That’s right. You’re not actually always free to choose whoever you want to represent you in real estate.
Sometimes, our industry’s law chooses for you.
(I know, we don’t like it either sometimes.)
Unsuspecting buyers fall under this rule all. the. time. at show homes.
Here’s how it works:
The MOMENT you cross the threshold of a New Construction Show Home or Condo Display Suite and say any word at all to the host or real estate agent, they literally own you. Even if you’re already working with an agent!
Well, okay, they don’t own YOU. The only way they can’t lay claim to you is if they are accompanied – in person, at that moment – with your own agent who must then register you and themselves.
Why it’s dangerous:
Every show home or display suite host or real estate agent standing in a builder or developers property– represent the builder. THAT’S who they’re contractually responsible to. THAT’S whose interests they’re looking out for. They’ll show the colors, options, and features, and even help you buy whichever of their homes you’d like, but the contracts are all being written by someone who is not loyal to you, the buyer. You are unprotected, unrepresented, and essentially on your own.
Why can’t my agent help me anyway?
It is due to the new construction industries way of operating called "Threshold Rights". In this segment of the industry the builders retain their representatives and unless you are physically accompanied by your own agent, as soon as you enter the property your own agent will not be involved in the transaction.
Whether you or your agent likes this or not, it is the reality of the new home/condo market. Understandably, the builder/developers spend time and money in marketing their builds but the key take-away here is they are marketing their inventory whereas you in having your own agent representing you and your best interests is focused on helping you navigate the array of options out there and providing their expertise and experience to ensure your ultimate purchase is as pleasurable as can be for you.
To be clear, it is not an US vs THEM scenario. The builders and developers are not the "bad guy/bad gal" but to hold the knowledge they are in business to move inventory (let's call it what it is) converting raw land into a build that is to be someone's home is the key difference between walking into a show home/display suite and working with their representative and having your own representation that is not loyal to the seller, but is loyal to YOU.
The Time My Client Got Trapped by Threshold Rights
One client of mine got so excited after I had completed the sale of their existing home making what they soon learned as the mistake of walking into a show home without me. We were already working together, actively looking at properties, they were "in the area" and they decided to stop by a show home. What’s the harm, right?
They looked at it, loved it, and called me so they could make an offer. The moment I heard the story, I knew that all the work we’d done together so far, and all the time and effort to help make and close this offer would not be something I’d be paid for. And I’d be out the costs to boot. Still, I obliged and agreed to help them put together an offer – and happily! They were my clients, after all, and I cared about them. They needed representation and guidance from someone who was in their corner.
The minute I had heard who the builder was, I knew it wouldn’t go smoothly. Like I said, some don’t like to cooperate. I walked in to the show home to meet the agent, arriving with a polite smile and respectful conversation. My clients hadn’t arrived yet.
“Why are you here?” he asked.
“My clients wanted me here,” I said.
“You know you’re not getting paid for this.”
“Yes, I know.”
He shifted in his chair, apparently uncomfortable with that.
My clients soon arrived, and we got the paperwork filled out and the deal made in a way that they were completely protected and getting an offer that treated them well. Although quite limited in what I could involve myself in, I made sure of it.
How to Protect Yourself
Whenever you feel the urge to check out the Parade of Homes, tour show homes, or peek at a new build, the best advice is this. Even if you’re remotely looking – even in the farthest deepest corner of your cerebral cortex if there is the faintest, most embryonic idea of “maybe” or “one day” building your own home, it’s imperative to avoid the enticement of going “just to see” an open show home without their agent in tow.
If you are absolutely hell bent on dashing into the frey and facing the builder’s agent all by your lonesome, however, it would be better to hang a placard around your neck that reads, “I’m a deaf-mute that understands no English” than to engage in any conversation.
Even a simple “hello” seals the deal as far as Threshold Rights are concerned. One “hello” and you’re out a loyal representative of your own. Not even an option. Well… unless they’re willing to work for free, or you’re willing to pay them out of your own pocket, I suppose. But that’s one costly hello!
Speaking for myself, it is and has never been about the money (commission) but is and always has been about the relationship. This is why I helped my overly excited clients with their faux pas as it was about them and not about me.
The take-away I am trying to impart is this: Once you have retained your own Real Estate Professional, as much as he or she will keep in communication with you, do the same with your agent. Let them know if you want to peruse new builds. That simple call/text or email can mean the difference between a good new home or condo purchase experience and a troublesome one.