Investment propertyThe Difference Between New Home Agents and Re-Sale Agents
Upon entering the model home sales office (is this really going to be
converted back to a garage someday?), you are greeted by a well-dressed,
personable sales consultant, who asks you a few basic questions and ushers you
into their first model home. You have received some appropriate literature
and have started your tour. But who is this person? Are they the same as the
agent who sold your house a few years back? How are they paid, and do they
need to have a real estate license? Who do they work for; themselves, or the
builder?
Believe it or not, these are very commonly asked questions. They can be
answered in generalities, but it must be understood that all builders pay and
hire agents differently. Usually, the agent of a new home subdivision must be
licensed in the state in which he or she sells, the same as a re-sale agent.
Some agents entering the world of new home sales have had an exposure to
residential sales, and some may have had no experience at all. Many start off
as new licensees in secondary, or support positions to learn the ropes from a
veteran agent, and this type of sales does differ significantly from other
types of real estate sales. Sales hosts, or greeters, may be unlicensed, but
are there to assist the lead agent in the distribution of brochures and
answering of very general questions. Usually, they are not permitted to quote
prices for homes or interest rates on loan programs.
Builders who hire in-house agents (employed and managed by the builder) are
usually paid a percentage of the closing revenues from each home he or she
sells, or may have participated in selling. This can range in today"s market
from .50% to over 2.5% of the total sales price, depending on whether the
builder pays a base salary, and if the subdivision is single or dual agents.
There are many variations on this theme, as I have mentioned.
In general, the compensation per closed sale can be significantly lower than
the re-sale agent"s average commission, but is (hopefully) made up in numbers.
One of the major differences between the two positions has to do with product
knowledge of the particular homes the agent sells. In new home sales, as with
other types of tangible sales, the new home consultant is expected to know
just about everything there is to know about the land, construction materials,
neighborhood, and the builder he represents. The concern here is with the
product, assisting the builder in marketing and selling its homes effectively
on the front lines. Much of our economy is affected by new housing starts;
you may hear this statistic quoted periodically in the news. New home
construction is one of the "straws that stir the soup", so to speak. But
listing the industries and lives affected by this industry would take too much
space to address here.
Another way new home consultants are employed may be by independent marketing
and consulting firms. These firms may have several builders as clients, and
have arranged to provide their builders with effective sales personnel, help
plan new communities, create advertising campaigns on their behalf, and even
furnish the model homes, so that the builder"s main focus is on building
homes, not managing the marketing and sales of them. These companies offer
services such as feasibility studies, (what product may be appropriate for a
particular area?) forward planning (assistance with land acquisition) and keep
builders apprised of the competitive market surrounding their new homes.
Salespeople in the employ of marketing firms may be moved from builder to
builder, depending on available projects, inventory, and the best
agent/builder match. Payment to agents employed by marketing firms is similar
to in-house employment compensation. There are, however, other differences
that have to do with liability issues in representation, with the builder and
marketing firm usually kept exclusive of one another.
Re-sale agents encompass a much broader base of real estate sales. They may
represent buyers seeking both new and re-sale homes, but also represent
sellers of existing homes. They must have expert knowledge of many
neighborhoods, and network with appraisers, inspectors, lenders, and other
agents in a position to participate in their livelihood. They create their
own incomes by the leads, relationships, referrals, and marketing efforts they
performs themselves. Commissions are paid almost exclusively at the close of
escrow on all their transactions. The variables involved in bringing a re-
sale transaction to its close may be much more involved than in new home
sales, and the liabilities for their actions rest with both their own agency
and their broker-managers.
Personable, ethical, well-versed real estate agents, whether they sit in the
garage of a model home, or and open house in an established neighborhood, are
usually well known in their industries in a particular area. Although their
commissions and loyalties are important to them, they usually have one
commonly outstanding trait that generates their success -- putting their
clients" interests and needs ahead of all other considerations.