Builder/Realtor Culture Is Changing. Billions Of Commission Dollars At Stake.

Written by Posted On Monday, 27 July 2020 08:16

Demand for new construction is so strong, the National Association of Realtors is pleading with home builders to build more homes faster. If they sell more, they will build more, guaranteed. 

 “New homes sales need to pick up through the summer to meet the demand and avoid a price spike,” said Lawrence Yun, chief economist at the National Association of Realtors, in a June 22 report. 

Realtors need to start intentionally showing new construction. The homes are needed to keep up with demand.  Builders need your qualified buyers. Realtors need the builders’ saleable inventory. 

“Only 67%” of recent buyers who purchased a brand-new home used an agent, according to Home Shopper Insights and Builder Brand Study-Wave 5, a study by Builder Digital Experience  (BDX), published in May 2019.

In other words, 33% of recent buyers did not use a real estate agent to purchase a new home. 

The real story is the amount of commission dollars available to real estate agents for selling new homes that are left in the builder's pockets. It’s impressive. Do the math:

• Assume 1 million new home sales for $500,000, each paying a $15,000 commission.
• Lost commissions 330,000 units (33%) x $15,000 = $4,950.000,000.
• Call it $5 BILLION 

Realtors may be so used to controlling listings, that showing new homes may be a road not just less traveled but never traveled by most agents. 

But there is good news ahead. The builder/Realtor culture is changing. Two of the three traditional roadblocks to a good relationship have been accomplished. The third roadblock is in the process of change.  :

1. Homebuilders must be able to feature their homes online without listing individual homes on MLS. Done.

 A critical cultural breakthrough occurred in August 2012 when partnered with the BDX to provide internet access to new home inventory, including floor plans and details in an MLS format. Both new home shoppers and Realtors, for the first time, had access to new home inventory online.  

2. Homebuilders must adopt an attitude change toward working with Realtors. Done.

 The second critical change occurred a few months later in January 2013 at the International Builders Show (IBS). 

 Tim Costello, the founder of Builder Homesite Inc, founded in 2000 by 32 of the largest home builders in the United States, made a startling statement to his large audience. Builder Homesite is the parent company of BDX.

“Your competition is not the builder across the street,” he said, “your competition is the real estate agent with a qualified resale prospect who is willing to consider new homes.” 

He showed them that according to the National Association of Realtors, 84% of all home buyers use a Realtor and that 35% of resale shoppers will consider a new home. This number increased to 38% in the latest BDX study. 

Builders, led primarily by production builders, started reaching out for Realtors and stabilizing their commission policies. Today production builders are practically competing for ‘co-broker’ support, but too few Realtors are responding. 

3. Realtors must show new homes as an established business practice. Needs attention.

Realtors are not trained or encouraged to get involved with new homes. The traditional approach is to focus on listing and selling resales. Any substantial change will come from the broker/principals. 

There is too much new home activity to ignore, especially since saleable existing home inventory is so tight. The time is right. Look for more brokers to start encouraging their agents to qualify their resale shoppers for new homes and add new homes to their resale showing schedule.

Timeline snapshot:

• In 2012  Realtors could easily find new home inventory online.
• In 2013 Homebuilders started reaching out to Realtors to sell their new homes.
• In 20?? Realtors made adding new homes to their inventory and showing schedules a standard practice.

Realtors are the last group needed to change the builder/Realtor culture to one of consistent, meaningful, and mutual success. 

Change from selling resale inventory Realtors control by listings, to selling inventory they do not control or understand is akin to selling for-sale-by-owner homes. 

If Realtors treat new homes construction as a market to discuss but not sell, thousands of agents will miss easy sales they should have made, and never know why. 

Then there is this reality:

• A large percentage of new home buyers have homes to sell and need the agent’s listing help. But most agents do not meet these shoppers because they do not market to them or qualify them for new homes when they ask to see resales in the price range of local, new home price points.
• A substantial percentage of home shoppers resist visiting resales for safety and health concerns. Some turn to new homes.
• Renovation- resistant resale shoppers turn to new homes, either on their own or at the recommendation of their Realtor. They are doing this now. Some make more confident resale offers or purchase the new home, which they never intended to see.

What if starting today, Brokers and trainers, as part of their indoctrination, required newly licensed agents to visit one new home sales center by their second day in the office? The advantages are enormous, but the first thing they would hear is, “Bring us a qualified prospect, and we will do the rest.” 

Onsite consultants make the sales presentation, answer, or get construction questions answered, write the contract, and provide  transaction management through closing- all things new agents are weeks away from learning to do for resales. 

The new home is the easiest ‘sell’ in real estate. Newly licensed agents need a fast start. There is none faster or easier than showing a new home. 

Showing new homes is not just about the commissions. Thousands of careers are saved by the addition of just one or two commission checks, especially those that are earned because the Realtor knew how to find saleable inventory, the most important service the agent provides.

Homebuilders proved that tradition could be changed to make more sales. If they can do it, Realtors can do it. 

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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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