You met the builder before and they gave you an estimate ... you are not a new customer. They don't believe they owe you realtor a commission and they are correct.

Why is your realtor reaching out to the builder? Because he/she wants to get paid as if they sold you a completed house. Pay the realtor for the lot and end that relationship. Go find your own builder and use a lawyer to review any building contracts before you sign them.

The builder did no follow up. The realtor brought a dead lead back to life.

Was the land bought from the builder? We had a realtor take us around to look at some houses. Not new construction. None of the houses we looked at were right for us but we did end up buying land in one of the developments the realtor took us to. Our realtor put us in touch with the developer and she did get commission for the land sale from the developer. There was no builder involved.

I doubt think there are hard and fast national rules for any of this.

But what are you wanting? Your Realtor to get 3% of your build cost? Then the builder just increases price by 3%. Take it or leave it.

I have always built with full transparency from builders including their profit and every dollar. In those instances, the Realtor cost is one of my costs. Hence, I never had a Realtor.

Think of this every time a decision is made. Every dollar the builder spends is at least a dollar out of my pocket. I see no reason why the Realtor fee be any different.

Look - times are weird. Builders call the shots more than usual. I really doubt this situation will persist much longer.

I appreciate all the responses. I spoke to the GM & he said since the realtor did not bring us to the company, they arent eligible for the commission. I dont want to deal with the builder directly, I dont trust them not to take advantage of me. Hopefully my realtor will work out a deal with me for representation. FYI, neither were involved in my purchase of the land.

A Realtor "referral fee" is the dirty little secret of the homebuilding business. A client purchases a lot and their Realtor gives them a list of builders to consider. There may be a dozen or more builders on the list. The Realtor doesn't typically disclose any fee obligation in exchange for the list (clients would likely refuse to take the list if they did.) When they choose a builder, the builder gets a call from the Realtor demanding a referral fee. What's even worse is when the client chooses a builder on their own, their Realtor finds out who it is, and tries to extract a referral fee from the builder even though they did nothing to promote the particular builder.

In my experience, the fees range from 2% to as much as 6% of the contract price of the build. For what? What was the value added in giving the client a list of builders? The fee gets passed on to the client in the form of a higher contract price for the build and it's not likely ever disclosed.

With regard to the specific case in point, the OP approached the builder prior to any Realtor referral. That's when the relationship was established. Whether the builder did any follow up is not relevant in my opinion.

OMG you don't trust the builder NOW, before you move a spoonful of earth, and you are going forward?

Wow, I'm confused by all this. You bought the land already, correct? Did your realtor get a commission when you purchased the land?

I'm sure things are done differently throughout the country, but I've never heard of a realtor extracting a commission from a builder if the build was done on land already owned by the homeowner. If this were a tract build where the builder retained ownership of the land and the homeowner purchased both the lot and completed house once the house was completed, I can understand a commission. However, as has been duly noted, those costs are/will be included in the price of the home. Either way, the homeowner is paying for it.

I don't understand the hesitation to not deal with the builder directly. I would not want the hassle of having to filter everything through a realtor and worry about things getting miscommunicated along the way. I 100% guarantee you'll end up dealing with the builder directly far more than you realize because some decisions have to be made on the spot. You'll end up regretting having the realtor involved because he/she isn't really protecting you from anything since you already own the land. It's not like you can back out of the deal.

Has the realtor perform any contractural service that is been beneficial to you?

I would trust a realtor less than a builder! But in reality if you are going to build a home you must trust the builder otherwise what are you even doing? You need to rethink if you are even in a place where you can build. The relationship starts with trust and communication not worries of being taken advantage of

I didn’t understand your point when I read your post yesterday and still don’t understand it today.

Do you WANT your realtor to get a commission? Why? (Is the realtor related to you? A good friend or neighbor?) Or are you really talking about a referral fee as discussed by Charles Ross above?

If your realtor was to get any money, you know it’s going to come out of YOUR pocket, don’t you?

It’s not a realtor’s job to act as a buffer between a builder and a landowner/homeowner. A realtor’s job is to sell real estate. Perhaps your realtor trying to do a snow job on you?

I agree with your builder. Neither of you have any obligation to this realtor. What this realtor is doing is unethical and possibly illegal.

