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The housing downturn has affected more than builders’ bottom lines. It's caused many of the industry's business fundamentals to shift beneath our feet.
On the brokerage side, fewer agents are finalizing more transactions than ever before. And while agents have less time to just visit communities and preview properties, they are selling a higher percentage of new homes than in the past.
On the home building side, cheap credit is no longer available and traditional marketing channels — newspapers, for instance — that were effective in the past are no longer working.
Builders are beginning to look to real estate agents for help, but many still are held back by the myths that surfaced in markets past.
Yes, those who embrace working with agents in today's market can thrive. But to do so, they first must dispel those myths. The following should help:
Myth #1: Bonuses Attract More Agents
Many builders may be shocked that this would be considered a myth rather than the truth. After all, builder sales normally increase when an agent is offered a bonus.
But keep in mind that every time a builder offers a bonus, it’s often accompanied by increased marketing to the agent community.
So, is the corresponding increase in sales due to the bonus or the increased marketing?
Agents at a large broker in Texas who responded to an anonymous survey indicated that bonuses were secondary to meeting their clients' needs and to being more effective salespeople.
They wanted to build long-term relationships with their clients — and to build a steady stream of referrals — so meeting their clients' needs with accurate and valuable information was more important than a bonus from a builder.
Of course, this doesn’t mean agents won't ask builders for bonuses — or refuse them if they're offered. But more consistent, informative and accurage marketing to agents, with possibly a smaller incentive offer, would be more cost-effective for builders.
Myth #2: All Realtors® Are the Same.
This is little more than saying that agents that shook builders down for their commission three weeks after the contract was signed represent the entire industry. Or that agents who only visit models for free lunches are typical of the industry.
Yes, those unprofessional agents are out there.
But the good news is that during the past few years, the real estate industry has drawn in many professionals seeking a second career, and that has raised the bar. The 80/20 rule that 20% of the agents produce 80% of the business is alive and well in today's market — and high-performing agents are selling more new construction than ever before.
With that in mind, the most cost-effective strategy for builders today is to target and market to that productive 20% of agents — and trim their mass marketing to the remaining 80% by abandoning flyer drops, magazine ads and other channels.
With more of their marketing budget directed at high performers, builders should identify key agents in their area and then personalize their marketing to them by sending them notes, candy, invitations to a special lunches and events. Builders will get noticed with this type of personlized and appreciative marketing — and enjoy greater success having those agents selling their homes.
Myth #3: Realtors® Don’t Add Value to the Transaction
But they can if the builder will let them because Realtors® can bring value to builders' bottom lines.
In most states, real estate agents earn their commission when they deliver a buyer to the builder, who later closes the sale. Essentially, they are being paid for generating a lead.
But, if builders focus on attracting high-performing Realtors®, they will get even more for their money.
First, they'll get an agent who can be a trusted third party and who can help set expectations and explain the ongoing building process to the buyer. For instance, they can explain that the bricks and mortar in the front yard will be removed as construction proceeds and that the rubble will, indeed, be replaced by a green lawn.
As a third party with no vested interest, the agent can intercede and explain to the buyer why the color of the carpet cannot be changed on the day it's scheduled to be installed without affecting the production schedule and adding to the cost of the home. The agent can step in and explain the procedures and — more importantly — calm the client down before the situation escalates into an argument with the builder.
This way, a happy home buyer costs less to maintain than an upset one.
Myth #4: The Key in My Marketing Is to Get Agents to Visit My Model.
Models win over buyers, not agents.
Customers buy on emotion. An agent give their clients opinion and advice based on information — the more accurate the information, the better.
What’s more, agents today generally don’t have time to visit a model home park to get the information they need. But once they have the information, they will visit a model when they have a potential buyer in tow. So what't the best way to get them that information?
During a recent roundtable interview, a large Dallas builder said he wasn't bothered by the fact that his website wasn’t accurate. He only wanted to use his website to pique the interest of prospects and agents.
Such an approach will discourage the high-performing agents that builders want to attract. If a community or builder website is inaccurate, agents simply won't bring prospective buyers to that community.
Accurate websites and next generation web services, such as buildersupdate.com, will help agents get the details they need to advise their client.
Myth #5: I Don’t Want to List With an Agent Because Other Agents Won’t Look at a Property Marketed by a Competitor
Agents have been cooperating when selling pre-owned homes for more than 40 years and they are cooperating when selling new homes, too.
Using as many marketing channels as possible is fundamental to selling effectively, and listing an inventory home with an agent will generate leads that builders cannot generate by themselves. Besides, builders don’t pay agents until closing, so exploiting their lead generation capabilities is simply wise and cost-effective marketing.
Because of the inherent fear in the current market, buyers are increasingly seeking agents to help them navigate the new-home market and provide them a certain level of peace of mind.
With this in mind, builders should approach agents with fresh eyes and effective marketing tactics. They must rid themselves of old assumptions and commit to a well thought-out agent strategy. Good results will follow.
Andy Bearden is a consultant for home builders and residential developers in Texas and Mexico and a speaker on marketing to real estate agents. He has more than 15 years of new-home construction sales and marketing experience, including nine years as a vice president of sales and marketing for a national home builder and six years on the executive team of the 11th largest real estate broker in the U.S. For more information, e-mail Bearden.
This article originally appeared on the NAHB Sales and Marketing Channel.
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