Tuesday, 07 April 2020

Six Primary Reasons Prospects Shop Brand-New Homes and Buy Existing Homes

Written by Posted On Tuesday, 28 January 2020 02:20

If you have ever been on the builder’s side of a new home sale, you have experienced the frustration of losing a sale because you did not have a new home in inventory. It’s almost as frustrating as showing a renovation-starved home to a buyer who is renovation resistant.

With apologies to Howard Hill, the smooth-talking trombone salesman in Music Man who said” you gotta know the territory”, the territory does not matter in real estate if saleable inventory is not available. 

Today’s home builders understand the importance of having move-in or soon to be ready inventory available.  

According to the  NewHomeSource Home Shopper Insights Survey – Wave 5 published by Builders Digital Experience (BDX) in May 2019, the number one reason new home shoppers buy resales is timing. The new home shopper who bought an existing home could not wait for the home to be built/ready. 

The survey was completed by 1,128 resale buyers, who earlier had said they intended to purchase a new home but bought an existing one.

But in the same study, 56% of the recent buyers (last two years), who did purchase a new home, said they bought a spec (inventory) or quick move-in homes.  

The study breaks it down like this: 

• 44% purchased to-be-built ( presales)
• 33% bought a fully completed home
• 23% bought a home partially completed. This is an important bit of inventory news in your market. You need to be aware of these stats locally as a way of showing your prospects that you understand your new home market. Partially completed new homes could be just what the buyer needs if they prefer to close in 90 days or longer, perhaps.

The 5 other major reasons existing homes were chosen over brand new homes in the order listed:

• Established neighborhood
• Lower cost per square foot/More space for the money
• Could not find a new home in my price range
• No new homes where I want to live
• Larger yard or lot/More space between houses

Spec and move-in homes can solve the number one reason for prospects for a new home buying an existing one. According to the stud ‘builders should seek to compete on better floor plans, safer neighborhoods, and more living space, and seek to win quality construction comparisons.

It is hard to assume a specific percentage of co-broker sales in this mix, but it is safe to assume that most of the existing homes sold were listed with a Realtor, because that is the way it works for about 90% of all home shoppers, according to the National Association of Realtors.

In my next piece  we will see what the study says about new home shoppers who planned on purchase an existing home but purchased a new home. This segment increased substantially over the past five years, as did the ‘indifferent’ shopper who will consider a new home or a resale. 

In the meantime, if you are qualifying a resale shopper for a resale, you might want to qualify them for their interest in a new home as well.  Especially if they are 'just shopping' and don't plan to move for a 'few months or their lease runs out in four months or so. A partially built new home that is expected to be completed about the time their lease expires might be just the solution they need. 

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David Fletcher, NHCB

Lifetime Achiever David Fletcher is Founder and CEO of New Home Co-Broker Academy LLC, home of the New Home Co-Broker (NHCB) designation. More than 4,000 real estate agents have completed the  Academy's course, How To Build A New Homes Niche, a three-hour online course based on research, case studies and David's  long career recruiting, training and supervising onsite teams, who sold more than $3 billion new homes and condominiums.

Along the way, he wrote Condominium Sales and Listings and has been the featured speaker for the National Association of Realtors and a present at the International Builders Show. He served as chair of the Sales and Marketing Council for the Florida Home Builders Association. 

He started in real estate as the project manager for Bay Island, of the first major condominium communities in Florida. During this time, he obtained his Florida real estate broker's license, served as chair of the Sales and Marketing Council for the Florida Homebuilders Association, earned his MIRM designation, and served as president of the Florida Condominium Developers Association. It was here that he leaned to work with local Realtors, 

After a successful three-year run, he brokered 27 lender workouts, 11 rental conversions, a TPC golf course, and more than 1000 condominium units in six different communities. 

He recruited, trained and supervised onsite sales teams for more than 70 communities, always insisting on co-broker cooperation in his listing agreements. 

He has been a contributor to Realty Times for 16 years and contributed to Inman News for 3 years. 

His education philosophy is based on these simple assumptions:

  • Builders need qualified buyers. Realtors need saleable inventory. 
    Today's home shoppers expect their Realtor to help them navigate the buying process whether it be for a resale or new construction. 

To lean how you or your office can benefit with our popular online new homes course, visit our website. 

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