Why Real Estate Brokers Don’t Take Commission from Customers in New Projects

Many people wonder why real estate brokers in India don’t take commission directly from customers when selling a new project. Instead, they often get their commission from the builder. This article aims to explain the reasons behind this practice and what the real estate broker gets from the builder in new bookings.

Why Real Estate Brokers Avoid Taking Commission from Customers

One of the primary reasons why real estate brokers in India don’t take commission from customers is the straightforward nature of real estate advertisements. Customers are often encouraged to purchase properties directly from the builder through advertisements or online listings. This approach creates a streamlined transaction process where builders set the terms and conditions directly with the buyers.

Another reason is the regulatory framework. In India, there are stringent laws governing real estate transactions. For new projects, many states have laws that mandate a certain process for buying and selling property. These laws typically require buyers to go through a certified real estate broker or intermediary to ensure transparency and protect the interests of both the buyer and the seller.

What Real Estate Brokers Get from Builders

Despite not taking commission from customers, real estate brokers still receive their commission from the builder. This commission is often a percentage of the total sale price, agreed upon in a pre-negotiated product agreement between the builder and the broker. The commission is typically paid by the builder once the deal is closed, and the broker facilitates the entire transaction process, from negotiations to contractual agreements.

The broker’s role in this scenario is essential as they:

Facilitate negotiations: Brokers help buyers negotiate terms and conditions with the builder, ensuring that the deal is beneficial to both parties.

Verify documentation: They help in verifying all legal documents, ensuring there are no hidden costs or discrepancies that could lead to disputes.

Provide financial advice: Many brokers offer financial advice, helping buyers understand the complexities of mortgage options, down payments, and insurance policies.

Ensure compliance: They ensure that the transaction complies with local regulations and that all legal formalities are complete.

Provide market insights: Brokers offer valuable market insights to help buyers make informed decisions, such as price comparisons and trends in the real estate market.

The Role of Real Estate Brokers in New Project Transactions

Even though the buyer is purchasing directly from the builder, the real estate broker has a crucial role in the transaction. They act as a bridge between the buyer and the builder, ensuring that the process is smooth and transparent. The broker’s commission is a reflection of their expertise and the value they bring to the table.

For instance, the broker might negotiate better prices, secure more favorable terms, or even find additional value-add services that the buyer might not have been aware of. The broker’s commission is paid by the builder as a reward for their services, which are invaluable to the transaction.

Example Scenario

Imagine a scenario where a builder wants to sell a new apartment block. The builder advertises the project online, and many potential buyers contact them directly. However, a trusted real estate broker is brought in to facilitate the transaction. The broker’s role is to guide the buyers through the process, help with negotiations, and ensure all documentation is in order.

Even though the buyers are purchasing directly from the builder, the broker is still compensated. The commission is a percentage of the sale price, as agreed upon in the product agreement. This compensation is justified by the broker’s efforts, expertise, and the value they add to the transaction.

The buyer might not be aware of the specific terms of the agreement, but the builder is fully aware and trusts the broker to ensure a successful transaction. This arrangement benefits both the buyer and the builder, as it ensures a smooth and transparent process.

Conclusion

Real estate brokers in India don’t take commission from customers in new project sales because they are often encouraged to buy directly from the builder. However, they still receive their commission from the builder. The broker’s role is essential in facilitating the transaction, providing valuable services, and ensuring that the deal is favorable to both the buyer and the seller.

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