Should You Become A Builder's Listing Broker of Record?

Written by Posted On Wednesday, 01 July 2020 05:00

Homebuilders, mostly small volume homebuilders, are starting to consider a Realtor to take over their sales, according to Colleen Pestana, co-founder of Professional Business Publications, which covers the top U.S. homebuilders through its National Builders Directory. 

 It's good to see these builders coming back. They were shut out for a good while because lenders would not lend them the money to build move-in ready homes or models. 

Small volume builders (20 homes a year or less) are willing to consider, if not execute, exclusive listing agreements with Realtors. Their number one issue is not your commission. It is a loss of control of their sales. Earning the builder's trust is issue number one.

A win/win listing agreement is imperative. Insist that the builder stays in control. Let the builder define the termination agreement, commit to a sellout with a 30-day notice for either party. Work against a budget. Include sales projections to meet. 

Too many times, agents list a builder's homes in a community and lose the listing within 30 to 60 days. Why does this happen?  You are marketing the builder's new homes as a resale.  It is ok to use your standard listing agreement if you list a builder's home and market it like a resale. It is not ok to use a standard listing agreement if you are responsible for recruiting, training, and supervising onsite sales consultants. 

Make sure your services and the builder's responsibilities are included in your listing agreement. You both owe it to the other, to be honest, and open about expectations. 

Here is where things start falling apart: 

1. The builder wants you to list his homes because you are with a large office. The idea is that if just 20 of your agents sold his 20 homes, he would be sold out. He will often voice this in the meeting with your marketing director, sales manager, broker, and you. 

The fact is only about three percent of your company agents will sell this builder's homes, if that. That's why you need to remind him that he needs to reach all the Realtors in the market, not just yours. 

If you are with a small office, remind the builder that he needs to reach all Realtors, not just those in your office. What he needs most is YOU.

2. The builder expected your prospects-to-sales ratio to be at least 2-to-1, when thanks to unqualified traffic, it is going to be more like 13-1. The builder may remind you that he is a better salesperson than you are. This statement is not about his sales ability. It is about his losing trust in you. 

 What you should have done: Ask for traffic and sales reports to see what the prospects-to-sales ratio is what the percentage of co-broker sales looks like, if available. Have this discussion before signing the listing agreement. 

3. The builder is upset with you because you are working your listing and sales business while covering the builder's sales office, and he had no idea you would be doing so. What you should have done is to make sure you added a floor schedule to the listing agreement and had this discussion in detail. 

Well written listing agreements and mutually approved policy and procedures force meaningful discussions. 

Here is how you go for a win/win agreement. 

1. Focus your marketing efforts on co-broker sales.  This way, you stay responsible for using the marketing system you understand to reach the co-broker market.   The builder stays responsible for approving and paying for advertising, marketing, and other expenses he would incur if he hired his own sales staff. This policy prevents the 'they are not spending enough on advertising" comment that will come up eventually if you agree to pay. The builder should not be placed under pressure to spend a specific amount. His lender may control what he spends, based on sales. Have the discussion.

2. Detail a list of your services. They can be quite lengthy.  Stay within the builder's systems as much as possible.

3. Can you use part-time agents for staffing the models? If you are part of that staffing, can you obtain listing leads and refer home shoppers that do not want to buy the builder's homes? Caution: this signals a lack of full-time commitment. But that may be important to the agreement if traffic is slow and you cannot make a living without resales.  It is ok, but make sure it is in your agreement.

 Being upfront and transparent about your intentions is paramount to building and keeping the builders' trust. 

4. The listing terms should be 'sellout,' not one year. Give the builder a short leash if you are not meeting production goals. Yes, it is risky, but it keeps the builder in control.

5. When is his bank expecting to sell out? Let us say 12 months. If he has 24 homes to sell, he needs to average two sales a month. Knowing what the bank knows prevents the builder from telling you his goal is to sell three homes a month, which is what he would like. You cannot blame the builder for wanting more sales than the lender expects. The market has a way of moving up and down, so it is hard to project.  

Be honest about your situation. If 'sitting the models' or taking over sales for a builder will dilute your focus on resales to the point you lose resale and listing momentum, if the builder opportunity does not work out, do not get involved.  But if you feel you can genuinely give the builder the services he needs, go for it. It could be the start of something good.

Rate this item
(2 votes)
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. 

Learn more and

Realty Times

From buying and selling advice for consumers to money-making tips for Agents, our content, updated daily, has made Realty Times® a must-read, and see, for anyone involved in Real Estate.