We put in the street, the city and the zip and then a voice tells us the quickest route to our destination. Like driving with a GPS, buying new homes used to be fairly simple and direct. The builders advertised; we took the buyers; they made selections, a few corrections, wrote, closed and moved in. It was a matter of following tried and true directions, well traveled roads. Now, like the more advanced GPS systems, we are given hazards, traffic problems and storms (usually financial) along the way; interrupting what once was a smooth ride toward the destined sale.
We hear those fateful, resented words… “recalculating route” from our satellite systems when something in our path is hindering our passage or…we took a wrong turn. If we listen to that grating voice and alter our route, we will reach our goal although sometimes delayed and often taking less traveled paths. The same is true for the new home sales purchase process: uncertain but being redirected and recalculated in light of the economic challenges and changes to the homebuilding industry.
We can see that just down the road, there will be a demand for new designs and developments. Job growth in this part of the country and specifically, in this part of Texas is very promising. Because financial institutions are limiting the builders’ new home starts, our available inventory is being rapidly depleted leaving a scarcity of completed inventory homes. Also, the spec home sales of the last 18 months, with their mixture of traditional transactions, foreclosures, shortsales and urgency pricing, have left potholes in the market regarding values and the availability of “like” product.
What does all of this mean on the new home frontier? Our buyer will need to be educated on the construction process and the concept of building and not just selecting new construction. Conceiving, designing and building will take time and clarification, a slightly more creative process for the REALTOR® in the transaction. Paychecks may be later in the transaction (often larger, too!) but the relationships you build will be stronger and long-term. (Always ask about one time closings in which the REALTOR® is paid up front prior to construction.)
Consumers state clearly what they want in a home and what they will pay. The spending styles of many are more conservative in light of economic unknowns. Consumers are looking for security in their investments. Will it be efficient? Will it be convenient? Will it last? Will it be a good investment? Will it sell if they need it to? Will it satisfy the changing needs of a family? “Need” has become more important than “want” for many. If price is dictated by size than smaller may be better. If long-term maintenance is more costly than efficiently built, then buying “energy conservative” construction may make more sense. The high end buyer with their portfolios in chaos and information overload is also exercising more scrutiny in the home buying/building process. In the midst of this buyer demand is the builder who is limited by stringent banking requirements and leveraging capabilities.
Bombarded by so many mixed signals, it is hard to hear or see that there is a pattern emerging.
To be on the cutting edge:
1. Conduct buyer interviews to establish needs, wants and realistic expectations of the design, build and construction loan processes.
2. Have a contemporary understanding of the different cultures and generations and what areas offer homes and communities to fit those defined needs.
3. Introduce the consumer to the builder; educate them. When they buy a home, they buy the builder and the company with all of its history. There is value in establishing that relationship.
4. Educate yourself on the changing designs and signature qualities of the local builders. Understand the building process and timelines and convey these to your client. Relieve tensions.
5. Understand the changing costs of construction and how they are affected by everything from politics to weather.
6. Establish a communication process with the builder for the entire transaction and beyond.
Production and custom home buyers are very different from those of recent years.They are informed. They are nervous about the economy. They want to drive their outcomes which can affect your income. Having fewer homes on the ground offers an opportunity for your customers and clients to construct the home that truly meets their needs and timelines. They will still seek and pay for the unique; help them define what matters most and what they would be willing to pay for. Stay in touch with the builder, the title company and the bank during construction to help offset problems as they approach completion and closing.
Out of the real estate potholes of yesterday will emerge the new home expressway of tomorrow with new designs, new communication procedures, new emphasis on home efficiency and investment security. If you are willing to follow the road signs, you can become a specialist as a new home buyer’s construction consultant: building from the ground up your business and their homes.