Understanding Builder Relationships in Real Estate

Instructor: Tara Schofield

Tara has a PhD in Marketing & Management

Builders are an important part of the real estate industry, building homes, commercial properties, and other forms of real estate. Learn how you can work with builders to increase your business.

Builder Relationships

Builders are the constructors of new real estate. You may find builders creating one home or an entire subdivision. All builders have the same focus: selling the properties before or as soon as they are finished. They don't want to sit on rows of empty houses without any buyers.

New Construction

Builders typically conduct business in two ways:

  1. They build homes that are pre-designed and ready to sell. Once the homes are near completion or finished, they actively pursue buyers to move into them.

  2. They prepare plans for a large subdivision and begin the structure of the neighborhoods by grating the land and putting in curb and gutter. During this process, the builders offer basic home plans that buyers can customize to their specific needs. Buyers can select the lot and the floor plan of their home, adding colors and individual choices based on options provided by the builder.

Builders who are building subdivisions and neighborhoods at once often will build a model home, a sample home of each model available in the area. Buyers can walk through the model homes to determine which floor plan is most fitting for them and which style of home they like. Typically in standard subdivisions, builders have a few floor plans available that the buyers can change.

Inventory

Builders may have a smaller inventory if they make custom homes for individuals or are smaller builders with a limited number of homes being built at once. Other builders may have hundreds of homes under construction at any time, creating a large inventory of homes available for buyers.

Most builders will limit the number of homes they pre-build because they do not want a large number of empty homes without buyers. They prefer to build a few homes as samples and sell future homes based on those models. However, most subdivisions are on very tight building timelines and homes are built in a relativity short period of time, making the need for help selling the properties even more critical.

Representation

Homebuilders often have an internal sales team to help market properties. They may hold open houses, tours for real estate agents, and large sales events. The regulations applying to sales for home builders can be different than regulations for real estate agents, depending on the state.

Home builders use a different sales contract than the state real estate commission provides for real estate agents. Additionally, in some states, home sales representatives for home builders do not have to be licensed real estate agents. They must be employees of the home builder and follow the rules governing home builder sales.

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