Here’s a shocking revelation…

…builders and real estate agents don’t always work together as well as they should. If you’ve worked in real estate, this is not exactly news.

But the reality is that there are very good reasons these two groups should value each other more.

Now, there are certainly agents who understand how to sell new homes and communicate with builders in just about every market around the country. And there are builders who understand the value of real estate agents and their needs and challenges in most markets too. Yet, probably less than 15% of all active agents pursue new home sales. There are a couple of reasons for this.

You would think that the main reason has to do with builders not wanting to work with agents in order to save money on commissions. There’s some validity to this. Yes, agents strive to earn and protect commissions, and builders strive for increased profitability. If a builder can sell a home without paying an agent commission, more money falls to the bottom line, right? While this statement is true, most builders are smart enough to understand what this short-term boost in profitability costs them in the long run.

Builders who don’t actively pursue agents risk losing one of the most valuable sales channels available to them. According to NAR, some 88% of homes sold are sold with the help of a REALTOR. Builders who spend their time chasing the 12% of sales that don’t come with an agent will likely miss out on the bulk of the market and often miss their sales goals. Even if this strategy works short term in extremely hot markets where builders can’t build homes fast enough to keep up with demand, those markets are rare. And even when they exist, they don’t last forever. Most builders understand that actively pursuing and marketing to agents builds strength within that agent “sales channel” for when markets inevitably contract. They gain sales, and they gain market share.

So if most builders understand that agents have value and offer them qualified buyers, why then would builders NOT want to work with them?

Builders Update recently conducted a builder study on builder-agent relations, and what we found was that while most builders perceived agents as coveted business partners, there was a percentage who found agent-related sales to be aggravating and challenging. The biggest reason for this, they said, was that some agents don’t understand the new home construction and sales process. According to the builders interviewed, that lack of understanding and education about new homes can leave agents who typically don’t sell new homes feeling vulnerable and even intimidated in front of their clients. Not a position they want to be in. That, in turn, sometimes often leads to less-than-cooperative relations between agents and on-site sales people.

The key to making the relationship between these two parties work, is education. Investing in new homes education can pay dividends to agents. Builders offer agents expanded inventory, often sales incentives and a competitive advantages over agents that don’t sell new homes. To their credit, there are a number of builders that offer significant agent outreach, and there are a number of brokers that offer new homes education to their agents.  Check with your local builder and broker to see what’s offered in your area. It’s worth the effort. You can always reach out to Builders Update as well. We can help put you in touch with builders in your area.

 

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