Successful Buyer Representation in New Home Sales

Presented by REBAC

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Module One: How the New Home Sales Market Works

Objectives identify types of residential builders and

products summarize the new home development

process describe the new home purchase transaction identify unique aspects of new home sales

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Custom Homes

Quasi-custom

– selection of plans– some modification

possible– buyer buys land,

plan, & construction from builder

Pure custom

– one-of-a-kind– unique plan– buyer buys land– buyer hires architect

& builder

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Production Homes

Tract

– finished models– no modifications– usually in a

subdivision– buyer buys lot &

finished home from builder

Modified Tract

– partially-built models– options &

modifications possible

– buyer buys lot, options, plan & and construction from builder

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Building a HomeA.

Pre-develop

B.Plan

C.Permit

D.Build

60-90 days

60-90 days

15 days

120 days

Possible Time Line

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Subdivision Pre-development

survey planning &

approvals grading water & sewer

gravel curbs & asphalt gas and electric lot corners, re-

survey

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House Plan

sketch ideas identify dimensions & other

specifications prepare & present preliminary plans convert preliminary plans to formal

drawings

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Permits

submit plans to officials receive building permits

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Build Cycle Inspections

soils and footings poured walls and

backfill initial plumbing, heating,

electric framing insulation

drywall final plumbing, heating,

electrical finish grade siding shingle septic

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Final Step

Certificate ofOccupancy

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Contracting and Closing

initial deposit-- on signing downpayment balance-- after planning lot purchase-- before construction periodic payments-- on completion of

phases closing-- on completion of (most)

construction

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Contract Variables

deposit percentage downpayment percentage advance purchase of lot additional payment for risk periodic construction payments

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New Home Financing Long-term builder financing

– interest rate incentives– downpayment incentives– buydowns

Construction financing– periodic disbursement– increasing principal balance– retired by permanent loan

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New Home Seller’s Attitudes

““Buyer reps don’t have a clue.”Buyer reps don’t have a clue.”

““Bring in the buyer and Bring in the buyer and

then get out of the way.”then get out of the way.”

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The Selling Process

Existing Homes– identify needs– identify location– show available

homes– select a home– if no sale, select

another

New Home– identify needs– identify level of

customization– define buyer

concepts– plan & price specs– if no sale, lose buyer

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New Home Sales Skills & Knowledge Builder Representatives: explain construction process explain stages and timing of development

process explain construction financing convert needs to specifications convert specifications to costs sell intangible and non-existent features

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Module Two: Building Relationships Objectives characterize builders characterize builders’ sales representatives characterize new home buyers identify ways to build productive relationships with

builders, sales representatives, and buyers

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Builder Characteristics

large / small custom / production specialties business practices documented reputation

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Documented Builder Reputation

how long in the area financial depth and history subdivisions/homes built record with budgets and schedules quality and quality control work force-- type and management professional associations

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Builder Attitudes-- Buyer’s Rep

Builders want you to:– bring in qualified buyers– let the sales rep handle the buyer– remain invisible– know your negotiation role

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Builder Attitudes-- Pricing and Commissions

Pricing is tight:– cost plus profit– narrow margin– not negotiable– same with and

without representation

Commissions all right:– most recognize need

to pay commissions– percentage of base

price (no options)– buyer rep must

properly register buyer

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Registration of the Buyer

by the builder– not your client– no commission for you

by the buyer rep– go with the buyer– follow the builder’s rules

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Builder Relationship Guidelines

Learn the builder's business. Stick to your role. Recognize the builder's pricing

imperatives. Be flexible. Observe the builder's policies.

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Sales Rep’s Characteristics

knows builder’s business and the market knows how to convert buyer’s vision to

tangible product with a price tag works on commission or salary plus

bonus shares builder attitudes toward buyer

reps: “Bring me the buyer and get out.”

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Sales Consultant Relationship Guidelines Let the sales rep work with your buyer. Respect the sales rep’s expertise. Focus on advising your buyer, not on “the

best deal.” Follow registration and showing policies. Show enthusiasm for the builder’s

product.

