How Can Realtor’s Build A Relationship With A Custom Home Builder?
Custom Home Builders are like other buyers and sellers in many ways but different. They need a Realtor for various things and the relationship can be mutually beneficial.
Below is a list of items Custom Builders are looking for a relationship with Realtors:
- Pre sales clients
- Investors
- Building lots
- Sales presentation help
- Access to MLS
- Realtor office introduction
- Sell speculation inventory
- Staff Parade of Homes and open house events
- A Realtor they can refer
- Loyalty.
Pre sale clients- The life blood of most Custom Home Building Company's is pre sale clients. Sure, there are those that only construct homes on speculation but that only works in a really hot market. Every time I hear of a local builder that only builds spec homes it isn't too long before I hear that he changed his tune or is out of business. Many new builders start out that way but quickly find out the risk of building speculation homes is just too much to keep a business going. Successful builders look to the Realtor community to refer buyers that want to construct a custom home and builders don't mind paying a commission for that referral.
Investors- It takes a great deal of cash and financial fire power to build homes on speculation or enter a closed community. A closed community is one where a buyers selection is narrowed down to only a handful of builders. Usually, developers require a huge financial commitment. A couple of lot purchases just for openers and an active or completed speculation home. That might be two lots at $500,000 each and a million dollar spec home. If the community actually takes off the Builder has to buy additional building lots or get frozen out of the community if others snap up the rest of the empty lots. That’s not even talking about furnishing a model and the interest carry on all that debt. Many Custom Builders are looking for a financial partner to carry some of that risk. Realtors are usually the first to hear of an investor that is looking to get into the building business.
Building lots- Even if a builder has a client that is ready to build a custom home, many times they need a lot on which to build their dream home. Realtors are driving all over town and know where the empty lots or tear-downs are. A “hot home buying prospect” isn't any good if the Builder doesn't have anyplace to build their new home.
Sales presentation help- after I meet with a prospect the first time, my next step is to introduce them to my building team. That consists of my Realtor, Interior Designer and Architect. That’s an impressive team with a great deal of firepower! Home buyers like that. The Realtor can provide a building lot, list their existing home for sale, provide expertise on features and floor plan as well as the target price range for the building package. After all, if the meeting works out the way it should, my favorite Realtor will be the one selling the Custom Home five years from now when the Owners are ready to upgrade. Realtors are showing buyers and sellers homes all the time. They know what the market wants and what’s hot. Their feedback on the new set of plans is vital to a successful experience. Many times, Owners have a great understanding of what they like in a home but have no idea what actually sells. The Builder can tell them “that’s a bad idea” but it doesn't have the same credibility as when it comes from a Realtor that works with buyers and sellers daily. The smart Builder enjoys having an experienced Realtor on his team to help guide the Owners in the right direction.
Access to MLS- one of the tools the Realtor has at their fingertips is access to the MLS system. MLS provides a wealth of market information. What price are homes selling for in a particular neighborhood? How quickly are they selling? Frankly, I don't have to tell Realtors how powerful a tool MLS is because they use it all the time. There’s data the Custom Builder and pre sale clients need to make valuable financial decisions. Making sound home building decisions isn't going to be possible without the guidance of a great Realtor with MLS info.
Realtor office introduction- Custom Home Builders need the Realtor community and Realtors need Custom Home Builders. That’s the basis of any relationship, mutual need. It doesn't cost a Realtor anything to ask their Sales Manager to schedule time for a Custom Home Builder presentation to the sales staff. Most Brokers are happy to accommodate. Builders have lots of information sales people can use to build credibility with home buyers and sellers. Just let the Builder know what topic the sales team would find interesting and he will be delighted to stop by the weekly sales meeting.
Sell speculation inventory- Receiving a call from a Custom Home Builder asking to sell his new spec home is music to the ears of any Realtor. As a matter of fact, it makes $$$ signs magically appear before their very eyes! Smart Builders usually team up with a Realtor before they even think about building a home on speculation. Builders want to know what areas hot, size home, specifications etc. It doesn't make any sense to “build a home and they will buy”. The Realtor can provide a list of the things that will motivate a quick sale of a spec home. The right Realtor guides the Builder properly as they know the first call when the spec home is not selling is going to be to the Realtor that promised the quick sale if the Builder followed their advice.
