New homes are one solution to tight inventories

Builders recognizing that general agents control prospects

Editor’s note: This is the second in a series of articles on homebuilders’ willingness to pay commissions to real estate agents who can bring buyers to their properties. Read Part 1, "Builders: Don’t forget Realtors brought you to the dance."

Keller Williams Realty real estate agent Patty McMillan made her first sale last week to a middle-aged couple buying their first home. It was not easy.

The couple lost bid after bid going up against cash buyers on bank properties. One can only imagine how many sales — and perhaps careers — are lost because new agents don’t know where to turn for inventory help.

But McMillan remembered and acted on a suggestion she’d heard during a seminar — a suggestion that got her buyers to the closing table, and earned her a commission check worth thousands of dollars.

"The speaker talked about the importance of showing prospects what they can get for their money, by showing new homes," McMillan said. "I had not showed my clients a new home, but on Tuesday following the Thursday seminar, I showed them a DR Horton home and they signed a contract on Friday. I could not be happier for my buyers, or myself."

This was not about her closing skills. It was about persistence, commitment to her buyers, and believing that "new homes" might be the solution.

McMillan is a new agent. She had never showed a new home. Her excuses could have been endless.

Instead, a new home was sold, a commission was paid, and the buyer was happy.

With commission policies stabilizing among home builders and the resale market so tight, general agents can expect to "run out of ideas" sooner rather than later.

Will this, in turn, mean that a larger number of general agents start showing new homes? Will real estate principals start offering new homes training?

Onsite agents are constantly reminding general agents that a new homes sale is the easiest sale in real estate. Orlando-based Holly Rabits, business development director for New Home Star Florida LLC, agrees.

"The most important thing I can say to general agents about why they should sell new homes is the fact it the easiest, most stress-free sale in real estate," Rabits said.

The builder follows through with the financing and conducts all of the transaction management through closing, freeing up the agent "to be more productive, and better focused on the next sale," Rabits added.

The sale may be easy, but getting from seeing the home to buying one — especially a new home — can be difficult if the general agent does not let the onsite consultant answer questions about the product and location.

Philip Baatz, a new homes sales executive with HHHunt Homes in Glen Allen, Va., advises general agents to let the onsite sales consultant provide the details and answer the prospect’s questions, because the onsite agent can help the agent’s client better understand the total price.

Baatz said the onsite sales consultant should make sure the agent understands the gross price, meaning the base price of the home plus the price for options and upgrades.

"I would tell agents to use the builder’s representative to get as much price and feature information as possible about the community, floor plans, lot sizes, and what is considered ‘standard’ in the home," Baatz said.

There may or may not  be an "upgrade’ credit or allowance tied to date of purchase or number of sales but maybe not. Another  cash contribution incentive may be tied to the builder’s financing. Don’t make a big deal out of this either way. In a tight seller’s market, the incentive may be the first to go.

Perry Goldman, president of New Home Sales & Marketing Inc. in Croton-on-Hudson, N.Y., believes agents will sell more new homes and resales if prospects establish a price benchmark before seeing resales.

"The first thing I would share with a general agent about showing new homes is that they can establish a price benchmark to help their customer better evaluate resales as well as new homes." and that they should preview new homes listings before they bring the customer to the sales office," Goldman said.

Generally speaking, several home builders said they recognize that resales are the competition, that real estate agents control the buyers, and that their co-broker programs were a major part of their marketing programs.

There will be commission modifications along the way, no doubt, but it appears that home builders and builder-developers are ready to focus on attracting as many co-broker sales as possible.

They may be right. According to a 2012 market study by Builder Homesite Inc. (BHI), a consortium of 32 of the largest U.S. production builders, 84 percent of all home shoppers will contact a Realtor for help.

One of the challenges for agents is finding new homes. 

Gene Graves , co-owner of Bennington, Neb.-based Charleston Homes recommends that general agents keep abreast of new subdivisions that are coming on line and visit model homes of the leading builders in the areas.

Homebuilders must face the reality that real estate agents control prospects who are ready, willing and able to purchase a home. One reason, of course, is that prospects do not want a real estate agent involved in their buying process until they’re ready to buy.

Buyer prospects will not provide their name and contact information until they are ready to buy, or at least thinking seriously about buying.

Several home builders said they treat the co-broker as the customer, because they can and do bring multiple buyers to their sales centers.

Will there always be pockets of builder-broker friction? Of course.

But the success stories — the ones where agents sold a new home to a prospect they almost lost — are rapidly replacing those you hear about commission issues. And based on Patty McMillan’s story alone, sales trainers need to start looking at adding a new homes showing segment to their agenda.

Now that we know we can trust homebuilders to maintain their co-broker programs and that general agents will find showing new homes an easy process, the only thing left is to help builders draw more Realtors to their sales office.

In the next installment of this series, we’ll hear from general agents about how builders can attract them.

David Fletcher, a licensed real estate broker and lifetime achiever, is founder of EMentoru, a company dedicated to helping real estate agents and homebuilders help each other make sales. Contact him by phone or text at 407-234-2349, or by email at davidf@ementoru.com.

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