How to Become a Professional Home Builder – Market Research

Market Research and Marketing

If you do any type of market research in this industry, you’re going to be ahead of the competition. The bulk of the builders I know just manage day by day and never really do any kind of market research. The thing I don’t want you to do is go overboard in market research so that you never build a home. You need to develop an accurate and concise research plan so that you can reach a clear-cut decision.

One key to good market research is a good real estate agent [Success Team Member]. A good real estate agent is always on the front lines. He or she knows what the customers want and considers what they value. A good agent is one with whom you want to list and sell your property. Even if you’re a licensed agent or broker, let a professional handle this for you. They’re working for you on those nights and weekends when you want to rest. They’re your go-between with the customer. I don’t want to deal with the customer. I want the agent to handle those negotiations.

Getting a signed contract is when your work begins. I don’t get excited over signed contracts. I get excited over closings and when I pick up my check. A good agent will work with the buyers, help them with financing and many other related items that I don’t want to be bothered with. If you ever become one of those builders who assumes the agents don’t know anything, then you’re on the road to failure because the agents know everything. The beauty of it all is, the agent only gets paid when the home is sold. Always use an agent and never, never, never build what you want to build. Build what the agents tell you to build. When you start in this industry you can’t afford to be a pioneer, because pioneers get arrows in the wrong places.

Now, you don’t have to spend lots of time and money doing this. Here’s all I want you to do. Go into a given area where you plan to build a home and jot down three real estate broker signs that you see in that area – three separate real estate brokers. Go home and call all three brokers. When you call a broker, you’re going to get the agent on duty to answer the phone. Don’t get locked into the agent on duty because the agent on duty may have little or no experience. Tell the agent on duty that you’d like to speak to the broker. When you speak to the broker, tell the broker that you’re looking for an agent who is familiar with the area where you want to build and is a member of the Million Dollar Club.

Now, listen. I don’t want to take anything away from those hard working agents out there that are not in the Million Dollar Club, but when you start out you’ve got to go for the gusto. I’ve found those agents that are in the Million Dollar Club have sacrificed friends, relatives and social life to sell real estate. They’re committed professionals. That is the kind of person you want to deal with. Tell the broker that you’d like an agent that earned most of his or her commissions selling homes, not listing homes. There is a big correlation between selling and listing. The successful listing agent is one that cultivates a large network of people. They’re members of tennis clubs and golf clubs, and they know a lot of people. You want an agent that got most of their money selling homes.

The broker will know what you mean. The broker may give you the name and number of one or two agents they can recommend. Don’t deal with two agents within the same company. Just deal with one agent. Contact the agent with a list of pre-printed questions that you’re going to ask the agent. Don’t tell them your grandiose plans. Don’t show them any of your plans. What you want to do is tell the agent you’re considering building in a given area or subdivision and you’d like to ask them a few questions. If things work out, tell them you’d consider them when listing your home. If deep in your heart you know you can’t let them list the home because you’re locked in with another agent in the subdivision, or some other business reason, then be honest with the agent. Tell the agents you’d like to ask them some questions and you’d be glad to pay them for their time. If they answer your questions without wanting payment, send them some flowers or a small gift as a token of appreciation. Remember, you’re going to receive only what you give.

Ask them questions like:

· If you were going to build in this area what size home would you build?
· How many bedrooms would you have?
· How many bathrooms?
· Would the master bedroom be on the first floor or the second floor?
· Would you’ve a two-car garage or would you’ve a three-car garage?
· Would you have a basement?
· What do you think of the schools?
· What do you think of the area?
· What would you do that other builders aren’t doing?

Write all of these answers down. After you complete the call, thank the agent for his or her time, hang up and call the other two agents. When you’ve completed these three phone calls, combine your lists, evaluate them and determine a common thread where all three agents said about the same thing. I want you to incorporate all those things into designing your next home. Add to it all those little goodies that you think are great and wonderful, and that you think will make your home unique. Then develop a set of drawings.

After you get a set of architectural drawings that incorporate all these features call these three agents back and set up lunch or breakfast appointments. Go to a nice restaurant. What an inexpensive investment to obtain this information. After the meetings, show them your drawings. This will accomplish two things. (1) You’ll have a professional critiquing your drawings. They may see little things that you’ve omitted or little things that need to be changed. (2) It gives you an opportunity to meet the agent and see if your personalities mesh and in that way you may indeed hire him to list your home. I can’t stress how important this is.

