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Builders’ New Selling Strategy – Should Home Sellers Follow?

For Sellers in Princeton, as well as across the country, the chill in the housing market raises questions as to what new marketing strategies should be employed in this market. According to National Association of Realtors sales of existing homes declined 4.3% in August – the slowest number in 5 years. There is a 10 months supply of homes for sale at the present rate of sales; two years ago this number was 5 months. The forecasts from the economists do not sound promising until 2009.

The homebuilders have historically been attuned to markets and aggressive in coming up with new strategies. They pioneered the concept of Staging – something many existing home sellers have adopted much later.
Selling Home

So, what are the homebuilders doing now and should Sellers of existing homes take notice?

“Deal of the Century” –is what Hovnanian called their 72 hours sale over the weekend. They offered discounts up to 30% and sold 10 times the usual weekend number.

D. R. Horton this weekend is holding an auction of 53 homes in San Diego. The starting bid for some homes are 50% lower than before.

Lennar – is saying that they are not following suit, but there numbers are not promising. Their average home price declined 6% in 3d quarter. Their incentives per home increased from $36,000 to $46,000.

As the ripples of the housing market slowdown continue to effect many sectors of the economy, with Lowes among others revising their earnings estimates, home Sellers have not yet adopted new strategies, or perhaps not adopted yet to the new market reality. The reality check is something that the Sellers need to understand. Unlike stocks or bonds, homes have a big emotional component. However, when it comes to selling or buying real estate the same market rules apply as to other types of investments: it's worth what someone is willing to pay for it. Real estate agents need to be proactive to bring this reality to their clients. To read more about how to sell your home now click here.

Please call Faina Sechzer at 609-553-4175 to discuss how to sell your house now.

Posted by Faina Sechzer - Princeton, Montgomery, Hopewell, NJ Real Estate Expert on 09/30/2007 12:01 PM

Comments (20)

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20 Comments on Builders’ New Selling Strategy – Should Home Sellers Follow?

SEP

2007

Consumers like a "sale". I think it was just great marketing. How would you apply it to individual home sales?

Very observant Faina.

I sold one of the KHavanian homes on the weekend of their 72 hours special. My buyers did very well.

This week, I've been alerted about another local builder doing a sale next weekend.

Builders are leading the way to price reductions in my area. Foreclosures are following to bring prices down.

Sellers are coming last, kicking and screaming.

Maria - Builders have a business perspective in everything they do. Many of them are public companies and are accountable to their share holders for their results. Home Sellers in that sense are different - they are only accountable to themselves. They have a choice as to whether to sell or not. But if they want to sell, the same market forces apply to them as to the builders - if the home is not priced at the market price it will not sell. It is a challenge for both sellers and agents, as we need to become more precise in pricing and persuasive in marketing.

Lenn - I think you provided value to your buyers by pointing out the opportunity that was presented in the market. This remains the value we bring the consumers regardless whether it's a weak or strong market. This client will most likely be buying or selling through you again because of your value added. Hopefully the market will be stronger then.

He who sells first wins right now. I tell this to my sellers and the ones who listen are very happy they did so.

Adam - the clients who listened to your advice are most likely be your best referral sources for the future - they hired an expert and listened to the advice. What is the point of hiring someone and then doing the opposite from what they are suggesting? Thanks for sharing your experience.

OCT

2007

Faina,

Nice post. It's unfortunate that builders are dropping prices because it is affecting individual sellers who are trying to sell their homes as well. However, these sellers cannot compete with the builders and so it is causing a downward spiral effect in the market as sellers try to keep pace with the builders in selling homes.

I believe if builders had not reduced their prices drastically, these potential foreclosures might not have occurred. I know of a builder who did this to a tract of homes by reducing it so dramatically that it is affecting the lives of the homeowners who originally bought it in the earlier phases. It is sad but it is a fact of life. These builders are looking out for themselves and are oblivious to the fact of how their rash decisions have deeply impacted the livelihood of these homeowners. I feel sorry for the homeowners but we all have to move on. Unfortunately, it is a business decisions since the builders are only looking after their own interests and their bottom line.

Dave

Dave - thans a lot for your insight. When peoples investments in stocks, bonds and real estate go down it's painful. It's even more painful when it's someones home, since there is a big emotional component there. But those that Need to sell, have to look at the reality of their market and act accordingly. Those who were not totally clear, why they are selling, may want to decide to wait.

Apples to Oranges. Most sellers have no way of competing with builders on either price reductions and/or buyer incentives. This summer in my market I have seen sellers bringing money to close. I do agree with you that seller motivation must factor into the price. Hopefully the negative media will find something else to do. Great Post

I saw an advertisement in my local newspaper last week that was offering a "special price" for a home that weekend only. It was listed with a traditional realtor (not a FSBO). My intial reaction was what a gimmic, but maybe it really was a creative strategy in the current market. I don't know if it was successful.

Linda - in my experience builders historically are creative with their marketing - they have to -their shareholders demand this. So may be we should be watching them more carefully in this market, and see what ideas can work for us. So may be the ad in your paper was borrowing the idea.

Keith and Robin - you are right. The point of the post is for the Sellers to be tuned into the market. Builders have to do it- they answer to the shareholders. Sellers have to do it - to sell their homes.

OCT

2007

Faina- Great post. Sellers are in denial right now. They do not want to budge and buyers do not want to pay. That just causes more slowdown in the market. The builders here are really discounting so much that we have 32 short sales that we have listed and the builder who is a competitor has the same model, brand new, for lower than what the sellers owe to the lender! SO that really hurts our seller. People would rather have the same mode for less brand new! Katerina

Faina, Home builders ridding themselves of excess inventory is not the same as an individual seller needing to sell. If the builder is "dumping" his inventory the affected individual sellers need to stand aside and wait until the dumping is done, then re-enter the market. Don't use the "fire sale" prices as comps or an indication of the actual market price either. This is "unfair" competition in the strictest sense of the word.

Bill Roberts

Bill - the idea of the post is to urge the Sellers:1. Get real with the market; 2. Look for the best marketing strategies -builders are often the ones who use them. There are also sellers who who are not in a position to wait, i.e. have to sell. For them the waiting game -is a game of loosing money. I don't base pricing of existing homes on the sale of new ones, since it won't be too relevant. Thanks so much for your ideas.

Katerina - I could not say it any better. Another name for the post: "Sellers -get real". Thanks for your comments.

Faina, As several of the comments attest that the builders are only reducing their profit margin slightly, whereas the individual seller usually has their property on the market for several reasons, they either are moving away from the area, moving up in class, or downsizing. So the urgency is much different.

One solution/advantage that individual seller s have over the builder, is that they can capitalize on the market by offering with the option to lease during the market uncertainty, and later come back and sell. As I pointed out in another post, if the buyers are not buying they certainly renting, thus on average paying more to rent than if they had bought the same property.

Paul - no question, builders and buyers are not the same. For one - most the builders answer to their shareholders, the Sellers -only answer to themselves. You are absolutely right that the Sellers have other marketing options at their disposal. Thanks very much for your comment and I will check out your post.

I feel that sellers should follow along and offer incentives. Unfortunately some sellers think the answer is to cut commissions to save money and "make up" for what they think they are losing.

Tina - this is the most amazing thing. It's like asking a stock broker to pay us back his commission, if the stock goes down. No one would think of doing that. It's not even equal analogy, since the stock broker does have responsibility for recommending the stock. The real estate agents responsibility - is to know the market and recommend the right price. Thanks so much for commenting on my post and weighing in with your ideas.

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