Bridging The Gap Between The Builder And The Sales Agent

Although there are many different profiles of homebuilders, for the purpose of this article we will consider two major sub-categories or classifications: national/regional homebuilders and local “spec” builders. These two categories have been selected since these builders own the land and the home as opposed to custom builders or builders for hire who are selling a service, homes built on your lot.

1.) Large Homebuilders - The large national or even regional homebuilders tend to have in-house sales teams made up of paid employees whose only focus is selling the homes within that specific builder’s projects. Real estate agents tend to interact with these builders only on the buyer’s side (not including large land parcel specialists), and this interaction is usually limited to bringing potential buyers and registering them into the sales process. Many of these builders do not allow their own sales staff to sell anything but their own product so there is no real competition with the independent retail agent.

2.) Local Homebuilders - The next category of builder is the local builder who builds homes on their own lots (often referred to as spec building). This type of builder will often use a real estate agent on the listing side. The majority of the problems that crop up in dealing with this category come from competing interests and a lack of communication or understanding of each other’s business.

One common complaint of real estate agents is that builders expect a very low commission structure due to their perception that they are giving the agents listing volume. This presents a challenge for the agents, as their commission structure is already based on doing a volume of business. The simple fact of multiple listings with one party does not significantly reduce the broker’s or agent’s operating
costs and overhead.

This problem is compounded if the volume that the builder is providing is scattered across multiple sites. In that case, the actual economy of scale is suspect, at best. You need to help builders understand that.

TWO VIEWPOINTS

Communications between real estate agents and builders can be somewhat difficult, as each has a different perspective. Agents often have a hard time negotiating with builders on behalf of their own buyers as they become the voice that is suggesting a lower return on the builder’s investment. Experienced agents
can often lead the builder to see that an offer is simply what a particular buyer is offering to pay; it may be a negotiating ploy but not an indication of true value.

As builders, we often hear agents say “this is what it is worth.” But with the large sums of money we have invested, and the enormous risk involved, this can be hard to accept. It is important to understand that the causes of builders’ perception of the value of their homes are complicated and multiple. Basically builders tend to overvalue items that are not often seen by buyers (ie: better quality lumber or shingles) and they often surround themselves with “yes men.”

If they are not getting insightful and good guidance when they enter a project, and their pricing is not in tune with the marketplace, the real estate agent has to overcome these factors when presenting an offer. As a builder, I am most placated by low offers when the agent attempts to maintain impartiality and can present comps to support the offer.

That’s when we have the best chance to negotiate a successful outcome since there is a basis for discussion. Perhaps a comp that was considered is invalid, or perhaps I reached too high on price and now see the offer is closer to being reasonable. After all, if I push for a higher price it may not reach that point with the appraisal. No point in getting a contract at a high number if it can’t appraise out.

LEARN THE BUSINESS

One of the most effective ways for sales agents to convert builders into easier clients and cooperative partners is by learning about the particulars of the new home market—both the sales side and the actual construction basics. Many trade associations and community colleges offer basic introductory courses that will help real estate brokers and agents with these goals.

This knowledge will also help real estate professionals show potential buyers that they are well informed. Builders often discuss in private a perceived lack of knowledge about construction in many markets. This can create unrealistic expectations that the builder must overcome during walk-throughs and in the warranty period. Education will help the sales agent build a closer and stronger relationship with the builder community.

COMMON MISPERCEPTIONS

One of the most fundamental challenges that real estate brokers and agents must overcome to gain the cooperation of builders is the way that builders perceive them. One of the most common misperceptions by builders is that the agents have no risk. Because homebuilding is so capitalintensive, many builders do not recognize that other businesses are fraught with comparable risk. For example, even the newest agent knows the amount of work and money that goes into marketing and touring with potential buyers.

All of this is done without any guarantee of making a sale. Furthermore the listing could expire without a sale, in which case that advertising investment and open house time is totally lost. Builders don’t have to worry about that—they cannot lose the listing! Of course they have other concerns, but their perception of the real estate agent as having nothing at risk must be recognized and overcome. A direct attack on this perception may be difficult, but the best chance for success comes from a two pronged approach.

First professionalism is key. If your dress and knowledge is consistently top notch,
builders—and prospective buyers—will respect you as a person of authority. The proper attire for new home sales does not necessarily mean fancy clothes and expensive shoes but rather whatever is appropriate. Jeans should be avoided at
all cost, but always have some boots or sturdy shoes available.

Builders perceive agents who are not dressed for jobsites as unqualified for new home sales. The second strategy involves simply being aware of the builders’ misperceptions about agents. This awareness can be used to help establish better communications and avoid major pitfalls. If you are aware of the builder’s negative perceptions and preconceived notions you will be more likely to create a positive perception of yourself.

A young agent who had a listing for one of our homes had done a great job finding a buyer and helping us to get them into contract. The buyer asked me to meet them to allow their painter access to provide an estimate for work that would be done after closing. When I arrived at the home I found it unlocked! I knew that the sales agent had shown it to another party the night before. When I called her, I said I was quite upset that she had failed to lock the door.

She naively said, “Pete, relax! It’s not like there is anything of value there. The house is unoccupied.” As you can imagine, this did not create a positive impression upon me. It occurred to me that she was so used to resales what she was unable to perceive the amount of money we had spent nor the risk of losing the deal if the house was significantly vandalized.

While I understand what she was getting at — there are no personal valuables that can be easily removed — for a builder, a finished home ready to close with a buyer is a major value!

WHAT WE WANT TO HEAR

Now that you understand the misperceptions that builders hold and some of the common pitfalls in dealing with builders, let me tell you what is important to builders as a group. We don’t want to hear a long-winded pitch on your marketing plan. You should definitely have one, but boil it down to a succinct summary. Bullet points are often a good format. We want to be assured that you really understand the new home market and current local sales conditions.

Your years of experience is also important, as is your commitment to learning about the individual builder and their offerings. We also want to be assured that either you will be handling the showings yourself or that you will be assisted by someone you supervise and control, and that they are equally knowledgeable. Never forget that working in an environment that is filled with aggressive, assertive males, builders often respect people with concrete ideas and who can articulate those ideas clearly and succinctly. We are equally impressed with consistent follow-through.