I had a builder student who heard this same message. He went out and built a beautiful home in a beautiful subdivision and didn’t sell it. He had to give it away and lost his shirt. Why? Because, in this case, the house had only three bedrooms instead of four. Any agent in that area could have told him, “You have to have four bedrooms in this subdivision.”

I know of a builder who built a beautiful home in a subdivision and had to sell it at a loss because his master bedroom was on the second floor not the first floor. Most of the people in this subdivision were retirees and they didn’t want to have a master bedroom on the second floor. Any agent in that area could have provided this information.

I remember a builder who built a beautiful home in an area called The Atlanta Country Club at the same time I was building there. He sold it at a loss because his dining room was too small. Any agent in that subdivision could have told him, “Your dining room is too small.”

I built an $800,000 home when the interest rates were 18%. I showed an agent the drawings. In a large home like this, the owners liked to entertain. Consequently the flow of traffic through the home was important. I had what is called a dead-end living room, that is a living room with no access out. The agent quickly pointed that out. I changed this before we began construction. I’d have been sitting on an $800,000 home paying almost $300 a day in interest because I didn’t have another door in the living room! The agent is very, very important in understanding what the buyer wants.

Custom Home Builders Accommodate Buyers In A Changing Market

After the recent year or so in a sluggish market, custom home builders are making strides in meeting the expectations and desires of their buyers. While recuperating from a slow housing economy, custom home builders are finding solace and increasing sales by giving buyers what they want in the form of upgrades and eco-friendly features.

Large national companies also consistently provide consumers with attractive amenities, but they are finding it more difficult to meet the demands of buyers who yearn for “greener” options and inexpensive homes. As the laws of demand in a market dictate, both custom home builders and large national companies are attempting to “give people what they want.”

Custom home builders are accommodating the desires of their buyers by offering personalized options in new homes. Outdoor living options are a high priority in the minds of many buyers and designers. While a barbecue grill and kidney-shaped pool have traditionally been the standard, buyers are now opting for outdoor kitchens, kid-friendly pools, putting greens, ramadas, and even a few backyard skate parks. Designers say kitchens are a key focal point indoors, showcasing convenience and beauty.

Custom home builders are trying to promote a particular lifestyle through gourmet kitchens, islands, and upgraded appliances. They maintain buyers do not want standard kitchen appliances, choosing instead to have upgraded appliances in their new homes. In custom homes, buyers are also requesting bigger and more elegant guest rooms and bathrooms. In response to buyers wishes, custom home builders are “going the extra mile” to please their buyers.

Arizona new home buyers also follow national trends in their desire to live an eco-friendly lifestyle, and Arizona custom home builders are meeting their demands. Installing energy-efficient appliances is commonplace, but custom home builders are doing more to accommodate buyers who wish to live a “greener” lifestyle. Many Arizona custom builders have adopted construction techniques that emphasize conservation of energy, water, and resources. Yet this type of construction for the large national builders (who build a majority of the new homes in metro Phoenix,) this means completely revising their business structure, which is driven by production. The large builders view this as risky at a time when revenue is down and sales are stalled.

National home builders recognize the environment-friendly market, and many already include more common features such as dual-pane glass and low-water bathroom fixtures. More extensive green construction, though, involves numerous other items: ductwork placed underground or in “conditioned” enclosures and “gray water” systems that reclaim used water from kitchens, bathrooms, and laundry rooms and use it to irrigate the landscaping. These features can be expensive, and national builders are skeptical as to whether enough buyers are willing to spend the additional money on a new home. It is estimated that “going green” increases a home’s price by approximately 5%. National companies are finding it difficult to justify any features that raise a home’s price, at a time when they are trying to clear out their excess inventory.

Markets are influenced by consumer demand. If Arizona’s home buyers continue to follow national and global trends in eco-friendly housing, national builders will benefit from “going green” and begin to see their sales increase. Custom home builders in Arizona are already reaping the benefit by giving buyers exactly what they want.