Like any profession, there are a lot of great, ethical realtors and a few really bad ones. The instant a realtor tried to strong arm me for an undeserved commission I'd be on the phone to my state's real estate commission.

Wait.....let me see if I have this right. You don't trust the builder and don't want to have any direct communication with them throughout the build process? I wish I had a flow chart; the yes arrow would then point to a box saying, "Stop. You should not be building!"

Are you wanting your realtor to be your build representative? Because those are very different services than your typical residential realtor bring-buyer-and-seller-together services. Does this realtor have specific experience with new construction and realize that you are going to want her to have all communication with the builder throughout the build process??? My guess is that's going to be an entirely different fee structure.

We must be missing some information here.

To clarify, the builder & realtor played no role in procuring the land. This realtor primarily deals with new construction and was referred by a friend. All of my research said it's a bad idea to not have a realtor when dealing with the builder. Commission aside (I'll pay out of pocket if needed), are you all saying I should not use a realtor?

FYI, i'm under the belief that ALL builders will look to increase profit at my expense. I dont expect them to be my pal.

What type of property are you buying? What type of home are you building? All that matters in how involved a realtor is. But the realtor stops being involved once the sale is done. They don’t hand hold and they most certainly aren’t looking out for you in a build. If you think the builder will only be looking for ways to profit more you should stop now and buy a spec house ready to go.

Re your belief: Did you understand the previous responses about trust. Why do you want to deal with an industry you believe will try to increase profits at your expense.

Your beliefs will negatively affect you during this effort. You will continually ask for assurance on the internet. Is this the path you want?

I'm just running the scenario by this board. Your thoughts are just being used as an alternate view. That being said, I would be a damn fool to go into a 500k contract believing that my builder is looking out for me like we're besties. To minimize the bs, yes I prefer having representation.

This builder will not likely reverse their position. There is plenty of work out there and the agent didn't earn any commission for this transaction.

If you believe the agent brings value to the transaction, pay them yourself. (disclosure I am also a broker).

This is no longer a land purchase agreement where an agent would have some contract knowledge. It is now a construction contract where they have zero expertise and no license to practice.

You don’t get representation with a realtor though. I’m not sore what you think they do but they aren’t your bestie either!

I say this as a former realtor: few realtors have the experience with new builds to give you the protection and representation you seem to think a realtor will give you. Your contract, reviewable by a lawyer, and inspectors you hire, will be your best representation with a new build.

Do you want better representation for which you're willing to pay or do you want someone else to pay (builder) for representation that may or may not be good?

I also agree with the thinking that if you're this distrustful of a builder today, you should keep looking. We built a house from 250 miles away. It could have been a nightmare, but we had a builder that was honest and did actually care about the end product and our satisfaction.

One further thought-I'd question the ethics/morality of a realtor that came in this late in the game and wanted to get paid or was willing to go along with such a scheme.

Hire a construction/'residential' lawyer to go over the builder's contracts. Hire a construction administrator/'inspector' to review the project beforehand, and then lead you on site visits during the build. Even if the realtor is willing to charge an hourly consultation, there are much more qualified persons to handle that side of the project.

However, if you have questions regarding your selections for design with how those will translate to the current market, then you can run those by your trusted realtor, though I imagine the realtor will terminate your relationship as there is no income opportunity.

I guess I misunderstood. I thought you were referring to the land. Our realtor got commission for the land sale but had nothing to do with anything we did as far as building.

You want the realtor to represent you in a new construction build. But you want the builder to pay the realtor to represent you.

He who pays the piper calls the tune.

I can't figure out if you are hook line & sinker with this particular realtor or if you think that the typical project has any realtor holding your hand throughout a new build. If the latter, that is not their wheelhouse. If former, she must be hot.

A realtor is the wrong specialist to navigate you through a custom new build. You should be looking to hire architects and/or designers who can "represent" you during the build as well as a construction attorney to guide you through the fine print of the builder's contract. You'll certainly get more bang for your buck.

Again, I appreciate all the feedback on this topic. I must say I'm truly shocked that the theme seems to be a realtor isn't beneficial for new construction. This goes against everything I was advised. Even when I google search, the consensus is it's best to have a realtor for new construction. The friend who referred this realtor used her for his new build & how beneficial it was having her on his team.

