David Hakimi

Do agents steer their buyers away from “Flat-Fee” listings?

I just saw a very interesting question posted on one of the Zillow forums. It asked: “Do buyer’s agents, steer their clients away from homes that are listed with a $3000 “flat fee” commission, as opposed to a percentage based (2.8%) commission?

Here was my answer…

Let me just share this recent, true story, and I’ll leave you to draw your own conclusions on the answer to this question.

I just took over a listing that had previously been offered by Denver’s predominant “flat-fee” listing broker. The home was listed by them at $359,000 for six months, with a $3000 flat fee co-op in place. During their listing period it had 64 showings and zero offers.

I took over the listing immediately after it expired, during the slowest time of the year for home sales (between Thanksgiving and Christmas). I did some very minor staging, updated a couple of the listing photos, and INCREASED the price by $6000 to $365,000. The only marketing change of any real substance was that I offered a more typical 2.8% co-op (commission) to the other agents.

Within ONE WEEK I had two competing offers, both above asking price, from extremely strong buyers. (Because of my price increase, my seller netted the same amount he had expected to net with the flat fee listing company, even though I had to charge him a bit more to offer the 2.8%).

I’ll leave you to draw your own conclusions on the answer to this one!

Do I need an agent to buy new in Collier’s Hill or Anthem?

I’m hearing this question asked a lot lately! Surprisingly enough, a lot of buyers are under the impression that its not as important to have an agent when buying a brand-new home, as it is when you buy a re-sale from another individual. Unfortunately, that is a downright dangerous assumption. Buying a home from a builder without agent representation, is almost as risky as defending yourself in court without an attorney! I realize that a lot of people will think that statement is a bit dramatic, but they are failing to take the following facts into consideration…
In the State of Colorado, the new home builders have successfully lobbied our legislature for exemption from using the standard, Real Estate Commission approved, “Contract to Buy and Sell’.” This is important to know, because the standard contract that they are exempt from using, is extremely geared towards protecting the rights of the buyers. By circumventing the standard Colorado contract (that is mandatory when dealing with re-sales), the builders are now free to present buyers with a random contract of their choosing. These builder contracts are always drawn up by their attorneys, and are chocked full of language that enforces the rights of the builder, while giving the buyers virtually no rights whatsoever. To put this in perspective, the standard Colorado “Contract to Buy and Sell”, outlines 29 separate opportunities that a buyer has to back out of the deal, but still retain their earnest money. The last of these 29 dates, typically doesn’t occur until a 2-3 days from the defined closing date. So in other words, the standard resale contract allows a buyer to back out almost right up until the end, with no penalty. By comparison, the contracts used by the typical new home builder outline the buyer’s forfeiture of all earnest money (and/or down payment money) within 3 to 5 days of signing the initial contract. To make matters worse, this is typically a much larger amount of money when dealing with a new home. It is typical to see large builders like DR Horton. Ryland, Richmond, Meritage, Shea, Toll Brothers, and Standard Pacific Homes, require a $5000-$10,000 down payment, plus up to 50% of any upgrades (on a dirt start) required upfront, in cash. The typical builder’s contract designates that all of this money is forfeited by the buyer, after a period typically as short a 5 days past signing of the contract. Of course there may be a few exceptions to this, such as failure to obtain financing, etc., but these deadlines also fall very quickly after signing. The builders attorneys take great care, to make sure that these contracts are air tight, and leave the buyer’s with very few rights.
All of this is why it is imperative that buyers should seek representation, from a competent agent to represent their best interests, before engaging a new home builder. Granted, no agent can restructure any of this verbiage, or improve your rights under these contracts. However, a good agent will make sure that you understand 100% of what you are signing, and prevent you from entering into an agreement that you might not be able to comply with. An agent will also make sure that you have a rock-solid grasp on all of the deadlines and rights granted to you in the builder’s contract.
I personally worked with two separate buyers in 2014, that had each lost money to a builder just before hiring me as their buyer’s agent. One couple lost $10,000, and the other lady had forfeited $4000. I feel very certain that I could have prevented this, in both cases, if I had been representing them in those previous purchase transactions. The sad part was, that it wouldn’t have cost them a dime to have an agent in their corner, if they would have chosen to use one. The builders realize that most of the best qualified buyers are already working with an agent (typically the one who just helped them sell their current home), so they would be foolish not to offer a commission to agents comparable to what they would make if they represented the clients on a a re-sale. Because of this, the builders cover 100% of your agents fee. Just remember, if you intend to have an agent represent you… you must declare this from the first time you enter a the new home sales office, or tour the model homes. NEVER fill out the information card the builder’s rep hands you, without including the name of the agent you intend to use. If you fail to include the agent’s name, the builder may refuse to pay them if you return with them later to buy the home.
I specialize in representing buyers on new home transactions.

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