While real estate agents wait for homeowners to sell existing inventory, the fact is that a decade of underbuilding following the Great Recession has left a housing shortage that will only be remedied by a slough on new builds. The good news is U.S. housing starts surged by 19.4% in March. The even better news (for agents) is that new builds mean potential new buyer clients. Getting buyer referrals from homebuilders is one way to increase your client base in a competitive market. Here are some tips for how to be top-of-mind to builders.
Most developers and home builders don’t have real estate professionals on staff. They often work with unlicensed salespeople, and those salespeople, with the help of a sales assistant, will sit in a model home seven days a week. This means those staff people are seeing a ton of unrepresented buyers who have homes to sell — a possible referral when a buyer client who needs to sell is unrepresented and needs a real estate professional.
Getting buyer referrals from homebuilders is a result of adding value, according to Andrew Franklin, founder of The Franklin Team, an eXp-affiliated brokerage in Houston, Texas. Franklin explained at the 2021 Modern Real Estate Summit that his team partners with builders by contracting to represent the buyer in marketing their existing home during construction.
“We’ll sell the existing home at a discount. But then, on top of that, we have a program where we offer them a certain percentage of the appraisal up front,” Franklin said. “And then if the house doesn’t sell, we’ll buy the house from the client a day before the new house closing date. We use a third-party appraisal to determine that value. And then, like iBuyers, we reimburse profit.”
The Franklin Team started this program 20 years ago, and have established relationships with local builders. The brokerage sold 1,800 homes last year, and Franklin said 60% of the business was related to this program.
Benefits to the builder and the buyer
- It creates incremental sales for builders’ salespeople by easing buyer nerves about their home selling, offering assurance via the buyout option.
- It converts people from a contingent sale to a certain sale via the buyout because they’re given numbers up front.
- It generates goodwill.
- It locks in the buyer.
As with most things in the real estate industry, getting buyer referrals from builders starts with building relationships with them. Realtors and developers can sometimes have complicated relationships, but those relationships can also be lucrative.
“You have to give them something of value for them to refer you to a client that has a home to sell or that needs representation,” Franklin said. “So they think of you when they have someone that walks through their house and doesn’t have a Realtor.”
Steps you can take
- Pick up the phone: Contacting the builder helps create trust. Make sure to let the builder know you want to grow a long-term relationship. Builders are going to work with the real estate professionals they trust the most, and who show the most interest. If they can depend on you to consistently provide great service and sell more homes, they will turn to you when they’ve got something to sell, said Christy Beck, director of operations for Caruso Homes in North Carolina.
“A Realtor can be a huge asset in branding and reputation building, because they will advocate a great company to their clients and other Realtors,” she said. “This expands the builders’ market, which means more sales. Referrals are just as important for new home builders as they are for Realtors.”
- Learn about new builds: Selling a new home is not like re-selling an older home. Realtors selling new homes need specialized knowledge and skills so they can answer their buyers’ questions about the financing and building processes, and also advocate for the new homes.
“Make an effort to master the ins and outs of new home construction,” Beck said. “Not only will this make you stand out as an expert, but it will help the builder trust you.”
- Show up: Getting buyer referrals from homebuilders comes from showing up at new builds’ open houses to get your name out there as someone who wants to sell new homes. You’ll also need to be ready to go to every meeting once a buyer has decided on a new build.
“A Realtor is the buyer’s representative and should be present at all meetings with the builder,” Beck said. “Being there lets the buyer know that you are working hard and have their best interests at heart. It also lets the builder know that you are eager to build trust and that you care about the entire process, not just getting that commission.”