The sale of a spec home is an entirely different animal than an Owner occupied home that is listed for sale. The owner occupied home isn't costing that homeowners anything from month to month. After all, they have to live someplace. As soon as a speculation home is completed the clock starts ticking. It’s as though the Builder has slit both wrists and his lifes blood is dripping on the ground. He has to sell that house before he runs out of blood (money). If that home sits too long, the Builder doesn't make any money for months of effort or worse has to bring a check to the closing. Talk about a motivated seller!
I like to say, there is nothing more lonely than a Custom Builder sitting on a speculation home for sale. Each day 25 people ask, have you sold your home yet? The subs and suppliers have all been paid and moved on to the next job. Meanwhile the blood keeps dripping. After a few months, even the Builders mom won't return his phone calls as she thinks he wants to borrow money to stop the bleeding! The right Realtor can make all the difference!
Staff Parade of Homes and open house events- Smart Custom Home Builders look for every opportunity to market what they do. Marketing a pre sale custom home is inexpensive compared to carrying a home built on speculation. Usually, the Builder provides incentives to their custom home buyer to allow their home to be entered into special events like opens houses, Parade of Homes or Street of Dreams. The Builder creates a win, win with their home buyer. This is where the Realtor steps into the picture. The home has to be staffed and who is more qualified than their favorite Realtor? Buyers that like the Builder’s work will require a building lot, someone to sell their existing home and other Realtor services. In exchange the Builder has a partner that is helping him put deals together.
A Realtor they can refer- I know it may seem that behind every tree is another Realtor but Custom Home Builders need a great Realtor they can send to their friends, family and home building clients too. People ask Builders all the time for a Realtor referral. Builders are delighted to refer their favorite Realtor as he knows his Realtor has been treating him right on other deals and wants his friends to have a great buying or selling experience too. For the Realtor the best part, the Builder doesn't charge them a referral fee as he's not licensed.
Just today, I received a call from an out of state home buyer looking for an already finished, Custom Home. I don't have any existing inventory so I texted my favorite Realtor their contact information. I know that even if there's nothing in it for me this Realtor will reciprocate when I need some help. What goes around, comes around when you dealing with the right people.
Loyalty- Is something everyone can understand. When a Realtor gets a call from a Builder it’s music to their ears to hear, “I’m only going to be working with you”. I'm not going to call anyone else to help me find tear-downs or building lots. The same goes for Custom Home Builders. They don't want to be just one in a crowd of five Builders. They want a Realtor that tells a prospect, “Regal Classic Homes” is the only Custom Home Builder I refer. After all, there’s a lot of competition out there and profit margins are on the line. Providing a prospect the names of 5 Builders is going to make the Realtor look good to the client but it’s not going to help the Builder feed his family. Loyalty, is a two way street! If the potential custom home buyer is looking to shop around let them find a competing bid on their own. Remember, we are looking for a relationship here between the Custom Home Builder and the Realtor.
Many times people talk a great deal about loyalty until there’s money on the line. Let's keep our eye on the big picture. A Custom Home Builder, Realtor relationship can last for decades, let's not be short sighted. The working relationship isn't about me, it's about we.
As you can see, there is a great deal a Realtor can use as a basis for a longterm relationship with a Custom Home Builder but like any great marriage it takes two willing partners, the right attitude and a great deal of work. Give a Custom Home Builder in your market a call and meet for lunch. Let him know what you are willing to bring to the table and see what he thinks. After all, we may be talking about a relationship that will be putting hundreds of thousands of dollars into your pocket over the years.
All comments are welcome on this posting. If you are a Realtor, what do you bring to a Builder relationship that I haven't already mentioned?
Read More- am I paying my Realtor too much commission?
Read More- should I ask my Realtors advice before I build a new home?
Have an awesome day!
Mike
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