Home Builders Association of Metro Denver

Home Builders Association of Colorado Springs

Myth vs. Truth about purchasing a New Builder Home!

Myth: The builder’s Sales Representative represents the Buyer.
The builder employs the builder’s sales representative! The builder’s sales representative does not work for or represent the Buyer. The builder’s sale’s representative has NO Fiduciary Duties towards the Buyer and in many cases are Not licensed Real Estate Broker in the sate of Colorado. 

Myth: The builder’s sales representative is bound by The Brokers Trust Duties.
Real Estate Brokers Common Law of Agency specifies Fiduciary (Trust) Duties to Principal. Builder sales representatives are not Real Estate Brokers, therefore, are not bound by The State of Colorado Department of Regulatory Agencies Guidelines. Builder sale representatives are employees of builder and do not represent the Buyer. Their Fiduciary duty is to their employer, the Builder.

Myth: Builders must disclose builder/lender incentive to Buyer.
Colorado Department of Regulatory Agencies Guidelines does not apply to builders. Builder/Lender incentives can be added to closing cost and there is no required disclosure regarding it. Every like-model floor plan within same community subdivision has the same base price. Each like-model must be sold at same base price to maintain values within the subdivision and to insure that property will appraise at value. Options along with base price are included and valued during the appraisal process. The options price list is pre-determined by the builder. When a builder provides builder/lender incentives (options, no closing cost, etc.), they are added to the base price, the builder is not required to disclose that incentives have been added to base price. All the builder is doing is adding incentives to base price and increasing Buyers base price to cover the cost of incentives. On average, if Buyers sales their property within 7 years their appraisal will be impacted in a negative manner. Their home will appraise for less than similar models in their communities subdivision that did not receive builder/lender incentives

Myth: I get a better deal if I eliminate my Real Estate Broker.
The Real Estate broker is the only protection the Buyer has when negotiating with a builder. The real estate broker represents the Buyer and the builder’s sale representative represents the builder. 

The conclusion: here is that nothing is Free. The Buyer pays for what they get. It is always in the best interest of the Buyer to have a licensed Real Estate Broker represent them throughout the process. The Buyer does not pay the broker success fee. The builder pays the brokers fee. The brokers fee does not / cannot impact builder base price, options price list or incentives, therefore, the Buyer still will get the same deal they would have gotten without a broker but have adequate representation to protect their interest.

Broker Fiduciary Duties
 Broker Trust Duties Buyer Agent Builder Agent
 Obedience Yes No
 Loyalty Yes No
 Disclosure Yes No
 Confidentiality Yes No
 Accounting Yes No
 Reasonable Skills & Care Yes No

Gerald P. Burl
Gerald P. Burl
Broker Associate