I've had 2 new homes built for me. Both times the houses were constructed on land I owed.

In neither case did I use a realtor. I'm not getting what a realtor would do in those circumstances. It never even occurred to me to talk to a realtor. An attorney, yes - but a realtor? Nope.

I know a little bit about building homes, in fact I'm involved in building two of them right now. Never heard of hiring a real estate agent to help with a build. A designer? Yes. An attorney? Yes, to look over the agreements.

Call the references the builder provides you. Call some recent clients. Look up the builder's license, any public reviews, etc. Check on the insurance.

I can't think of much that a realtor could do to help you in a build. I'm sure one would love to be involved, though! In case it all goes to heck and you need to sell the project.

Oh, I'd like to add something I've learned, and maybe this isn't universal, but unique to my circumstances. We have a top-notch, A+ architect. He is spearheading not only the plans, but also procuring all the permits, helping us hire various engineers and and negotiate the painful permitting and prep process in a very, very restrictive location for permits and building. The people he works with are similarly top notch, and they are quite responsive too, probably because he has a working relationship with them. Sometimes we go get our own bid for the services, but so far, the bids he's procured are right in line with what we get, and he will talk to us about pros and cons of each. Maybe the architects can tell us if they perform those services, too. A realtor would be way out of their depth in these circumstances.

OP, who, exactly, are you taking advice from?

My advice comes primarily from friends, family and collegues that have built homes (tract and custom). Out of 6, only 2 didnt use a realtor for the build.

They all have stories of how the builder at some point requested more $ or other issues that were resolved by the realtor.

We've built 3 different (tract, semi-custom, and custom) houses. Not once did we use the services of a realtor beyond the purchase of the land.

G NC, your protection from the builder comes from having a well-written contract and from knowing what's in it. Period. If you need an advocate along the way to enforce the terms of your contract because the builder is operating outside of its confines and trying to get more money than they are entitled to, that's the practice of law and a realtor would not be licensed nor qualified to do that.

I have heard of builders paying a fee to a realtor ONLY in cases where the realtor is the procuring cause of a customer deciding to build WITHIN that builder's development. In other words, if you were house hunting with your realtor and they brought you to a development under construction and made the introduction between you and the builder. That's not uncommon -- some tract builders even give referral fees to homeowners who refer others to come in and build in the development.....mine did. But that's not the case here. This is your land and you are selecting a builder to build on it. That's a very different situation and NO builder is going to pay a fee to your realtor in this case.

So.... that being the case, you would be paying your realtor in this situation. Here's where it gets interesting. I would love to see the agreement the realtor would ask you to sign and what the payment terms are. Because make no mistake -- as much as the builder isn't your pal, neither is the realtor. They are there to do a job and get paid for it; same as the builder. Make sure you're very clear on what your expectations are for them to earn the full fee.....my guess is your ideas there and theirs may be very different.

To the OP: of the people who have told you they used a realtor during construction, did they already own the land on which the house was being built? And, are you in the U.S.?

OP, if you have advice from family friends colleagues, why are you on the internet asking people you do not know.

This is not a site for those looking for assurance. This site does not treat fools kindly.

I do think this site give advice and it can be harsh. But advice needs to be harsh sometimes to be effective, doesn't it.

There may be regional differences in the use of Realtors when it comes to new construction. The OP mentions a Realtor that specializes in new construction so maybe would be helpful.

In my market, the Realltor fee is often a very large unexpected fee that I spend a lot of effort avoiding. Like refusing to take calls from the Realtor we used to buy our land - because he was just trying to "give" me builder's names.

So that is the typical POV from me.

Now, I have heard of Realtor's assisting with the build process. From looking over the contract to helping you make design or other decisions that would be beneficial to resale. I have seen a lot of custom builds where a Realtor should have been involved.

Overall, you will pay for it yourself. Whether that is worth it to you, I certainly can't say.

I personally would involve a lawyer and inspector if you feel you need to. There should be some level of trust for this $500k transaction. Your builder should want to do a great job so that he gets a referral to get another one. Have you checked references on the builder?

Unfortunately, in these times, you will find that the system is somewhat imbalanced for you which is troubling but I don't think a Realtor really fixes that.

