I'd like your educated opinion on the implications of using brokers for pricing/negotiation when purchasing units in new constructions. Say, I am interested in purchasing a unit, which I found on my own, in a new development. I could potentially bring in my buyer's broker before making an offer. Some people have told me that I would be more successful in negotiating with the developer if I go on... [more]
I'd like your educated opinion on the implications of using brokers for pricing/negotiation when purchasing units in new constructions.
Say, I am interested in purchasing a unit, which I found on my own, in a new development. I could potentially bring in my buyer's broker before making an offer.
Some people have told me that I would be more successful in negotiating with the developer if I go on my own w/o a broker. This makes intuitive sense to me, given the commission developers must cough up to pay my broker.
But, others have told me the comlete opposite--that, unlike with resales, you have better chances of getting deeper discounts by using brokers (especially high-yielding ones) when purchasing new constructions because the developers want to establish a good relationship with your broker (so s/he can bring in other clients).
Do you have any thoughts on this? Any input would be much appreciated. Thanks!
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Response by front_porch
almost 15 years ago
Posts: 5325
Member since: Mar 2008
I'm under the impression that when a developer hires a marketing firm, they expect to pay out x number of co-broke commissions, with x being rather less than the number of apartments that they're marketing.
So I believe if you come in without a broker, there's no budget line for your commission for you to recapture.
However, it is completely impossible to know, because it is impossible to run a double-blind test.
ali r.
DG Neary Realty
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Response by ClintonBuyer
almost 15 years ago
Posts: 82
Member since: Aug 2011
Thanks, Ali, for your thoughtful response (as always). I see... It's interesting to know that the "savings" in co-brokers commission won't necessarily benefit the buyers.
Given the non-financial benefits of using a buyer's broker (e.g., disclosure issues, etc.), it sounds like it would make sense for me to make an offer through my broker.
[By the way, Ali, I know you are credible because you said what you said despite the fact that you'd indirectly benefit from just saying, "ALWAYS go with a buyer's broker!"--as a RE professional.]
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Response by douglasternyc
almost 15 years ago
Posts: 62
Member since: Sep 2009
A broker can add significant value in this situation. In this case, find a buyer's broker that has extensive experience with new developments. They know where developers will typically have some flexibilty based on the amenities, trajectory of sales and market conditions. If you can find someone who has worked on the develpors side, even better - as they have seen first hand what can and can't be done, and what to look out for. Also, if you are merely looking for a broker to help you on a transaction after you have identified the specific unit, you can likely negotiate a commission rebate, since the "hunt" has already been completed, and there is less work involved than if you were starting from scratch. However, be sure to let the seller's agent know you are working with a broker prior to putting in an offer (and ideally before you make the appt) - bringing a broker in the late stage has been known to anger some developers, even though buyers are within their right to bring in representation at any time.
Full disclosure - RealDirect offers these services. Others do too - so worth shopping around for the right representation.
Doug Perlson
RealDirect.com
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Response by ClintonBuyer
almost 15 years ago
Posts: 82
Member since: Aug 2011
Thanks, Doug, for your insightful post. You raise some interesting points and possiblities, and I will be sure to follow our advice. Thanks!
I'm under the impression that when a developer hires a marketing firm, they expect to pay out x number of co-broke commissions, with x being rather less than the number of apartments that they're marketing.
So I believe if you come in without a broker, there's no budget line for your commission for you to recapture.
However, it is completely impossible to know, because it is impossible to run a double-blind test.
ali r.
DG Neary Realty
Thanks, Ali, for your thoughtful response (as always). I see... It's interesting to know that the "savings" in co-brokers commission won't necessarily benefit the buyers.
Given the non-financial benefits of using a buyer's broker (e.g., disclosure issues, etc.), it sounds like it would make sense for me to make an offer through my broker.
[By the way, Ali, I know you are credible because you said what you said despite the fact that you'd indirectly benefit from just saying, "ALWAYS go with a buyer's broker!"--as a RE professional.]
A broker can add significant value in this situation. In this case, find a buyer's broker that has extensive experience with new developments. They know where developers will typically have some flexibilty based on the amenities, trajectory of sales and market conditions. If you can find someone who has worked on the develpors side, even better - as they have seen first hand what can and can't be done, and what to look out for. Also, if you are merely looking for a broker to help you on a transaction after you have identified the specific unit, you can likely negotiate a commission rebate, since the "hunt" has already been completed, and there is less work involved than if you were starting from scratch. However, be sure to let the seller's agent know you are working with a broker prior to putting in an offer (and ideally before you make the appt) - bringing a broker in the late stage has been known to anger some developers, even though buyers are within their right to bring in representation at any time.
Full disclosure - RealDirect offers these services. Others do too - so worth shopping around for the right representation.
Doug Perlson
RealDirect.com
Thanks, Doug, for your insightful post. You raise some interesting points and possiblities, and I will be sure to follow our advice. Thanks!