Build Your New Construction Commissions on Referrals, Not Skills - Part 3

Written by Posted On Friday, 08 June 2018 08:57

The following is Part 3 of a four-part series. 
Part 1: Builder/Realtor Relationships Poised for Long-Term Win-Win
Part 2: What Experienced Realtors Like About Selling New Homes

Realtor Ed called to tell me he sold a new home, after showing resales for six weeks.

“I’ve been doing it wrong for 16 years,” he said, but I did something I learned recently, and it worked. 

“What did you do?” came the obvious question.

“I introduced my prospects to the builder’s onsite agent and did not say another word.

“They bought the same day. I am stunned. The onsite consultant was terrific!”


Did Ed ‘sell’ this home? No. The onsite sales consultant sold it.

What did Ed do? He referred his prospect in person to the onsite agent. Is that what today’s production builders are doing? Yes. Most.

In a real sense, he referred his prospect to the agent, just as he would a resale referral, with one important exception, the prospect will remain his prospect throughout the process.

What nails it as a referral is the fact that the builders write the contracts.

It’s time Realtors stopped ‘selling’ new homes and started ‘referring’ their prospects to new home consultants. Training new home agents to sell new homes is redundant. To ask them to learn construction is a complete waste of time and distraction.

Realtors introduce qualified home shoppers to onsite agents, and the agents do the rest. That is the way it works with most production builders.

And it works as well as the Realtors allow it to work.

When onsite agents tell Realtors to bring their prospects to the sales office, and they will do all the work, they mean it.

So, if it is a referral fee, why do builders pay commissions that compete with resale fees paid to the local Realtor community, and sometimes more?

It has been customary for years for builders to consider themselves the listing broker and Realtors co-brokers, paid for the sales side of the commission.

Thus, the ‘how to sell new homes’ mentality, but it needs to be called what it is- a  referral. Why? Because more Realtors will start showing more interest in new homes.

Helping qualified, motivated resale home shoppers find a home is what Realtors do. About half of their prospects come from referrals.

If Realtors start to think ‘new home referral,’ instead of ‘sale,’ they soon understand why they have nothing to prove or impression to make, other than being honest and helpful.

The sooner the Realtor community grasps the ‘new home referral” concept, the sooner it will start suggesting that their agents farm for new home prospects.

There is nothing about construction, incentives, or anything else one needs to learn to refer a new home shopper to a new home builder.

Onsite sales consultants do not need or want your help during the sales process.

That’s the way most production builders think of your service, not because they disrespect you, but because they do not need your services during the sales and construction process. They have professionally trained, highly motivated staffs to provide every task in the process, better than you can.

Except one.

Today’s builders are acutely aware that Realtors provide the one thing builders cannot deliver in quantity and cannot do without – ready, willing and able prospects.

According to the National Association of Realtors, Realtors sold ninety percent of all homes sold last year.

As Builder Homesite Inc (BHI) Founder and CEO Tim Costello said five years ago at the 2013 International Builders Show. “Builders’ are starting to understand that their competition is not the builder across the street. Their competition is the resale and who controls these potential buyers? Realtors.”

Here is what homebuilders can do better in most cases than you can:

  • Sell the benefits of the home’s features
  • Sell the value
  • Sell the urgency (incentives)
  • Sell the location
  • Sell the builder’s reputation
  • Sell the amenities
  • Sell the construction quality
  • Sell the design features
  • Help them understand the money, starting with a fixed price
  • Explain financing
  • Coordinate mortgage application/approval
  • Provide answers to all construction questions
  • Explain the construction process
  • Write the contract
  • Provide all transaction management
  • Close escrow
  • Provide other services as requested by the buyer.
  • Pay referral fee (sales commission/fee)
  • Welcomes you as someone who has a strong relationship with the builder and looks forward to working with your referred prospects for years to come.

These builder services beg a question. “What do Realtors do to earn their fee?”

They get paid if the referred prospect purchases the builder’s home and the Realtor is the referring agent of record.

Finding qualified resale or new home prospects in new home price ranges is not easy. Every member of the local Realtor association, and it could be thousands, are competing for these buyers.

Homebuilders understand this.

What many builders don’t understand about Realtors- and it’s a turn-off, is when they say, ‘bring them out, and we will do all the work.”

Realtors don't like the idea of not working for their commission. They hear a lack of respect for their hard work.

What if homebuilders said:

“Refer your new home prospectsto me. They are always treated with respect and courtesy, as you will be, and yes, you are welcome to participate in any stage of the process.”

This approach is respectful, honest and implies that the onsite agent is to do all the work.

Here’s the game changer.

Realtors understand referrals. They are encouraged to build their business on referrals. They are not trained to ‘refer’ prospects to onsite sales consultants. But it is what they are doing when they introduce their prospects to an onsite consultant.

If homebuilders asked for referrals instead of sales, they would be speaking the Realtors’ language.

If Realtors were taught to refer, instead of ‘sell’ new homes, there would be no need for Realtors to fear working with new home shoppers.

Here is what matters: At the closing, your clients should be singing your praises.

You provided the most important service for them.

You not only helped your buyers find the home of their dreams, you introduced them to a builder and a team of professionals that held their hand every step of the way.

You earned a healthy referral fee because you referred the one thing the builder needed most – your prospect.

Next: Part 4 Best Practice Recommendations For NAR and NAHB

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David Fletcher, NHCB

David Fletcher is a co-founder and CEO of New Home Co-broker Academy LLC., an online e-commerce business. Visit David's website to take his famous 3-hour online course, How To Build  A New Homes Niche, to become a certified New Home Co-broker (NHCB). More than 5,000 graduates. Content is based on his long career and onsite sales success working with both builders and Realtors to list and sell more than $3 billion in new construction. If you are a broker who wants to offer your agents a way to add new homes to their resale inventory and home shoppers, this is your solution. 

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