Last updated on August 26th, 2023 at 06:52 am

Quick Answer

  •  Realtors typically get paid a commission of 3-5% of the total sale price on a new construction home.
  • The commission is typically paid out of the builder's marketing budget, which is set aside to cover the cost of advertising and other promotional activities.
  • In 2019, the median commission for a real estate agent on a new construction sale was $7,500.
  • Some builders may offer incentives to realtors for bringing in buyers, such as cash bonuses or discounts on upgrades.

Buying a new home is exciting, but it can also be overwhelming at times.

One of the biggest questions that buyers have is how realtors get paid in new construction sales. 

We will answer all your queries related to realtor commissions and fees in when dealing with these new build sales.

We’ll also discuss whether a home buyer needs a realtor when buying a new build, and what factors they should consider when deciding on one.

Additionally, we will highlight some potential pitfalls of buying and how working with a realtor can help you navigate them.

Lastly, we’ll talk about the pros and cons of rebates for homebuyers, so you can make an informed decision while investing in your new home.

How does the Realtor get paid in new construction Sales

Typically, the builder pays the realtor’s commission.

The commission varies by market and can be a percentage of the sale price.

Strong relationships with home builders are a priority for realtors to secure these sales, and written agreements help outline commissions and responsibilities.

Some builders may offer incentives to realtors for bringing in buyers, such as cash bonuses or discounts on upgrades.

Realtors may also receive referral fees from builders if they refer a buyer to a particular builder or development.

Understanding Commission and Fees

Realtors must understand how they will be paid in any transaction.

In most cases, the builder pays the commission for a home sale, which is typically a percentage of the sale price.

This is typically 3% of the sale but could be more. 

Negotiation of the commission is made to ensure that the real estate agents get fairly compensated. Realtors must also confirm that their commission is added to the purchase agreement upfront.

Realtors may also receive referral fees from builders if they refer a buyer to a particular builder or development.

This way, there are no surprises when it comes time for closing costs.

How is the realtor’s commission calculated

The realtor’s commission is typically a percentage of the selling price of the property. This percentage can vary but is generally around 5% to 6%. This commission is usually split between the seller’s agent and the buyer’s agent.  But when dealing with a builder, it should be less.
Remember, commissions are negotiable. 
  • Realtors typically earn a commission of 3% of the purchase price of a  property.
  • Redfin agents can make this much money.

Where does the realtor’s commission come from

It is paid by the seller from the proceeds of the home sale.

In the case of the builder, they pay out of the proceeds they receive from the buyer. So basically the buyer pays the agent’s commission.

How often does the realtor get paid

  • A realtor is usually paid by their broker after closing. 

Do Buyers Need a real estate agent for a New House Sale

The short answers is “no”.

While it is not mandatory for buyers to have a realtor, having one represent you can be advantageous and can add value.

Remember, realtors offer expertise in the home buying process, negotiate on behalf of the buyer, and help navigate any potential issues.

There are other issues as well. Suppose a new home had issues during the inspection. The agent could negotiate on the buyers behalf!

Some buyers may think that the seller or home builder will be open to lowering the asking price if a realtor is not involved. 

The simple answer is “the buyer can ask“.

However, it is ultimately up to the buyer to decide if they want a realtor’s assistance.

Factors to Consider When Deciding on a Realtor

  • According to NAR, did you know that most realtors don’t work 40 hours per week?
  • 34% of realtors are male.

Choosing whether or not to work with a realtor is an important one, so take your time.

For example, an experienced agent can provide valuable assistance during the complicated process of purchasing properties. It can be more than simple negotiation on the price of the home.

In fact, many builders may even offer incentives or discounts if you choose to work with an agent during your transaction.

Many builders know that the buyers are more likely to buy a home in their development if a realtor accompanies them. 

Ultimately, whether or not you opt for representation during your purchase depends on your specific needs and preferences as a buyer.

What to Watch Out for When buying New Houses 

When buying new houses, stay aware of potential issues that could arise during the process. 

