Title and lender secrets of working with builders
By Ben Caballero, published by Inman News, October 20, 2016
As winter approaches, many agents watch their book of business dwindle as more and more homeowners prefer to wait for spring.
For brokers and real estate agents who know how to work with home builders, however, the fourth quarter can be a great time for sales, especially this year.
New home growth
New home construction is operating at peak capacity, and new home sales are the hottest category in residential real estate today. Fannie Mae forecasts new home sales will soar by nearly 12 percent this year, compared to only 3.4 percent of existing sales.
Most builders use several sales channels to move their homes. Some 87 percent of homebuyers use a real estate agent or broker — a share that has increased steadily since 2001. That is one reason why builder-broker relations have come a long way.
More home builders than ever before have established relationships with brokers and agents, while many others are receptive to the idea.
Working with home builders and new construction is different from selling existing homes in several important ways. These differences can lead to honest misunderstandings between well-meaning people due to the subtle differences inherent in the sale of new and pre-owned homes.
When both sides are aware of these subtle points, they deal with these differences in a more constructive manner.
Why builders have partnerships with lenders and title companies
Builders use specific lenders because they know they can rely on them to perform. Builders need to know that a sale will close when construction is complete so that they will not incur carrying costs. They prefer to work with lenders who understand their business.
Home builders also need a title company that can handle sales in the states where they do business and is experienced working with them.
When a builder starts a home, its title company creates and maintains a file that will help each home close quicker. A title company that has a history with a builder will not need a builder’s corporate resolutions and authorizations for its signatory each time it titles a new home.
The title company’s legal department will also know in advance the ownership history, subdivision restrictions and homeowners association if the builder has established one.
Whenever possible, builders prefer to work with the same lenders and title companies to save money and time because of the efficiencies involved.
Real estate agents who insist on working with different vendors will find it difficult if not impossible to develop fruitful and lasting relationships with builders.
Like many brokerages, some builders have their own captive lenders and title companies, and these can be substantial profit centers for them just as they are for brokerages.
The builder-broker relationship
Builder-brokerage relationships are a two-way street. Builders prefer to sell presales rather than build inventory homes on speculation.
However, even though one of the attractions of a new home to buyers is the ability to participate in the design and select finishes, brokers and agents are not accustomed to selling presales and prefer completed homes to list on their sites and show to buyers.
In the past, these differences in the way builders and brokers work have kept each side from taking advantage of what the other has to offer.
Remember the real objective is helping families buy the best home for them. And with buyer demand for new homes, there’s a lot of business that could be gained. Builders and agents are always looking for more business, by working closer together they will find it.
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