Agents: Here's When To Turn To New Construction

Career
June 22, 2021

It’s easy to find yourself in a bind while operating in the current housing market. Agents are searching far and wide for homes that fit their buyers’ criteria albeit it all within an era of bidding wars, multiple offer situations, low inventory, increasing prices and an overall housing shortage. Needless to say, it isn’t the easiest time to be a real estate agent. 

But if you’re struggling to find the right list for your client, there’s an avenue that you may want to explore: new construction. In hopes of playing catch up to the nation’s inventory shortage, there’s been a rise in residential construction rates. Back in March 2021, new housing starts were at their highest levels since 2006, and single-family home construction rates are seeing an even higher rate. 

While new construction is a specialized area of the industry, it’s a niche that’s in dire need of agent support. Just consider the risk clients take by walking into the model home of a new build location — model homes are staffed by agents hired by the builder. Without your representation on the first visit, the builder’s agent now represents both the builder and the buyer. And we can only assume the buyer’s best interests are not priority here. Even with this opportunity to make an impact, how do we know it’s the best time to turn to new construction? Our team provides a few scenarios where it may be in the best interest of your client to show new construction. 

1. When clients can’t get the “dream home” off of their minds

Two things go hand-in-hand here. One, there’s a massive housing shortage currently, meaning there are just not enough homes being listed for sale to meet the demand. In effect, your buyer has less of a selection to choose from. And two, a smaller selection means there’s less of a chance that the “dream home” is really out there. 

If you have a client who can’t seem to get the image of that dream home out of their mind, it may be time to show them some options from new construction (just create inventory when you can’t find any!). Similarly, needs are changing as the pandemic continues. There’s the “COVID migration” where residents are moving to more suburban areas along with the need for a larger space where the entire family can live and breathe at once. You can thank the quarantine experience for many families realizing their house just isn’t big enough. Building a home from the ground up, and choosing upgrades, fixtures, finishes, etc., gives clients the opportunity to customize the home in order to fit exactly what they need. 

2. When inventory is incredibly low

We already mentioned just how low the home inventory currently is. In fact, it’s estimated that 3.8 million homes are needed to be built in order to meet the demand. Housing supply is at a fifty-year low, and a lot of this goes back to the recession in the late 2000’s — new housing developments hit pause, and we’re reaping the consequences a decade or so later. 

When existing home sales top out, we’re only going to see listing prices increase, which could easily price your client out of the market altogether. And if you have a first-time home buyer, this experience could be overwhelming and discouraging. Another option could be new construction, where clients have more control over the housing cost. They can remain closer to the base model and cut out the costly upgrades.

On the other hand, a lot of new construction costs are related to location. Obviously, builders have to find undeveloped areas that have the capacity to spring up new communities. If your buyers are priced out of a desired area, it may be wise to see what nearby communities are currently in development that are a more affordable option. 

3. When a builder’s model home goes on the market

Often, builders will absolutely spruce up their luxury model homes with all the upgrades, add-ons, finishes, fixtures, larger lots, you name it. While it is far from what the base model will look like, it’s one way to get potential buyers interested. Generally, when a new community is close to finished, the builder will put the model home up for sale. And although the model home may have been built a few years ago, technically it’s still new as no one has lived in the home. In addition, these model homes generally go for a great deal because they’re sold at market value but are jam-packed with upgrades. This new construction option isn’t made for buyers on a tighter budget, but it’s a good way to show the comparison between already existing homes for sale especially when they come with modern energy efficient features and new appliances. 

4. When new construction has been sitting on the market for a while

Another time to turn to new construction as a real estate agent is when these builds have been sitting on the market for a while. Unlike a typical seller who remains in the home while it’s listed, a new build doesn't have an occupant waiting for the sale. Actually the contrary, a builder is losing money every day that a new build doesn’t sell. 

Aiming for a new build that’s been on the market for a while has one major downside, it’s not customizable. The buyer doesn't get to choose the floors, countertops or cabinet color, but the fact that it’s been sitting for sale means that there’s some wiggle room. Builders have a bit more wiggle room because of the incentives they have available to offer buyers: price, home warranty, closing costs and lender fees. Even if the builder won’t accept a lower price offer, especially if they want to avoid setting a cost precedent, they have the ability to offer additional benefits that are valuable to your client. 

Zipi is the Real Estate Operating System (OS) that aims to make real estate simple from agents and deals to commissions and billings. Request a demo to get in contact with one of our expert team members. 

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Written by
Jesse Garcia

Jesse’s 13-year career and tenure as an office manager, coach and top producing agent includes running two multi-million-dollar real estate offices and managing hundreds of agents, while increasing both production and profitability. It was this experience that led him to develop Pipeline Wizard, which became the proof of concept for Zipi.

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