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Home builders across the country plan to ramp up construction this year, following two years of relatively sluggish activity. At a time when resale inventory remains tight, they hope to lure home buyers with brand-new custom homes, along with sales incentives to bring consumers’ costs down.
New-home sales have been accounting for a growing portion of home sales—in 2023, they were more than 30% of the market, compared to more historical averages of 10% to 12%, according to the National Association of Home Builders. Builders report plans to increase single-family construction over the next two years, trying to chip away at the nationwide housing shortfall, estimated at 1.5 million units. Also, they’re introducing more lower-cost options, such as increasing townhome construction and building smaller homes.
Builders want real estate agents to talk up the “new” possibilities. The cost spread between new and existing homes has shrunk to $25,900, with the median price of new homes at $433,500 versus $407,600 for existing homes as of April. Yet, 53% of home buyers cited costs as the top reason they shunned new construction, according to realtor.com®’s 2024 New Construction Consumer Report. Builders say they may have more leverage to negotiate with buyers on price than the resale market does: This spring, more than half of builders reported offering sales incentives, like buying down mortgage rates; also, 22% of builders cut their prices, by an average of 6%, according to NAHB surveys.
“There’s a tremendous opportunity for real estate agents in the new-home space,” says Amy Lessinger, president of RE/MAX LLC. “These days, many developers would rather deal with a buyer’s agent than directly with prospective buyers. An experienced agent has the skills to keep the purchase on track and help nervous buyers feel confident about their decision.”
Indeed, “most builders value their relationships with real estate agents and brokers, and when markets tighten, they value them even more,” says Bob Seeman, realtor.com®’s vice president of new-home sales. “The more builders and agents under-stand each other and the new-construction building and selling processes, the better the experience will be for all involved, most importantly buyers.”
Build Up a Niche
New-home sales differ from selling previously owned homes—often selling from a blueprint, tackling lengthier timelines (averaging eight months, but possibly up to two years for fully custom builds), and navigating a construction process, builder contracts, permitting, deposit structures and more. Buyer’s agents often work alongside a builder and their sales team to help guide a buyer from start to finish.
Vicki Monteagudo, broker-owner at Century 21 Tri-Cities in Richland, Wash., has focused on new-home sales for 20-plus years, working with landowners to sell land to developers for new-home residential communities and helping buyers build a new home. “Learn all you can. There is so much education with new-home construction, and every builder has different processes,” Monteagudo says.
Agents who specialize in selling new-home construction offer these tips:
Know the opportunities: Visit new-home developments and learn the floor plans and offerings of each builder, and the available land to build from scratch. Also, where lots are tight, learn infill development opportunities that could allow buyers to tear down existing properties and rebuild.
Take a course: The Center for REALTOR® Development course “New-Home Construction and Buyer Representation: Professionals, Product, Process” covers topics from the acquisition and construction phase to the personalization of a new home and best practices in representing new-home buyers.
Network with builders: Attend builder association meetings, visit Parade of Homes events (which showcase newly built or remodeled homes) and attend builder- sponsored special events, like golf tournaments, Monteagudo suggests.
Market your expertise: The majority of new-home buyers say they turned to online resources first to learn more information, such as photos, floor plans, online reviews and community videos, according to the realtor.com® survey.
Jessica Grier, a broker associate at Premier Sotheby’s International Realty in Charlotte, N.C., who specializes in new-home construction, hosts lunch-and-learn seminars and posts videos online that break down the process. One of the couples that attended her first seminar asked for help five years later to build a $2 million custom home.
From Blueprints to Homes
Sixty-one percent of new-home buyers over the last year used a real estate agent or broker because they wanted representation in the buying process, according to the National Association of REALTORS®’ 2023 Profile of Home Buyers and Sellers.
Real estate experts offer these tips for making the transactions smooth:
Educate buyers on the process. “There can be lots of frustration in the construction phase, and that’s when deals can go sideways,” says Grier, who, before working for a real estate brokerage, was a sales manager for a luxury custom home builder. Make buyers aware of the steps involved, including building permits; time expectations and the potential for delays; pricing and deposits structures; design selections; inspections; and walk-throughs.
“Often, buyers love the idea of something new and shiny, but it can get messy if they don’t know what they’re getting into,” says Mike Opyd, ePRO, senior vice president at RE/MAX Premier and co-owner of Motto Mortgage Next in Chicago.
Know the contracts. Builder contracts are different than purchase agreements for resale properties. “Get familiar with things like the different deposit structures and warranties, which vary among builders,” Grier says.
Avoid the traps. Budgets get blown when buyers start adding custom upgrades to the blueprint floor plan, which can take the final sales price tens of thousands of dollars higher than the originally quoted base price. Work with builders to gather estimates upfront for any features buyers are considering.
Offer comparables. Give buyers a snapshot of how their newly built home compares to others on the market. Grier recalls a buyer purchasing a newly built townhome as an investment property. She selected more than $50,000 in upgrades, making it one of the most expensive townhomes in the neighborhood. Grier reviewed comparable sales and the length of time she planned to own to help deter-mine whether she needed to scale back on her selections.
Work as a team. Grier sets expectations upfront with builders about the construction process, timelines, and frequency and methods of communication (e.g., via email or onsite meetings). “I want to make sure we are all on the same page with our goals and expectations... and that we make this a good experience for the buyer so that everyone shines,” she says. She uses Close CRM to help set reminders and track communications.
Document everything. Because builders often juggle several projects at once, mistakes can happen. Opyd says he’s found wrong floor plans coded in contracts or wrong finishes installed. For example, a builder once installed the wrong kitchen cabinet handles—they were silver rather than the requested gold and the wrong size. The mistake resulted in having to reorder all new cabinet door faces. “We double-check everything,” he says.
Stay committed. Don’t vanish right after the purchase contract has been signed and then show up months later once the construction of the home is completed.
Grier stays committed for the long haul, during and after the transaction. No better example of that was when, in 2020, her buyers even asked her to marry them in the house they were tearing down and then rebuilding. Grier got ordained for the occasion.
“This business is all about relationships,” she says. In new construction, “you’re basically married to that builder and buyer for a year or more.” It’s a bonus when buyers stay committed to you, too: Two years later, the couple was ready to move and asked for her help starting the process to build a new home all over again.
