Changing Tactics
Realtor and Buyer Education Are Key
by Cathy French
In 2006 when the new home market was just past its peak, most homebuilders viewed other homebuilders constructing in nearby communities and neighborhoods as their main competition. The downturn in the market has changed that perspective as today, a great deal of our competition is from resales, short sales and the more than 40,000 foreclosures in greater Phoenix.
Given the new reality, builders should join forces, working together to move inventories and sell homes. With interest rates at their lowest, home prices at historic lows and the federal government offering up to $8,000 in tax credits to first-time homebuyers-2009 presents an opportunity.
But how do we get buyers off the fence?
Educating Realtors
Realtors are hungry to make a sale-and buyers want the best deal. Unfortunately for homebuilders, inmany buyers'minds, the best deals today are foreclosures.Therefore,Realtors should be reminded both of the ease of selling a new home and the benefits a newly constructed home provides.
The market has driven us all to drop our prices, and while a new home may be priced slightly higher than a short sale or foreclosure, there are many other important benefits to buying new. Homebuilders need to do a better job of educating Realtors on these benefits.
The advantages are numerous: A new home is move-in ready and often offers the homebuyer the opportunity to select finishes, have everything completed to their liking and purchase a home with a warranty. From the Realtors' perspective, earning commission on a new home sale is as simple as bringing their clients to a builder's sales office and registering. The builder's sales team takes care of the rest. For the home buyer, there is no need to buy as-is with work to do later, haggle with the bank or have concerns about the unknown history of the home. While these advantagesmay seemobvious, the numbers are telling us that we may all benefit if we raise awareness within the Realtor community.
Direct Sales Approach
The old approach to selling was to know the competition, but today there is noway a sales associate can knowall of the foreclosures and resales on the market. In today'smarket, our sales people need to bemore direct with the buyer and ask, "Are you considering the purchase of a foreclosure home?"
Once again, education is the key. The sales associate must discuss the benefits of a new home and confront the buyer's fears.By asking questions, a salesperson can better uncover and diffuse fears. Let the buyer know about all the obvious benefits of purchasing a new home, along with other options available-new build price guarantees, long-term rate locks and job loss insurance.When the buyers understand these benefits as well as the opportunities the current buyer's market offers, they may be more eager to make a move now rather than waiting until later.
Create Traffic
Traffic to sales offices is significantly reduced.With fewer buyers out there and less advertising dollars available, how do we generate traffic?
The answer is simple; the sales team must step up and do the job by becoming creative and innovative. These cost effective steps can help increase visits to the sales office:
- Tap into the old cancelation list. You may be surprised to find that a previous buyer's situation has changed in your favor.
- Plan and hold Realtor presentations.
- Utilize complimentary mailing lists from a title company and do an inexpensive direct mailing.
- Hold a drawing for tickets to a popular event.
Take Advantage of the Stimulus
Don't assume potential buyers understand how the homebuyer tax credit works just because it is headlined in the news. Again, education on the advantages of buying nowmaymake the difference. Be sure to point out that:
- Interest rates are near all time lows.
- Home prices have declined to levels not seen in years.
- Qualified first-time home buyers are now eligible for up to an $8,000 tax credit.
Finally, buyers should understand that even if they are sitting on the sidelines because they believe home prices will continue to decline, interest rates may not remain at these low levels. If home prices were to decline 10 percent but interest rates available for home loans were to increase by 1 percent, a homeowner's monthly principal and interest payment would actually be higher.
At the end of the day, we will all benefit if we can reduce inventories. The only way we will ultimately achieve this is by working together, educating Realtors and helping buyers understand why now is the best time to buy.
Cathy French is Vice President of Sales and Marketing for the Arizona division of Standard Pacifc Homes, and is a 20-year veteran in the homebuilding industry.
