By John Caulfield
For the past several years, builders have actively sought help from REALTORS® to find qualified buyers. The National Association of REALTORS® estimates that two-thirds of new homes sold in 2013 were purchased by buyers brought to builders by REALTORS®.
Rei Mesa, president and CEO of Berkshire Hathaway HomeServices Florida Realty, with 40 offices throughout the Sunshine State, notes that 62 percent of buyers who purchase houses from his brokerage’s parent company, the builder WCI Communities, come with REALTORS® attached. “These guys get it,” says Mesa about WCI and other builders that embrace their REALTOR® liaisons. “They understand that REALTORS® can be a reassuring presence” for buyers.
Mesa adds that some builders have even stepped up their bonus programs and commissions for agents.
The big question, though, is whether builders’ courting will ultimately prove to be a flirtation of convenience or a longer-lasting affair? As economic conditions improve, and as motivated buyers flock back into the housing market, will builders and REALTORS® dance or spar for customers?
Embedded with Buyers
REALTORS® candidly acknowledge they could become less relevant to builders as buyers become more plentiful. But that’s less likely to happen in markets where REALTORS® are firmly ensconced. “We’ve been 100 percent REALTOR®- listed for 21 years,” says David Erickson, president of Grayhawk Homes in Columbus, Ga. “We’re in a small market, and if you don’t have a REALTOR® relationship, you don’t sell homes. Period.” Grayhwak recently opened its first sales office, “but we still pass along our customers to the REALTOR® community,” says Erickson, whose wife is a broker.
During her 20-plus years in the business, Patti Beaulier, owner and CEO of CENTURY 21 Realty Partners in The Woodlands, Texas, says Houston-area builders have consistently used REALTORS® as “buffers” to “explain the process to buyers.” Beaulier specifically cites Toll Brothers, which as much as any national production builder encourages REALTOR® relationships: recently Toll has been taking advantage of Century 21’s global tentacles to attract prospects from China and Latin America to Toll’s homes in California and Texas.
A sizable number of Houston’s buyers—40 percent, by one estimate—are relocating from other states, and those buyers “have generally been the purview of REALTORS®, ” says Mark Woodroof, a partner at the brokerage Better Homes and Gardens Real Estate Gary Greene. He notes as well that Houston is a big master-planning community market, “where developers drive [customer] traffic, and 80 percent of that traffic comes from REALTORS®.”
Alex Saloutos of First Weber Group REALTORS® in Madison, Wis., says he receives a couple of emails a week from that market’s largest builder, David Simon Homes, whose pre-recession marketing had been directed exclusively toward consumers. (He should know; he was that builder’s marketing VP back then.) Saloutos thinks builders continue to target agents and brokers because “buyers are more aware of the value of REALTORS®. I can’t tell you the number of deals I’ve done lately where I’ve had buyers on ‘instant search,’” where he finds a home in the morning, makes an offer, and the buyer signs a contract by the end of that day.
Buyers Come First
This isn’t to say that some builders and REALTORS® don’t see each other as rivals who are convinced they alone have buyers’ interests at heart. But issues that kept them apart in the past seem less intractable after a brutal recession clarified their mutual goals of making the buying process as painless as possible for prospects.
Last year, Georgia’s REALTOR® and Home Builder trade groups got together to create a uniform construction purchase and sales contract that managed to iron out buyer-related binding arbitration issues that had previously been a sticking point for smaller builders. The two groups “bridged the gap, so that the contract didn’t cause the transaction to fall apart,” says Seth Weissman of the Atlanta-based law firm Weissman Nowack Curry & Wilco, who is general counsel for the Georgia Association of REALTORS®.
Concerns about new-home scarcity are still a reality. And those builders that are catching up with demand and putting up more spec homes are doing so cautiously. “Back in 2005, if you had a 1,000-unit community, they’d build 500 and see what sold. Now, they’re building 25 at a time,” says Woodroof. Still, Mesa says he’s buoyed by any new construction. “I get excited because that’s my future inventory.”
On its website, The Providence Group of Georgia, which is on track to close about 40 homes this year, states “we cherish our loyal REALTOR® community and would love the opportunity to stay in touch with you by providing you up-to-date information on our community grand openings, special REALTOR® incentives, REALTOR® Events and community updates.” In April, Providence was one of five local builders that participated in a REALTOR® bus tour of their neighborhoods. The builder also holds lunches for REALTORS® on a regular basis, says Kelly Fink, its vice president of marketing and online sales.
She adds that when a REALTOR® has a positive prior experience with a builder, “it makes things a lot easier from contract to closing.”
Steve Hoffacker, a licensed broker and the author of “Selling with Builders—How REALTORS® Can Profit Selling Builders’ New Homes,” contends that smaller builders could benefit most by tapping into REALTORS®’ marketing and sales prowess, two areas that usually aren’t the builders’ strong suits. And Woodroof says that custom builders in Houston need REALTORS® to help them find land to build on: “We know where the dirt is and where one-off lots are” in a market where locating either “is like looking for a needle in a haystack.”
John Caulfield is a freelance business journalist and former senior editor with Builder magazine.