The Importance of Buyer Representation in New Construction

The Importance of Buyer Representation in New Construction

As published in Inman News on May 31, 2020

By John Giffen

Tom, one of my agents, had a very calm demeanor and never let anything get to him. When he called me one Saturday afternoon, he seemed pretty upset. He told me had been out of town for a few days visiting his elderly mother in Florida. Apparently, one of his active buyers wrote an offer with a builder without him knowing about it.

Tom said the builder was not paying him a selling commission, as he was not present with his buyers when they walked through the door of the model home. The onsite agent claimed he was not the “procuring cause” for the sale. Unfortunately, in this case, Tom was not the one who introduced the property to his client and initiated the offer and subsequent purchase contract with the builder.

Tom’s experience is not unique. During the years, I’ve handled similar situations involving an agent not getting paid by a builder on a new construction contract because they did not accompany the buyer when they visited the model home to write the contract. This is why it is critical real estate agents educate buyer clients at the beginning of the buyer/agent relationship, so they understand the importance of not visiting new construction sites without the agent. Unfortunately, buyers will visit and write a contract because they fall in love with the home plan the builder’s agent presents to them and want to get the deal sealed before it gets away.


What must you do to make sure this doesn’t happen to you? First, educate your client! You must explain to them the importance of having buyer representation in a new home construction. Second, you need to have a signed buyer representation agreement in place before an offer is made on a property, including new construction. Third, if you want to get paid, and you are not receiving compensation from the seller/builder, the buyer needs to understand you do not work for free. Most buyer representation forms provide pre-printed language that offers a way for you to be compensated if the seller is not offering a selling commission. If not, you will need to add compensation terms to an addendum or draft a separate commission agreement.

It could become problematic when a buyer says they did not realize they had to pay you, their buyer representative, a commission if you did not receive compensation from the seller/builder. That is why it is critical you review the buyer representation agreement in detail with them.

Don’t be afraid to go over the compensation sections. Remember, you are operating a business, and you get paid for your experience, knowledge, negotiating ability, and knowing how to manage complex real estate transactions. If they clearly understand what buyer representation is all about and the benefit it provides them, they will want you to be with them when they visit new construction home sites. They will know you “have their back” and are working in their best interest.

John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Franklin, Tennessee.  He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”

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