After more than a decade of rising real estate values in most U.S. markets, many builders are sitting with inventory they had anticipated would be sold by this time. If you own one or more quick-delivery for-sale spec homes and you want to protect your business, consider writing a multifaceted plan to survive and prosper during this current buyers market.
Analyze the spec home
Ask and seek answers to some key questions about your spec home. For example, does your job-cost budget accurately state the total cost to complete the home? Do you have adequate budget in the construction loan interest account to carry the project for an extended period? Do you have sufficient cash flow to fund the completion and the additional carrying costs? If not, secure funding for these cash flow needs now.
Does the spec home have curb appeal and would a tour of the interior leave a prospect concluding that the home is in “move-in” condition and punch-list free? If not, when will it be completed? Write a schedule with dates and tell all your key employees of your commitment. Go one step further to ensure that you meet this target date by scheduling a grand opening weekend event roughly two weeks after your schedule indicates the home will be done.
Analyze the market, again
Review your competitors’ homes and ask yourself if the current asking price is justified. Would a serious buyer feel the asking price has value or are you relying on the buyer to make you an offer? The asking price must reflect a “value purchase” at current market conditions. Your home will sell faster when a serious buyer knows the current asking price is realistic.
Update the marketing plan
We all would love to sell our homes without paying a realtor’s commission. However, working with a realtor is not as passive as signing the listing agreement and waiting for them to call you with a contract.
My sales and marketing director, Lauren and I work closely with our realtor to first write and then implement a plan to bring prospects to our spec homes. Recently, I signed a listing to sell two $2 million spec homes, one nearing completion, and the second on an adjacent undeveloped lot I own. Following weeks of meetings with the realtor, the manager and the broker owner, we agreed to a 4 percent listing that included an extensive marketing plan.
New income opportunities
Do not become so focused on the sale of your specs that you forget to seek new business. If you have done everything you can to maximize your chances of selling your spec home, then it’s time to focus on ways to generate current income. Or, alternatively, look to immediately reduce overhead; translation — lay off employees so you can keep your business in the black, not the red.
Part II in next month’s column will focus on the many commitments we received from our realtor to bring in traffic and support our sales efforts.