On April 5, 2020, The CREB published an article, interviewing Ariette, about bringing your own realtor when buying a new home directly from a builder. Read the full article here: Better bargaining: why new-build home buyers should hire a realtor.
Realtors vs sales people
You are allowed to work with your own realtor when you buy a newly built home directly from the builder. The show homes in Calgary are all staffed by sales people who are working in the best interests of the builder. Sales people in show homes are not licensed like realtors and these sales people are not bound by certain codes and ethics, like realtors are. Also, builders use their own contracts, created by the builders and their own lawyers. With these factors in mind, you should always bring your realtor when buying a home from a builder.
RECA is the governing body that creates, regulates and enforces the standards of real estate in Alberta. This same RECA always recommends you bring your own representation when you buy (or sell) any home or condo.
Builders require that your realtor is present during your first visit in their showroom
Bring your realtor on your first visit to any show home
If you enter a show home without your realtor on your first visit, you may be, essentially, waiving your right to have a realtor’s representation and help in your new home purchase. Some builders require you to sign in when you enter the show home, suggesting this is for safety reasons. But, through our experience, we have discovered that this signature may be the builder’s means of having you waive your rights to using a realtor to help you buy a home. You write your name on that piece of paper, and you have just waived your right to bring your realtor.
Written agreement with your realtor is important
When you have your own agent representing you, make sure you have a written agreement with your realtor. This agreement outlines several things, including the commissions. In most cases, builders pay a commission to your realtor (brokerage). This means there is no money directly out of your pocket, while you are protected by your own agent. Do be aware, though, that not all builders pay the full commission, and very few builders don’t pay any commission at all. Discuss the commissions upfront with your realtor and have a written agreement in place that clearly outlines these commissions. These agreements were made mandatory in July 2014, and have been required from that time to the present.
Occasionally, a builder may want to deal directly with you as a buyer , but, where you can, consult with your buying realtor behind the scenes. This is a means of ensuring you are being dealt with fairly and correctly.
Discount without a realtor?
Although we wish it were otherwise, in a show home setting, some sales people will actually take a buyer aside and tell him or her that a big discount will be given if the buyer ‘gets rid of’ his/her realtor. Obviously, this is not to be permitted, but it does happen. Several years ago, Tanja even dealt with a sales person trying to bribe her. Be aware that most builders have set prices for their homes. In the end, more often than not, you are not getting any discount. It is simply made to appear that way. Also a builder ‘throwing in’ upgraded appliances as an incentive is a common sales tactic.
Always get a home inspection done, also on brand new homes
Get your own lawyer
Some builders suggest home buyers use the builder’s lawyer at a reduced fee. Understandably, most buyers like to save some money, but we personally advise buyers to find their own lawyer. You may save a few hundred dollars upfront, but you may lose your hair when dealing with issues at closing or perhaps any defaults after possession. Purchasing your home is likely the biggest investment in your life, so it is in your best interests to have your own lawyer working for you. Don’t use a lawyer who is already ‘married’ to the builder.
Get a home inspection on a brand new home
At last, the question, should you perform a home inspection on your brand new home? Clearly,our answer is YES! Always have a home inspector come in, before waiving that condition! Builders may tell you it is necessary, but our experience tells us it is very necessary.
Selling your home with a builder may give away your motivation to sell
One more note if you need to sell your home. Some new home buyers need to sell their current home, and some home builders offer this service at a reduced commission. The danger in selling your home via a builder is that you may lose your motivation for selling. The sales staff in the show homes are not licensed realtors. Instead, builders will contract licensed realtors to take over the selling process, to list your home on the MLS. However, many realtors know exactly which realtors work for builders. Because this service is only offered if you buy a new build with the builder, it is fairly evident that you now own two homes; your brand new home, and your current home. And knowing your motivation for selling often means you are in a weaker position during negotiations. For our clients, this strategy has already worked on a several occasions. We were able to negotiate more firmly and get a better price for our clients because we knew they already purchased a home. The question is: did the money the sellers saved on commissions make up for the lower selling price of their home?
Four main pointers when buying via a sales home
The bottom line is there are four important pointers when buying a new home where you are dealing with the builder:
- Think twice before entering a show home on a sunny afternoon, without your realtor. You may waive your rights of having your own representation.
- Discuss commissions with your realtor. Make sure you know upfront which builders pay full and/or partial commissions as compensation to your realtor.
- Hire your own lawyer, one who will work in your best interests.
- And finally, always get a home inspection done, even on brand new home.
Please note: The above is general information and not considered legal advice. We do our best to write informative articles about real estate in Calgary, Alberta. If you have any questions or concerns about our comments, please feel free to contact us or speak to your legal advisor. This article was first published in 2018 and updated April 2020.