Articles & Events 05/19/2011
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Watch out for New Construction
Blog Category: Real Estate Nitty Gritty
It is not only the competition of cheaper foreclosures that are hurting builders. Builders are continuing to hurt themselves by doing business in such a way as to cut out buyers’ agents, seemingly to increase builder profits and more easily manipulate buyers.
Bad news travels like the wind, and by now most agents probably know how a builder may demand the buyer’s agent pay for the buyer’s concessions out of the agent’s commission. This is one way builders shoot themselves in the foot.
Another builder policy is to immediately inform buyers that show up without an agent, that the house will cost them more if they use an “outside” agent. So most buyers use the builder’s agent, not understanding the lack of representation may cost them far more in the long run.
Builders also demand offers be written on the builder’s contract, which conveniently sidestep many buyer protections written into standard CAR contracts. Typical builder terms may include insisting the buyer use the builder’s lender, and that the buyer give the 3% earnest deposit directly to the builder, without recourse.
Considering how many builders have gone bankrupt these days, it’s hard to imagine this industry even being allowed to use these contracts, or that any sane buyer would ever agree to give money directly to a builder before the house was done.
In my opinion, Builders should revisit their business model with an eye to partnering with agents instead of pushing them away, and recognize they need to provide more buyer protections.
CJ Holmes, real estate investor since 1977, broker since 2005, and market analyst since 2007, has personally handled hundreds of transactions, viewed thousands of properties, and dealt with countless agents. She also owns a portfolio of income producing properties, and has developed unique market analyses to determine and predict price trends, which principles apply to every market nationwide. The buyer-seller motivations, the lender-bank restrictions, and the market dynamics are universal. She can be contacted at (707) 578-5727, firstname.lastname@example.org, or www.cjholmes.com