Sources: “Greater Expectations: Model Homes Build up Buyers’ Appetite for Upgraded Amenities,” Susie Steckner, The Arizona Republic: July 7, 2007.

“Going Green is a Hard Sell for Struggling Home Builders,” Glen Creno, The Arizona Republic: July 20, 2007.

Buying Eggs – An Introduction To 21st Century Advertising For New Home Builders

Everyone has heard the old saying “love makes the world go round.” Most have heard the typical rebuttal “money makes the world go round.” But in reality, neither of these actually explains the movement of the universe.

The phenomenon that actually fuels the world in its revolutionary progress is purchasing. Money doesn’t have much of an effect on anything until it is used; until a purchase is made.

Some might say that the way in which money is used is determined by the individual in whose hand the bills reside; that the use of money depends upon personal and/or family needs and individual circumstances. To these people I would like to offer my congratulations on their idealistic vision of the world around them.

The world might be a better place if I could agree, but I would argue that the majority of today’s financial decisions are influenced so heavily by outside forces that they can’t really be said to be the direct result of personal needs or circumstances.

For instance, once upon a time if a man needed an egg, he wandered in the forest until he found an unguarded nest and he took the egg he needed (or all the eggs if he was greedy.)

A little time passed and a similar need would arise with a similar man and the man would fulfill the need by wandering out to his henhouse, lifting up a hen and taking the egg he needed.
More time passed and a similar man with a similar need might walk to the town market to purchase or barter for the egg he required.

Still more time passes; another similar man with the same need visits his local grocer on his way home from work to procure the needed egg.

Even more time flies away and we find ourselves in the world of today. But this man faces many questions before he will be able to obtain the object of his desire.

The first question is where will he purchase the egg? Is he going to go to a convenient store? It’s quicker; it’s more expensive; it may be very close.

Is he going to visit a grocery store? And if so, which one? Will he go to the closest store to his home? Will he visit the one nearest to his work on the way home for the day? Will he visit the grocery store that has the best sales? Will he visit the grocery store that is known to have the highest quality products? Will he visit the grocery store that is known for its specialty items? Will he go to a health food store? Will he go to the store he is most familiar with for that reason alone?

Once he arrives at the chosen location he will be faced with still more questions. How many eggs will he be purchasing? Will he go with a flat dozen? Does he need a dozen and a half? Will he look to see if they can be had by the half dozen? Or maybe he should buy in bulk.

Next he will need to know if small, medium, or large eggs suit his needs the best. Brand names and prices will vary and offer more options.

Some men would even go so far as to include the chickens from which the egg originated into their purchasing equation. Did the eggs come from cage-free chickens?

So what caused the drastic changes? What made it necessary to question such a simple, straightforward need and the mode of fulfilling it? The most obvious answer (and the correct one in my opinion or I wouldn’t be offering it to you) is the availability of choices.

When there is only one option that is the option that is used. And likewise, if an individual is aware of only one option, that is the option that is used. And similarly, if an individual is convinced that one option is better than another that is the option that is used.

You may wonder why we are discussing eggs. Eggs are a solid example of a need that has been in existence for so long that no one questions the fact that they will be bought and sold.

As long as people are around they will need (and want) to eat. Other such needs are obvious. After eating the most obvious need is shelter.

While natural shelters were all the rage “once upon a time” they are really only fully appreciated in our modern times during times of desperation, extreme survival, and dire emergencies. Other than that, most people look for a bit more in their mode of “shelter” nowadays than the nearest cave with convenient cover from the rain.

The same evolution of available options we discussed with the egg is evident when it comes to “shelter.” Today’s purchasers find themselves with a plethora of options when it comes to which home to purchase; especially once they’ve made the decision to build a new home.

It used to be that if someone decided to build a home they contacted their local contractor and that was it. He took it from there.

He had built other homes in the area and they were in use and apparently he was able to fulfill their need. Build it and they will come and all that. But we are all very aware of the myriad changes that have been wrought in this particular industry, and so are most of the buyers out there.

You might still run across the rare individual who is going to go to the nearest builder because they are in the area they are familiar with regardless of their standing with other local builders and national competitors. This is the same individual who will go to the grocery store they always visit because they feel comfortable walking in the doors, they know where to find the eggs and they know which cashier is the quickest.

