3D home tours, customization and other keys to reaching today’s new-construction buyers

One of the biggest hurdles facing residential builders is raising awareness of their projects among prospective buyers, according to Zillow’s recently released new-construction consumer housing trends report.

“Among new-construction buyers who didn’t initially consider newly built homes, 71% cite not being aware of any in their desired location as a reason why,” the report said.

Clearly, marketing and raising project awareness are essential for builders and agents selling new construction. The study also found that virtual home tours and customization are more important than ever. Another key takeaway from the report is that buyers of new-construction value agents who are affiliated with major brokerages more than the typical homebuyer does.

Today’s new-construction buyer

The demographic profile of the new-construction buyer has not changed much in recent years, Zillow reported. That buyer is typically 44 years old and married or partnered, with a median income of $110,000. Beyond that, though, the preferences among new-construction buyers have evolved. It starts with the importance of customization.

“One reason new-construction homes continue to compete well against existing homes is buyers’ desire to customize their home before it’s built,” the report said. “That desire increased in 2022. In fact, 35% of new-construction buyers said they intended from the start of their search to buy a home they could customize during construction, a surge of 10 percentage points from 2021.

“This year, 44% said they planned at the outset to buy a completed home, while 21% sought out a home already under construction they could customize. The rising enthusiasm for customization may be the biggest trend uncovered among new-construction buyers this year.”

Another change is the willingness among new-construction buyers to look for a fresh home within existing communities, rather than solely in newly built neighborhoods.

In 2020, 23% of new-construction buyers purchased within an existing community. That percentage increased to 30% in 2021 and 33% last year.

“For some buyers, new-construction conjures images of dream homes lined up next to each other in a suburban development built from scratch,” the report said. “Over the last few years, the data is trending away from that vision.”

Buyer preferences

The Zillow report found that new-construction buyers gravitated to experienced agents with ties to teams and large brokerages more than the typical homebuyer did.

About 60% of new-construction buyers preferred to work with an agent on a team, and 59% preferred an agent who is part of a “major brokerage.” Among all buyers, those percentages were just 45 and 42, respectively.

“When it comes to new construction, buyers need trust and credibility throughout the process. According to the data, they may even care about it more than other types of homebuyers,” the report said. “Given the complexities of new construction, perhaps some buyers are hesitant to sign on with agents working solo.”

New-construction buyers also were more likely than all buyers to prefer a digital home tour compared to an in-person one. Forty-three percent of homebuyers looking at new construction prefer 3D tours to in-person viewings. Only 20% of people looking at existing homes prefer a 3D tour.

How new-construction buyers purchase their home varies greatly from buyers of existing homes.

“New-construction buyers are 35% more likely than existing homebuyers to be selling a home they already own,” Zillow Senior Economist Jeff Tucker said.

Zillow reported 32% of new-construction buyers saved for their down payment over time; 28% used money from the sale of a previous home; 19% used sale of stock or from a retirement fund; and 14% relied on a loan from friends or family.

New-construction buyers relying on equity from a prior home sale present a double-edged sword for builders, Tucker said.

“Those buyers should have substantial equity from their home value’s recent rise, but they may not be able to sell as quickly or easily as they hoped,” Tucker said. “They’re also likely to get some sticker shock at mortgage rates, which could be twice what they’re currently paying.”

Deliver what buyers seek

To meet the demands of today’s new-construction buyer and maximize sales, builders and agents should focus on three things, the report noted.

First is customization. If buyers are prioritizing custom amenities and layouts, builders and agents should highlight those options. “Communicate those possibilities early and often during the sales process. This will give buyers more say in their purchase, which could lead to more commitments,” the report said.

Second is location. The data shows buyers are more and more comfortable with new construction in older, established neighborhoods. Make sure potential buyers are aware of those options.

Third is to offer contract contingencies.

“The median sales price for newly built homes costs roughly $60,000 more than the median sales price for existing homes,” the report said. “As a result, homeowners may decide to delay buying their next house because they’d lose their comparatively lower mortgage rate if they moved. Builders that provide a rate buy-down combined with flexible financing and sale-of-existing-home contingencies might tempt them off the fence and into a new-construction home.”

The who, what, when, where, why and how of new construction

by Tim and Julie Harris

What is it?