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Traditional Fiduciary Dutiesof an Agency Relationship loyalty obedience reasonable care and diligence confidentiality full disclosure accounting

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The Representation Agreement

Include and discuss: the property scope of work exclusivity duration payment for third-

party services

consent to show properties to other buyers

dual agency concept agreement

compensation miscellaneous

contract items

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New Home Buyer Characteristics

has built before has bought new before has detailed picture of desired home does not want repairs and maintenance can’t find the desired home doesn't want compromise wants to stay in one place a long time

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New Home Buyer Concerns

risk flexibility financing type of home level of customization quality health and safety

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Module Three: Serving the Buyer’s Homefinding Needs

Objectives apply a service philosophy for new home

buyers determine a new home buyer's wants and

needs match builders and homes to a buyer’s needs assist a buyer in looking at new homes help a buyer evaluate builders, subdivisions,

and homes

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Extensions to Your Service Philosophy discover needs

– let the buyer set priorities– make the buyer aware of alternatives

advise– pay attention to business details– keep buyer’s interests foremost

manage relationships– be the nerve center

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Relationship Central

Buyer’sRepresentative

Builder SalesRepresentative

Buyer

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What does the buyer want?

Current home– new / used– physical features– likes / dislikes– reasons for moving

New Home– preferred type– ideal home– ideal neighborhood– price range– timing– subdivision features

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Tracking Subdivisions

location amenities utilities time on market pricing overall ranking

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Matching Guidelines

Compare buyer’s prototype with subdivision profiles and builder ratings.

Let the buyer decide. Be careful - Do not steer.

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Guidelines for Showing Homes

Ask permission from sales rep. Share what you know about buyer’s

needs. Let the sales rep do the selling. De-brief the buyer alone later. Let the sales rep know the status of the

buyer’s decision.

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Evaluating Homes

lot house location subdivision builder

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Module Four: Serving the Buyer’s Transaction Needs

Objectives describe pre-offer preparation & research assist a buyer in the contracting process identify important monitoring services for

the build cycle assist a buyer at closing and beyond

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Preparation and Research

Give real estate advice, not “legal” advice - (refer to an attorney).

Research the subdivision. Keep track of all transaction documents.

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The Offer

price and terms deposits contract issues builder’s performance contingencies acceptance

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Common Pro-builder Clauses

performance substitution cost closing

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Pro-buyer Clauses

“reasonable limits” on performance clauses

buyer reliefs or remedies buyer inspections

Remember - Do not draft any contract language. Use only clauses that were pre-approved by an attorney

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Negotiating

More negotiable:– unreasonable terms– add-ons– payment schedules– treatment of funds– right to inspect– final punchlist– withholding of

payments

Less negotiable:– price– forms– location of closing– title company

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During the Build Cycle and Beyond Pay attention to inspections. Make sure independent inspections

occur. Monitor construction progress and quality

control. Monitor final punchlist. Negotiate

withholding if necessary. Attend closing. Assist buyer as needed.

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Summary of Services

advise on builders and subdivisions

educate on processes

help define needs and preferences

schedule and conduct showings and visits

help evaluate properties

research subdivision and builder

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Summary of Services-2

advise on options negotiate some

terms help understand

documents monitor construction

progress

maintain paper trail arrange for

independent inspections

assist at closing assist at move-in

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Module Five: Marketing your Services

Objectives identify ways of generating new home

sale buyers plan a marketing and selling message list buyer benefits of new home sale

representation services identify elements of a marketing plan

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Three Marketing Keys

how you formulate your message how you communicate it to the market how you present yourself to a prospect

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Tips for a Good Marketing Message why you (the new home buyer) need

representation my market knowledge how I manage relationships how I fulfill your housing needs how I protect your interests

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A Marketing Plan

Transaction/Income Goals Target Types Marketing Messages Marketing Budget Marketing/Promotional Programs Allocation of Resources Action Schedule

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Promotional and Selling Programs brochure and mailer advertising networking presentations

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Final Thoughts on Succeeding in New Home Sales Representation Know your market-- builders,

subdivisions, home products. Know how new home development and

sales occur. Know what you can do for new home

buyers. Provide superior service. Follow up after closing.