your client, the builder, the builder’s team and the agent meet to discuss the client’s needs, wants, budget and expectations. Builders may provide a form of agreement stating what they will be building, where they will be building it, and the estimated time frame and costs involved. This is an important step because it helps to set basic expectations and keep everyone on a timeline. If your client has their current home to sell, you can gauge exactly when they need to put it on the market and how aggressively to price it. If financing is the biggest issue, then you can discuss with the lender how many months in advance your client needs to put funds aside and what “new home construction” grants they might qualify to receive.

Questions to ask during this planning period include:

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  • Could weather play a role in the building schedule? For how long? When would be the ideal time to build?
  • Will your client accrue the expenses if there are mistakes on the builder’s end? If changes are made to the original plan, how will that alter the build budget?
  • If there are defects in the completed home or the appliances, will the builder provide some sort of warranty or replacement guarantee?

An agency agreement form from your brokerage office is one of the best ways to ensure compensation for your services. It lays out your obligation to your client and who is responsible for your compensation and serves as your protection from liability for issues with the builder.

If you are working with a new builder who doesn’t have an agent representing his or her side of the transaction, it is important to clearly define your relationship with your client in writing, including how the compensation will be handled, who will be paying it and the agreed-upon commission rate.

Rather than rely on the builder’s website for information about builder policies and how a specific builder handles commission percentages and payouts, talk with the builder over the phone or schedule a face-to-face meeting to get clarity, confirmation and written documentation.

Remember, a Realtor who is fortunate enough to successfully work with a builder on behalf of one client often ends up doing future business with the builder for several reasons:

1. A completed transaction shows the builder that the Realtor is capable of selling their properties.

2. If the transaction runs like clockwork with open lines of communication to all parties involved, the builder will feel more comfortable with a Realtor being involved.

3. If you sell a builder’s homes to your clients and then promote this “amazing experience” via your social media outlets, it provides the builder with extra promotion for future business and also acts as an incentive for the builder to alert you about any new homes he or she is building that may need to be sold.

Whether your clients are having their home custom-built from scratch or are looking in communities where new construction already is taking place, the knowledge and experience you gain is sure to serve you well with future clients and bring you one step closer to being your community’s expert in working with builders.

Anthony West is a real estate agent at Moffitt Realty and an entrepreneur in Kansas City.