But this individual is not as common as many think. Most purchasers know the value of their money and want to stretch it as far as it will go.

They research and they take unofficial surveys of friends and family to try to ascertain which product will best fulfill their needs. And all the time, smart builders are doing their best to put themselves in front of prospective buyers as the solution to their every individual requirement.

We call it sales and marketing. Advertising is all well and good. Sales are an accepted necessity, but the combination of both of these, along with appropriate research and statistical analysis to increase company profits, is the key to success in today’s new home building market.

Separating the marketing from the “sales and marketing” is a mistake that too many make. If you take the sales out of sales and marketing you’ll soon discover that all you have left is a lot of glitz and glam without any results. And results are the reason for “marketing” in the first place.

There are those in marketing who attempt to avoid the responsibility that is placed on them by the expectation of results by claiming that results can’t be measured in marketing. This is an embarrassing side step and an obvious attempt to refuse to accept that there is a purpose to marketing that makes it vital to any company; and that is sales.

Without the sales to go along with the marketing it becomes an extra expenditure that doesn’t pull its own weight. Companies that find themselves in this situation typically cut their budget and remove marketing from the situation altogether.

I can’t blame them, other than to berate them for failing to recognize that what they needed was to redefine their company’s interpretation of marketing and redirect their team towards a marketing program resulting in direct sales increases or hiring someone who can.

Marketing is measurable. And it should be measured. The easiest way, and most productive way to do so, is sales.

Good marketing should increase sales. And the only way an individual or company can be successful in a sales and marketing program is to always remember that their overall goal is to get more people to buy more stuff more often so that more money will be generated for the company and profits will increase.

Marketing is about selling stuff. It is not about creating an image. That’s another guy’s job that will help you in successfully selling and marketing your product, but won’t do your job for you.

A couple of decades ago the success of a new marketing campaign was measured by the elevated image of the company. Image was everything. But in the end you can produce a new ad that is award winning, popular, and wonderful, but if it doesn’t increase sales it is next to worthless.

Sales & Marketing is about selling the product; it doesn’t matter if those already buying your homes appreciate the clever ad or if the big wigs in the company think the ad positions the company well.

The end result, sales, is always the only result that matters. It doesn’t matter if everyone loves your marketing campaign and loves your product because of it…if they just don’t feel compelled to buy it. Successful marketing campaigns compel consumers to purchase; not appreciate and adore, but to purchase.

If there is a choice between a marketing campaign that results in nationwide popularity without increased sales, or a marketing campaign that results in nationwide censure with sales increases…which do you think would be viewed as a successful campaign by savvy owners?

Marketing in the new home industry began due to the introduction of choices (or competition). Competition does two things: increases product quality through necessity and introduces the need to make the public aware of the increased product quality.

Builders who had never before had to compete for their work were eventually introduced to the world of sales and marketing through necessity. As discussed earlier, when there is only one option or one builder, new home purchasers are going to use the one builder available.

When a second option is introduced through a second builder, willing and able to build new homes in the area, there ensues a new aspect of business never before necessary.

Competition results in both the refinement of the product and services offered to consumers (you now have someone who you want to appear better than in the eyes of the public) and sales and marketing; you want the public to be very aware of exactly why you are better than the competition and why the sale should be one they make with you and your company.

The history of traditional “old school” advertising and marketing for new homes included newspapers, signs, billboards, location, and we can’t forget the be all and end all “build it and they will come” theory. New home builders still depend upon models and spec homes, but not to entice new home buyers to look at their homes.

Successful new home builders of today don’t depend upon consumers seeing their models and coming to see what the fuss is about. They reach out to potential new home buyers with focused advertising coupled with clearly defined sales and marketing plans using all available mediums.

The traditional advertising mediums are included in the process, but new, even more advantageous and far reaching mediums have been added with the easy access to consumers offered by the television and the Internet.

Builders in the past could rely on a quality product and a good reputation to survive and even thrive in the new home industry, but in today’s market the builder who gets ahead is the one who is dedicated to fully understanding and incorporating modern sales and marketing techniques into their day-to-day advertising and business maneuverings. The successful builder will address the 5 M’s of Advertising and Marketing: Market, Money, Media, Message, and Messenger.