If you want advice related to new construction seek it from an attorney, a designer, and a qualified inspector, depending on the question. They will add more value and their collective fees will be less than you'll pay for a Realtor referral fee.

Thanks @David Cary ! The replies on here suggest, this is a foreign idea that is unheard of. "A realtor for new construction? Why I never!"

@User "titsonaboarhog" ? You sound weird, angry, and a danger to women and kids.

We weren't in this exact situation, but we were working with a realtor I had worked with on previous transactions to purchase a house, but then we decided on new construction. I didn't understand why our realtor wanted to schedule the meeting with a builder identified, but she did. I though to myself that she would be with us along the way to negotiate and that was not the case. After that first meeting we barely heard from her again and we worked with the builders realtor. Honestly, we had a great experience with their sales staff so that's good. But, our realtor ended up getting 3% of the land sale. Don't get me wrong, my realtor is great but she basically just sat with us for a 2 hour meeting and made a few thousand dollars. It felt like there was an "agreement" that she would back away and we would just work with the builder. So, I would just make sure you know what your realtor will be doing for you in the new build process before you agree to pay a pretty big fee off the total price.

I'm a little confused.

Your initial post said, "Am I wrong?"

The nice thing about this board is that you have ready access to wide variety of people from all across the US (and indeed even other parts of the world).

After having posted here for years, I can tell you that you are talking to highly knowledgeable people from across this country. Not me, I'm an idiot. (ha.) But you have other people here who are architects, well respected builders/GCs/skilled craftspeople, and realtors, and even a lawyer or three swing by now and then. Then throw in a smattering of people who have had homes built for them who persist in hanging out here long after the process is complete, and you have access to a pretty amazing wealth of information about..."Building a Home."

To a person, the response has been what you have proposed makes no sense to almost anyone here.

I'm honestly not sure what you were hoping to gain from this discussion. However when you're getting a nearly universal response - particularly from this board - it may be time to re-evalute your thinking.

I suspect that nothing I say will change your mind, however, a realtor for a home build is simply the wrong person for the job. Unless your realtor was formerly a builder then s/he suffers from the exact same information asymmetry problem that you do.

A realtor is not qualified to give you advice on a construction contract unless they also happen to be an attorney and I have never seen a realtor who would. In my state a realtor would lose their real estate license for looking over a construction contract. They are allowed to look over production type sales contracts but are not allowed to look at any non-sales type build. I have bought and sold personal and investment properties in several states and have never seen a state where a realtor could advise you on a construction project.

You can appoint anyone you want as an agent. However, if you want an agent to deal with a builder then hire a construction manager to advise you. When you go to your doctor's office the clerk who checks you in probably isn't a doctor, the teller at the bank probably isn't a CPA, the security guard at the mall probably isn't an attorney, and your realtor probably isn't a builder.

Realtors are good at marketing homes and themselves. I do believe realtors add value to existing home transactions, but they also add transactional friction. In a build there are two keys to success, (1) proper planning and (2) proper communication. Having a realtor stand between you and the builder listening to what you say and then relaying that to the builder is a recipe for disaster in both of those things. Of course, there will be things that the realtor can point to in demonstration of the value they provided, but the question becomes how much friction do they create in the first place? If a realtor creates ten problems and then solves eight, then they can say they saved you money. However, in reality you would have spent less and had fewer net problems without them.

I understand that you came here asking one question and ended up getting input on the basis the question was asked on, however, I urge you to consider it, as I believe your assumption is simply incorrect. Your statement about the magnitude of the risk is probably the best demonstration of the faulty reasoning you have. You would be a damn fool to go into a $500k contract believing that your realtor is looking out for you like you're besties.

It seems like there might have been a miscommunication between the builder and your realtor. It's always best to clarify these things upfront to avoid any surprises later on.

Following "Lisa Diazsbh"

What is this following thing??? @sushipup2

How does you commenting solve anything? The rest of us just get another notification of a new comment on an old post.

I do not get notifications. Ignorance is bliss.

I never get notifications either, and if I did I wouldn't bother looking. By commenting, it shows up on my "Recent Activity".

She's doing a service of getting these spam posts deleted, which I believe discourages others from doing this. She's giving the person the benefit of the doubt by providing an alert, and if she's right, she flags it and someone else flags it (sometimes me) and it goes away.