Will Builders Start Lowering Agent Commissions?

Most haven’t, data shows, as they wait for the post-settlement dust to settle. Instead, they’re leaning into agent relationships and rethinking incentives.

Key Points:

• In a webinar hosted by the NAHB, a panel discussed the effects of the NAR settlement on new construction.
• So far, most homebuilders don’t appear to be reducing buyer agent compensation, at least not on a national level.
• But panelists advised builders to adopt these practices, if they haven’t already: Ask about buyer agreements upfront, and be transparent about agent pay.

Brokers and agents aren’t the only ones adjusting to recent industry policy changes: Builders are also figuring out how new rules impact their businesses — while leaning into their relationships with real estate agents. 

That post-settlement reality was the subject of a webinar hosted last week by the National Association of Home Builders. Along with providing advice on handling NAR’s rule changes — which include getting a signed buyer agent agreement and removing offers of compensation from MLSs — the panelists talked about what they’ve been seeing in new construction and the real estate industry overall since Aug. 17.

Commission Fees Haven’t Changed Much (So Far)

While some evidence suggests that commissions have been declining this year, that hasn’t appeared to be a big issue for agents involved in new construction transactions. Panelist Lance Lambert, co-founder of the housing research website ResiClub, provided data showing that among national publicly traded homebuilders, real estate commissions have remained about the same, with few lowering buyer agent commissions or switching to a flat-fee model.

“There’s probably some of that out there happening, but at a nationally aggregated level, nothing too significant yet,” Lambert said.

That data came out of an August homebuilder survey from John Burns Research and Consulting that Lambert also shared last month on X. When builders were asked how they expect compensation to change in light of the settlement, 85% responded with “no changes,” while just 10% reported lowering commissions and 6% said they were switching to a flat fee. But that doesn’t mean things won’t change: The report noted that “most [builders] are waiting to see how the settlement unfolds and how other builders react.” 

How Builders Are Handling Buyer Agreements

Panelists also discussed buyer agreements and how they relate to new home sales. Because an agreement needs to be signed at the beginning of the buyer-agent relationship, homebuilders should make sure their policies align with the new requirements. 

Alaina Money-Garman, founder and CEO of Garman Homes, said her company is taking a proactive approach, asking buyers — including those who come in without an agent — if they have an agreement in place as soon as they walk in the door. She believes it’s an important way to establish and maintain connections with agents.

“Those relationships that we built with Realtors have been in place for a long time,” Money-Garman said. “I didn’t think this was a time to be quiet at all.”

Buyer Agents ‘Worth Every Penny’

Part of nurturing those relationships, panelists noted, is being transparent about agent compensation. Involving all parties in the conversation ensures that everyone understands their financial obligations and can come up with a plan if there’s a gap between what the builder is willing to pay and what the buyer agreement mandates.

But that doesn’t mean builders are going to start lowballing. In discussing commission percentages and flat fees, panelists said that the local market tends to set the price, and it’s important not to alienate experienced agents by going too low.

“I think it’s worth every penny to have someone else on the team being compensated for setting good expectations and preserving the quality of the transaction for the consumer,” Money-Garman said.

What About Incentive Programs?

Some homebuilders offer VIP programs and other financial incentives to encourage agents to work with them (a tactic also commonly seen in the iBuying space). Because post-settlement rules do not allow agents to accept compensation beyond what’s listed in their buyer agreement, however, builders may need to give those programs another look.

The first step: Check your state laws, said Kimberly Mackey, founder of New Home Solutions Consulting and an NAHB leadership council member. VIP programs don’t have to involve extra commissions, Mackey said. Examples include having a point-system raffle for prizes, or providing a thank-you gift that fits with the company branding, like a bottle of wine or flowers.

The important thing is to be consistent and manage the program in a way that builds long-term trust and loyalty, Mackey emphasized. “So this is not tied just to the sale of the home, but … rewarding the right behavior to cultivate those relationships.”

Source: Real Estate News

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