New home construction has become an enticing option for buyers—and right now the market is surging
By Andrew Conner
Even before the coronavirus pandemic put unanticipated stress on the housing market by reducing inventory and increasing prices, new home construction was an enticing option for many prospective homebuyers.
“There has always been this desire for new homes,” says Shawn O. Reilly, CRS, agent at Better Homes & Gardens Real Estate in Alexandria, Minnesota. “It might cost you more money, but being able to create something from the dirt is a really cool process. That’s one of the most compelling things about doing new construction: seeing the structure rise from nothing.”
The new construction market is surging, as marketing research firm Zonda reports that 90% of builders raised prices on new construction homes between September and October 2020. If you’re an agent with little experience in the new construction space, you might be wondering how you can break in. Here are some tips to help you succeed in this market segment.
Make time to meet
The biggest hurdle to developing a successful business selling new construction homes is creating meaningful relationships with builders.
“The first and easiest thing you can do is pick up the phone and start calling,” says Mark Ewell, REALTOR® and builder representative at Maximum Elevation Realty in Colorado Springs, Colorado. “As a builder rep, if somebody gives me a call or comes into my office, whether it’s a new or established agent, and they say, ‘I want to get to know you,’ I love that. I’ll take 30 minutes or an hour out of my day to talk with them.”
April Neuhaus, managing broker at Neuhaus Real Estate in Loveland, Colorado, echoes Ewell’s comments. “You need to stop in and visit them, and drop off chocolates or some other type of treat,” she says. “It sounds like a silly thing, but you want them to know your name and see it on a regular basis. If the builder looks at you as someone who is active, has buyers and understands the value of new construction options, that is a benefit to them as well as to you.”
“I have had very positive experiences with all of the builders I work with, and, for me, it’s because I love to market their product for them,” says Michael Bondi, CRS, with Urban Nest Realty in Las Vegas. “If I’m able to establish a good relationship with the builder by giving them free exposure on my website, that’s a positive experience for both of us. And then when I bring them buyers, not only am I getting paid, but I’m showing that I can produce results.”
Know the details
To work with buyers and market new construction homes as Bondi suggests, you need to know the details of the community in which you’re working. When introducing himself to a new builder, Bondi always asks for detailed information, such as plot maps, measurements and subdivision layouts, among others.
“I’ll ask permission to take and use pictures and video on my website,” says Bondi. “I’ve had builders tell me they will go on my site to look at the competition because I have access to information other people don’t have. And, obviously, I’m doing this to generate clients, but I also want to be seen as the expert in that area. It’s so that I know what I’m talking about and I can say to clients, ‘I’ve walked these models.’”
Neuhaus suggests putting together as much information as you can when you first start to take an interest in a particular community. “It takes some digging,” she says. For example, she recommends agents collect standard inclusion lists, lot maps, floor plans, incentives lists and preferred lenders, and organize them together in a folder and other electronic formats. “You have to educate yourself, and if you take the time upfront to do that, you will be an invaluable resource to your clients.”
Show your value
In addition to educating yourself about the new construction communities you want to do business in, it’s also important to educate your clients. Neuhaus explains that many buyers won’t immediately understand why an agent is needed for a new construction home.
“It is absolutely a myth that buyers will get a better deal if they work with the builder without an agent,” says Neuhaus. “The basic reasoning that I find gets through with my buyers is: A builder is constantly trying to raise their prices. As their inventory sells and they have a base of sold properties showing an established price point, they automatically increase prices since they can have appraisers factor in appreciation and ultimately get loans approved for the higher amounts. So if a buyer thinks a builder is going to give them a better deal and knock down their price without a real estate agent, they’re out of their mind.”
Beyond negotiating for better deals from builders, another way Neuhaus demonstrates her value to clients is through her engagement in the process. For example, as part of her usual process, she recently suggested a client get an independent professional home inspection done before closing—the builder said it was unnecessary because the city already inspected the property. The buyer paid for the independent inspection and the inspector found a slew of issues, including an attic that wasn’t fully insulated. “That’s something we wouldn’t have seen on a walkthrough,” she says. “And it’s that kind of thing that a good buyer’s agent will do—push for their clients’ rights.”
