Brought to you by the Builder Relations Committee of the Sales and Marketing Council of the Northeast Florida Builders Association and Lennar
by Barbara Moore, Division President, Lennar Homes
Q: How should a builder (or site agent) respond to a Realtor who wants to negotiate a higher commission?
A: The site agent should have the commission policy available in writing for the Realtor to see. Builders develop their commission co-op percentage policies based on their business plan, competitive market conditions, and certain monthly or quarterly specific goals. I don’t think it’s a good business practice for a builder to negotiate commissions on an individual basis. In addition, most Realtors don’t want to have to negotiate commissions at every builder’s model. The builder’s commission policy should be clear and in writing, and available for everyone to understand. You never want a prospect to have to listen to a discussion about how much commission the Realtor is going to make. That puts the prospect in an uncomfortable situation.
Q: How can a Realtor protect themselves and their commission when working with a builder?
A: The “tried and true” way is for the Realtor to bring the prospect in on the first visit, register them, keep a copy of the registration, and be involved in the sale. Having said that, there are always exceptions and circumstances that require flexibility and good business sense. Some builders allow pre-registrations, particularly with Realtors with whom they have an established relationship. Others allow on-line registrations. A common circumstance is that even when a prospect is actively working with a Realtor they will sometimes visit a model home without their Realtor. In that situation, I think it’s good business for the builder to allow the Realtor to bring their prospect back in on the next visit, and register the prospect. Becoming adversarial with a Realtor and an active prospect who wants to work with the Realtor rarely results in a sale and a happy customer for a builder. Another situation is a site agent who is paid a higher commission percentage when there isn’t a Realtor. The short term approach (and short career approach) is to make an effort to cut the Realtor out of the sale whenever possible. This may result in more commissions on a sale or two, but fewer sales and less commission in the long run, never a good business plan. When dealing with this situation, Realtors need to be extremely cautious in their registrations and carefully protect themselves. Most problems regarding commissions are caused by the extremes on both sides of this issue: the builder who makes every effort to cut the Realtor out of the sale, and the Realtor who calls and demands a commission after the sale with no involvement on their part. However, most Realtors and builders are reasonable business people who understand the business and how to work well together.
Q: What should the Builder do if two Realtors bring the same prospect to the model?
A: This is truly a touchy subject, and is more common than you think! A typical scenario is this: The prospects believe that they need two Realtors to make sure they see everything. The Realtors both prequalify the prospects well, and come up with similar homes to show. Neither is aware of the situation. Both bring the buyer to the same model center or centers, unaware of the duplication. Additionally, sometimes they see a different on-site agent, who also isn’t aware they’ve been there before. The buyer doesn’t ‘fess up. Ultimately, the buyer selects one of the Realtors as their favorite, and proceeds to purchase the home. This, of course, puts everyone in a difficult situation. After much investigation, I believe the correct response is to put this situation in the two Broker’s hands. This is a Realtor to Realtor issue, not a Builder-Realtor issue. Procuring cause, as defined by the Realtors, will govern. I have always seen the Brokers work through this situation amicably and come up with a solution based on procuring cause. One of the advantages of the Association of Realtors is that they have strong and fair rules that apply to most difficult situations. Builders should respect those rules and work with the Realtors to resolve situations such as this.