Using a Realtor for onsite sales is not a new idea. It has been done many times before, ranging from instant failure to complete success. 

As a profit center, the retired author's new home division's highest annual NOI for one community was $350,000.

 In this series, he shares what he learned along the way because he senses onsite listing opportunities as condominium developers and home builders compete for fewer qualified buyers as interest rates and prices continue to rise.  

Builders use Realtors for various reasons, not just the old standby – the builder closeout. 

"I am tired of the sales management headaches," said a regional single-family builder. 

 "Our onsite agent needs more support than we can give her," said a condominium builder/developer.

"I need a full-time team to recruit, train, and supervise sales and marketing efforts," a lender told me.  

Builders who have learned how profitable a co-broker program can be may toy with the idea of an exclusive agency agreement with a local brokerage. 

Some brokers/principals understand the builder's business – not how to build a house – but how important it is to use new-home marketing strategies to develop and sustain sales momentum. Thus, the emergence of new homes divisions or new home teams within the Realtor's company.

Turning over sales to a local broker is a natural upgrade for home builders who depend on co-broker sales for most of their sales. Many builders today compete for Realtor-controlled prospects using an open listing approach that is difficult to sustain because Realtors are trained to look for used and new homes inventory in MLS. 

When considering a right of sale agreement with a broker who is expected to recruit, train and supervise a full-time onsite sales staff, what should builders do: 

1. 1. Don't say, "I have 20 homes to sell. The broker has 20 agents. If each one sold one, I could be sold out in a week."  You are letting the broker know you will not be any fun because you don't know how to work with Realtors.

2. 2. Don't judge a broker by their number of agents. Judge them by their track record, reputation, and new homes expertise.

3. 3. Ask to see a copy of the broker's onsite sales policy manual. Or show them yours. A policy manual you both sign off on is key to a long-term relationship. Please attach it to your listing agreement.

4. 4. Ask to see a copy of the new home listing agreement the Realtor uses. If the Realtor uses the same listing agreement for resales, the Realtor does not understand your needs.

5. 5. Ask to see reporting systems. There is a good chance the builder will want to use their reporting system. It is ok and preferable that the builder control or manage the transaction through closing. 

6. 6. Ask the Realtor what percentage of their sales will be co-brokered. Usually, The higher the home price, the higher percentage of broker sales. 

7. 7. Ask if they are willing to work on a net commission meaning the builders pay all expenses. The higher the percentage of co-broker sales, the more likely the broker will use a net listing.  

8. 8. Ask for referrals!  

As a Realtor, what should you look for and understand: 

1. 1. Understand that a builder is making a critically important decision. The builder depends on you to create sales momentum and sustain it. 

2. 2. Understand projected absorption rates upon which the lender funded the builder. When absorptions rates are not met, the lender and the builder get nervous, to put it nicely. It is ok not to meet the builders optimistic sales goals. It is not ok to fail to meet those expected by the lender. Understand that no matter what the builder said his advertising budget would be, one phone call from his lender can significantly reduce spending. Spending less than expected does not mean the builder does not keep his word. It means that the absorption rate the lender expected is not being met, and it is time for the sales team to start making more sales.

3. 3. Build the onsite sales training program around the policy manual. Include the builder's policy on change orders, contract processing, in addtion to contigencies, writing the contract, answering construction questions, office hours, model maintenance, and more. Ensure both the builder and the Realtor sign off on this document.

Look for the following services new homes divisions provide. This list is provided as a guide to encourage productive discussion. s

1. 1. Recruit, train and supervise an onsite sales team.

2. 2. Recommend pricing strategies.

3. 3. Recommend phase marketing. 

4. 4. Write marketing plans or assist in selecting an advertising agency.

5. 5. Assist in presentations to financial institutions.

6. 6. Critique floor plans and elevations,

7. 7. Provide full-time coverage of the sales office.                                                                                                                                                                               

8. 8. Provide turn-key sales follow-up systems.

9. 9. Provide competitive marketing analyses.

10. 10. Provide technical support as agreed. 

11. 11. Recommend effective sales promotions.

12. 12. Build a co-broker network with local brokers.

13. 13. Provide leadership in multi-builder developments.

Our next piece will discuss what the builder and the Realtor  win-win agreement should include, from a services perspective.