Being engaged with your client doesn’t have to solely take the form of protecting their rights. For Shulanda Franks, CRS, qualifying broker at IXL Real Estate North Central in Mobile, Alabama, it also means constantly staying abreast of what is happening at the property.
“Don’t leave your client in the hands of the builder or the builder’s rep,” says Franks. “You should be actively involved. When a house is under construction, I’ll check in with the builder at least every few weeks, as well as with the buyer. I’ll also stop by and take photos to send to the buyer. Even if the buyer is riding past the house daily, they’re probably not always thinking about capturing the moment, such as when the roof is being installed. If you’re not in constant contact, it can be very easy to basically serve your buyer up to the builder and just show up for the paycheck. You want to stay on the scene and stay relevant, so you can show your value.” Franks notes this is also a good strategy for referrals. When your buyers see you’re engaged, they are more likely to recommend you to others.
Similarly, Bondi goes the extra mile for his clients by documenting the entire process. “They get to see, over that six-to-eight-month period, something rise from the dirt into an actual house,” Bondi says. “Something I do that a lot of other agents don’t do is go to the structural and electrical walkthroughs. I’ve always been fascinated by construction, and I love taking photos of the dirt and the studs. The clients not only get a good historical record if they want to eventually sell the house, but I’ve also had clients refer to the photos for stud and wiring placements when doing other work.”
Leverage your connections
Breaking into the new construction space can be intimidating, and more so if you do it alone. Neuhaus recommends taking advantage of colleagues and connections in the industry. “If anyone is thinking about branching into this and is scared, there’s nothing wrong with partnering with someone in your office who has experience,” she says. “Start a relationship with a mentor to help get you through your first couple transactions, and after you do that you’ll feel more confident doing the legwork yourself. Give the mentor a cut for participating, and you will never regret it.”
“I’m training a new agent right now, and I told her: You need to think outside the box,” says Bondi. “Don’t just copy exactly what I’m doing because it may not work for you. I suggested she find a brand new community and introduce herself to the sales agent and ask, ‘Hey, can I do a video for you? Can I do a blog for you? Can I do this or that?’ Because at some point when that blog or video gets attention, the client isn’t going to call the builder, they’re going to call you.”
If you don’t have an industry connection to help you through the process, Reilly suggests taking on a transaction or two and learning the process at your own speed. “Start small,” he says. “Start with a boutique builder that only does one home a year or a semi-retired builder, or work with a family member who wants a new construction home and go through the process that way.”
If you are interested in getting into new construction, Neuhaus summarizes the appeal: “You will be able to joyfully leave the world of ridiculous bidding wars and frustrated buyers and just sit down and pick out a lot, floor plan and color preferences, and have an exciting, happy experience.”
Switching Perspectives
Mark Ewell, REALTOR® and builder representative at Maximum Elevation Realty in Colorado Springs, Colorado, says that being a builder rep has advantages and disadvantages. Key among the advantages is a more regular schedule. “What you gain is an office with office hours,” says Ewell. “You might also be working as an employee with benefits. Maybe your lifestyle is changing and you need to be home at 6 p.m. and not have to answer the phone.”
On the other hand, Ewell says that for agents who like to “be their own boss,” it may not be a good fit. “You have regular hours and benefits, but you have to do things like request time off. As an agent, you have more control over your schedule than you do as a builder’s rep.”
Ewell also notes that larger builders often require builder reps to “put their license on ice” if they have one, which means you aren’t able to act as a REALTOR® while working as a builder’s rep. “This is frustrating if someone who comes to your office is selling a house,” he says. “But builders try to avoid any appearance of competition or conflict of interest.”
For a deeper dive into the new construction niche, The New Construction Game webinar is available at CRS.com/learn.
Photo: iStock.com/Feverpitched
