Breaking Ground on the New Construction Business

Jun 14, 2013 4:32:53 PM

Across the country, reports of a recovering housing market have filled the news. Among the markets on a positive trajectory: new home sales. Last month, the U.S. Census Bureau reported that sales of new homes edged slightly higher in April, selling at an annual pace of 450,000, which was up 2 percent from March 2013 and 13 percent from the year earlier sales price.

Historically, a rise in new home sales corresponds to economic growth, the result of an increase in construction jobs created and big purchases of necessary goods, such as appliances, made by homeowners. Keller Williams associate Jay Day proves that good news for the new home industry can be good news for real estate agents – if they are willing to put in the time and energy it takes to dominate the new construction category.

JayDay-New-Home-Construction-TipsDay, who works in the Ellicott (Md.) market center and came to real estate from the corporate world, got into new home construction almost by chance when he saw directionals for a community being built by a national builder. “They weren't hiring real estate agents then because the market was hot and directionals would get the homes sold,” he says. “They said their percentage of sales from real estate agents was something like 5 percent, so I told them I had a solution for increasing that number. I made a promise to them and delivered on that promise.” Getting in when the market was hot wasn't normal – Day didn't do it without hard work and some objections. But it was when the bubble burst in 2008 that Day’s builder-focused business really took off. “When the market is booming, builders feel like they can get the job done, but when their numbers drop, they’ll do dramatic things to get sales.”

Which is why, he adds, as builders ramp up their business, “educated agents who understand construction need to get in now.” Day’s new home sales business runs the full gamut, handling multiple listings and even on-site staff for builders. For other clients, he conducts studies and analysis before they purchase the land. Once a builder approves the sale, the buyer team goes in and sells new homes.

One of the more interesting services they offer helps builders price homes backward. “If they've got a piece of land, we can tell them what the homes need to have (down to the type of siding and shingles), what the sale price needs to be and what financing looks like. The commission doesn't come from the sale of the land, so we charge for that service instead.” He continues, “But agents need to deliver. If your numbers are off, they’re not going to use you. Your reputation is everything in this business.”

Day shared three more pieces of advice to successfully break ground in the new construction sector:

  • “Don’t go in haphazardly and say you can do something better,” Day says. “Examine the builder’s presence. Are they using multiple listings? Is it being done properly? Get some details from them, and come in with something of value. Don’t do it for free though, because we can’t devalue what we bring to the table.”
  • “You also need to know the lingo and the jargon. If you’re new, try to get some education. Eight years in, I’m still learning new stuff. You need that mindset of constantly learning and improving.”
  • “Understand land and follow up with trends in housing. Right now it’s all about cost. Know the specifics about your market. Maryland is a small state, but what’s required in a house in one area compared to another can be completely different. In some areas, you have to have granite counter tops and a finished basement or it won’t sell, but 30 minutes away, you can get away with vinyl floors and different paint colors.”