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Production Builders Are Meeting Realtors More Than Half Way

Written by on Wednesday, 15 May 2013 7:00 pm
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There was a day not long ago that builder/Realtor relationships were strained and unstable. But today, especially as it concerns production builders, misunderstandings are not as common as they were at one time. We can probably thank the internet on some level.

Production builders could be running out of things to do for Realtors. Many of these home builders pursue real estate agents with offers to do most of the work the agent does for resales for the same commission the agent would earn if the agent sold a resale.

A builder's representative demonstrates the model, answers 'location' questions, writes the contract, coordinates the financing, coordinates all post contract appointments, including the final walk through and closing. But that's not enough. Today they are setting appointments for the broker's prospect before the sale!

Yet, according to rough and unofficial estimates, only about 5 percent in a given office (my guess is that this is on the high side) show new homes. Studies (which we will discuss in more detail in a later column) show that agents want to sell new homes, but don't understand the builder' s process and struggle to find new homes inventory not listed in MLS.

In the meantime, a study by Builder Homesite released this year, said that 19% of the 84% of home shoppers who contact Realtors insist on a newly constructed home and 35% are "indifferent' meaning they will buy resale or new. This means that there is a 50-50 chance of the resale prospect sitting across from the agent is willing to consider purchasing a new home.

Why don't more Realtors show new homes? Technology is making it much easier to find both inventory and prospects. Not just any prospects but prospects who want to work with Realtors. In my opinion, I think it has to do more with the lack of MLS participation by the builders and confusing prospect registration at the new homes sales center, than the commission.

On one hand onsite agents like working with broker's prospects because they are generally in the market for a home and are financially qualified and capable of buying one. But some onsite agents have a hard time hiding their disdain for having the broker accompany their own prospects on a model home tour, "because the broker can cost me the sale."

Really? Let's look at some real-life myths.

Myth #1 - The Agent Cost Me The Sale

In the weekly sales meeting the builder's sales manager reviews the sales for the week and asks an agent why the Smiths did not buy.

"They ended up buying a resale. I had them totally convinced to buy our new home, but the agent interrupted my sales presentation and I lost them."

In my mind, this is a case of a frustrated agent not being accountable for a lost sale. I have never heard anything like this:

"I was going to buy a new home but my agent interrupted the sales presentation, so I decided to buy a resale."

Myth #2 General Agents Need To Know Construction

"Agents can't sell my houses because they don't know anything about construction." I believe this to be a negotiating tactic used mostly by a small number of the 80% of 'local' builder members of the National Association of Homebuilders to set the agent up to cut their commission, or to keep some kind of intimidation stick over the agent. It makes no sense. I have listed and sold billions of new construction and don't whittle about construction.

What do these homebuilders expect the agent to say to the prospect?

"So you want to see new homes? I will be happy to show you one in about three months. taking a course this summer to learn how to install cabinets. I will call you just as soon as I complete the course .

No, I am sorry. I understand that you need something now, but I don't know construction and the builder knows I don't know construction

"Why don't we go look at some resales?"

From day 1 in this business, I have never understood why real estate agents need to know more than how to find and qualify their prospects, bring them to the sales center, and accompany their prospect on the sales tour, before they show their prospects resales.

In my mind, there is only one way to help a prospect with construction questions. Introduce your prospect to the builder or his representative.

I felt it was my job to train the builder how to deal with cobrokers and cobroker prospects, not the other way around. My prospects deserve better service from me than to give them anything but direct access to the one with the answers and the responsibility to stand behind them.

Myth #3 The Builder Should Pay Me A Commission Because I Educated the Buyer (who bought from the builder without the broker).

I have talked with agents who actually think they deserve a commission because they 'educated the prospects' about new homes market, but never showed one. Then, when their prospect bought a new home on their own, the agent called the builder. When the builder refused to pay, agents have called me to ask what I think.

When I ask if the seller had been a FSBO, would they have called the owner and demanded a commission "because you rode by their house one day", the agent usually settles down and admits she should have stopped by the builder's sales office.

Home builders and Realtors are working closer than they have in memory. Major issues like registration policies and commissions are becoming more dependable. The fact is millions in commissions are being paid by homebuilders to Real estate agents.

And it is time for the real estate industry start encouraging its agents to learn how to leverage new homes showing to sell ether a new home or a resale.

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  About the author, David Fletcher

1 comment

  • Comment Link Luisa Cestari Saturday, 15 February 2014 2:31 pm posted by Luisa Cestari

    Here in Massachusetts, we show new construction homes all the time without any problems. I would never tell my client to buy a resale over new construction, its purely their choice. Any agent that is steering their client away from a new construction home, is hurting them self. Co-broking is not a problem. I will say, however, if a builder doesn't put his properties on MLS then he is hurting himself. I was trying to reach an agent for a builder of a property NOT listed on MLS and he refused to return my calls. In our area, if you don't cooperate with agents, you are loosing most of your audience. If an agent is concerned about waiting for the new property to be completed for say 6-9 months when they can be paid for a resale in 6 weeks to 2 months, is an agent I would not recommend. I take it upon myself to know all the builders in the area and make sure they know who I am.

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