  1. Traditional new-construction, single-family home neighborhoods
  2. New town homes, doubles, zero-lot-line homes, patio homes, garden homes
  3. Condos; low-, medium- and high-rises
  4. Urban and suburban infill/teardowns/rehab
  5. Land acquisition, lot sales, development

Why do you care?

  1. This is a great source to find inventory for your buyers that are not in the MLS! Note: Many resale buyers get frustrated thinking about the cost of repairs on an older home. This is a solution that overcomes that objection.
  2. New construction is a major part of most markets. Not knowing new construction is a handicap to your career. Don’t claim it’s not there if you haven’t actually researched this.
  3. One relationship (with the builder, developer or sales manager) can lead to many multiple transactions. We’ll explain how in a moment.
  4. End the frustration of being in competitive-offer situations with your buyers trying to buy resale. New construction offers them freedom of choice, time to move and no rehab costs.
  5. Buyers can often get more home for the same payment if you find them a builder with in-house financing, rate buy-down options or other assistance.
  6. This is actually EASIER prospecting than many other spokes, because builders usually have commissions built into their pricing!

What opportunities are available?:

  1. Sit in the new-construction model home during the hours the builder doesn’t have coverage. Sell their product when you can, and keep the leads who don’t build with that builder or don’t build at all. Think listing leads, new-construction buyer leads, etc.
  2. Create a relationship with new-build reps and/or the sales managers at different projects where they refer the resale listings to you. If they’re licensed, you may pay them a referral fee. If not, show your gratitude with gift cards.
  3. List the spec homes the builder has under construction or homes where contracts recently fell apart. There are always opportunities that arise, especially in the larger subdivisions.
  4. List every listing the builder has, representing them on the whole project. This may include both lots to sell to other builders and/or the actual homes being built.
  5. Sell as much as you can yourself, to your own buyers, controlling more of the project and keeping the builder as happy as possible for future developments.
  6. Bring the builder/developer land, sell them the land, list the new homes, sell those homes … lather, rinse, repeat!
  7. Develop land yourself or with investors. This may include house-by-house teardowns, rehabs or larger projects.

How do I get started on this?

     1. Find new construction in your area. Create a file, a spreadsheet, a PDF — some way to have your own ‘New Construction MLS’ — for quick reference. The local builder associations can help you know who’s building what, where and for what price. Example: http://www.texasbuilders.org/membership/member-directory.html. NewHomeSource.com is also a great resource.

     2. Determine which builders have new-construction representatives “on-site,” in either model homes or trailers.

     3. Prioritize the builders who have reps on-site for the sake of building your resale referral network.

     4. Visit each development. Get to know the product FIRST, before you go asking for anything in return. Ask the following questions:

  • Do they have spec homes?
  • How do they handle home sale contingencies?
  • Do they have in-house or special financing arrangements?
  • Where else are they building?
  • Do they ever list with agents on a house-by-house basis or entire projects?
  • Who is their typical buyer?

Asking these questions shows your interest and enthusiasm and getting the answers helps you to know how to monetize the relationship.

     5. Create a “pop-by” plan to build relationships and get the inside scoop on available homes. (Be the one they call when someone backs out of a new home that’s just been completed!) 

     6. Take appropriate buyers from your pipeline to the right projects, and sell what you can! Remember: Builders offering financing equals higher price point and same payment for your buyers.

     7. Take appropriate new-build reps to coffee to discuss referral arrangements for resale properties or other opportunities you’ve discovered so far. Make sure you know their product first!

     8. Set appointments with sales managers, the actual builder or the developer to discuss listing spec homes or projects. Use your Pre Listing Package, with a modified Listing Plan of Action for their project.

     9. Lather, rinse, repeat! There are new projects getting started all around you. Make sure you are educated, communicating and participating.

     10. Consider joining your area’s Architectural Review Committee, Urban Planning Committee or other organizations to be on the inside track!

     11. Join Premier Coaching so our expert, Harris Certified Coaches can help you develop this source of business to the highest level. They can shorten your learning curve, hold you accountable and move you forward faster than trying to figure all of this out on your own!

Tim and Julie Harris host the internationally syndicated, No. 1 daily podcast for REALTORS, “Real Estate Coaching Radio.” Their podcast has had over 20 million downloads from 61 countries and continues to grow every episode.

In their first year selling real estate, Tim and Julie broke all records, selling more than 100 homes, and continued to do so for nearly 10 years. They’ve been professional real estate coaches for more than two decades in all types of market conditions and have a team of Harris Certified Coaches.