Make sure you research the reputation of your builder thoroughly and keep an eye out for any hidden fees or charges that could increase your overall cost.

Has the builder been sued before! That could be a red flag. 

Verify that all necessary permits and inspections have been completed before finalizing your purchase. 

Consider hiring an experienced real estate agent guide you throughout every step of your buying journey.

They don’t need experience in working with a builder to help you but it is a plus.

Don’t forget to read through all documentation carefully, including contracts and paperwork related to financing and closing costs.

Ask about warranties as well.

Ensuring Quality Construction and Materials

To ensure that you get a good deal when purchasing a new home, pay attention to several factors during the home-buying process

First and foremost is ensuring that the builder uses quality materials and follows proper construction techniques.

Since most people won’t know what these are, that is where you realtor can help.

It is also important to check the builder’s reputation by asking for references from previous buyers or researching online platforms such as Zillow or Facebook.

Moreover, inspecting the site regularly against code and plans will help identify any defects early on. 

You should ask for a detailed breakdown of all materials being used in the build process upfront to avoid unforeseen costs later on.

Lastly, consider hiring a third-party inspector who can evaluate the quality of construction before closing on your new home.

Navigating Confusing Paperwork and Contracts

To avoid confusion while buying a new home, one must navigate the paperwork and contracts carefully.

Seek legal advice if necessary and watch out for hidden fees such as homeowner association fees or builder upgrades which can add up quickly without you realizing it.

But legal advice will cost you if you have to hire an attorney.

Before signing any contract, make sure you go through the warranty and understand what it covers. 

To get better deals try negotiating terms like inclusion of appliances or closing dates with your lender or home builder’s representative.

Benefits of Working with a Realtor 

A real estate agent specialized in new construction sales can be a valuable asset for homebuyers.

From providing assistance with financing and closing costs to ensuring that everything goes smoothly during the construction process, a good realtor will always work in the buyer’s best interest.

Realtors also have access to exclusive MLS listings, insider information about local builders and floor plans, and can get buyers better deals or upgrades from builders.

Working with a realtor is usually free for homebuyers since they are paid by the home builder.

Access to MLS Listings and Insider Information

Working with a real estate agent when buying a home is always in your best interest.

One of the advantages of having a realtor by your side is their access to MLS listings and insider information. 

They have relationships with builders and have more info that you do.

The inside scoop on builder upgrades, financing options from preferred lenders or working with the right title company are just some examples of what they can offer.

A buyer’s representative can also provide valuable guidance throughout the construction process, ensuring that everything goes smoothly.

Assistance with Financing and Closing

Not only can a realtor offer expert advice on financing options and guide you through the closing process without hassle, but they can also provide valuable insights into local builders and listings that may be of interest to you.

They may know lenders who provide better interest rates on homes. Or they may know title companies that provide cheaper closing costs and can save you money.

Pros and Cons of Rebates for Homebuyers

Homebuyers may find that home builders will provide rebates that include savings and extra funds for expenses. 

Although realtors can offer rebates too,  and this can attract more clients, buyers must consider the commission and local laws before accepting them.

In states like Texas, realtors can offer a portion of their commission back to the buyer. 

Rebates are usually in the buyer’s best interest though. 

Prior research into specific rules within the area of purchase can ensure a smooth transaction with minimal issues.

By checking up on documentation beforehand, buyers save time, money, and headaches down the road.

Final Take-aways

When a realtor represents a buyer in a new construction sale, they typically earn their commission from the seller or builder rather than the buyer.

Working with a realtor can lead to several benefits, including access to insider information and assistance with financing and closing.

While buyers may be hesitant to ever pay commission fees, it’s important to understand that the builder typically covers these costs. 

When deciding on a realtor, consider their experience in all facets of real estate and their knowledge of quality construction and materials.

It’s also important to watch out for confusing paperwork and contracts.

Lastly, rebates for homebuyers can be both a pro and con, so weigh your options carefully.