Hi. We've been looking at homes in our area (Wisconsin - Minneapolis/
St.Paul area) and haven't really found one to our liking. We decided
to buy a lot an build a custom home. We've identified a nice lot.
There is a realtor who is selling on behalf of the developer. We've
agreed on which lot I would like and are now just starting the process
of offer/counter-offer.

I understand that part of the price I pay for the lot will go in
commission to the realtor - fair enough, he did the work of marketing
and showing us the development. The lots are open to any builder so I
should be able to pick whichever one I like who gives me the best bid.

I was told by a friend that whichever builder I use, the realtor (who
sold me the lot) will be getting a percentage of the build cost of the
house as a commission - which the builder will naturally pass on to
me. Obviously, that could be in the 10's of thousands as the house I
am planning on building will be in the $450-500K range (on top of the
lot cost). I would rather be able to either save that money or use it
to upgrade the options on the house.

My question is/a

Is this a legal arrangement between builder and realtor, especially if
I do the work of getting a floor plan, finding builders, obtaining
bids, getting lot construction permits, etc?

How can I find out for sure about the arrangement? Do either the
realtor or the builder have a legal requirement to disclose this if I
ask them?

Having spent several hours already looking for these answers on the
web (without success) I know that the first thing someone (who will
not be helping) will say is that I shouldn't care how the money I pay
for a house gets divided because the seller (builder) is the one
paying the commission. But it is a basic principle of economics that
the buyer (me) is ultimately the one who pays since the commission
will be paid out of my money for the house. The commission may be a
cost to the seller ( just like concrete, wood, labor, and siding) that
the builder has to charge me to cover his costs and make a profit.

Now, I don't know that the builder will lower his price by a cent even
if he doesn't have to pay the developer a commision. But I would like
to think that if the builder saves some money on the cost side of his
balance sheet, that he would pass a portion of that to me, his
client. At the very least, if the builder has to disclose commission
information, I could then go to a different builder who maybe doesn't
have to pay that commission.

Any help is appreciated.

Why would the realtor who sold you the lot get any kind of cut on the
builder's fees to build a house there? I've never seen an arrangement
like that. If there is something in the development CCRs about it,
then the realtor should be able to point out exactly what the contract
says. If not, then he shouldn't get anything; he gets the commission
on the lot sale only.

I've looked at buying land to build on, and the realtor working with
me on the land purchase has nothing to do with the building.....

On Jul 3, 7:45 pm, wrote:
Hi. We've been looking at homes in our area (Wisconsin - Minneapolis/
St.Paul area) and haven't really found one to our liking. We decided
to buy a lot an build a custom home. We've identified a nice lot.
There is a realtor who is selling on behalf of the developer. We've
agreed on which lot I would like and are now just starting the process
of offer/counter-offer.

I understand that part of the price I pay for the lot will go in
commission to the realtor - fair enough, he did the work of marketing
and showing us the development. The lots are open to any builder so I
should be able to pick whichever one I like who gives me the best bid.

I was told by a friend that whichever builder I use, the realtor (who
sold me the lot) will be getting a percentage of the build cost of the
house as a commission - which the builder will naturally pass on to
me. Obviously, that could be in the 10's of thousands as the house I
am planning on building will be in the $450-500K range (on top of the
lot cost). I would rather be able to either save that money or use it
to upgrade the options on the house.

My question is/a

Is this a legal arrangement between builder and realtor, especially if
I do the work of getting a floor plan, finding builders, obtaining
bids, getting lot construction permits, etc?

How can I find out for sure about the arrangement? Do either the
realtor or the builder have a legal requirement to disclose this if I
ask them?

Having spent several hours already looking for these answers on the
web (without success) I know that the first thing someone (who will
not be helping) will say is that I shouldn't care how the money I pay
for a house gets divided because the seller (builder) is the one
paying the commission. But it is a basic principle of economics that
the buyer (me) is ultimately the one who pays since the commission
will be paid out of my money for the house. The commission may be a
cost to the seller ( just like concrete, wood, labor, and siding) that
the builder has to charge me to cover his costs and make a profit.

Now, I don't know that the builder will lower his price by a cent even
if he doesn't have to pay the developer a commision. But I would like
to think that if the builder saves some money on the cost side of his
balance sheet, that he would pass a portion of that to me, his
client. At the very least, if the builder has to disclose commission
information, I could then go to a different builder who maybe doesn't
have to pay that commission.

Any help is appreciated.