Even in the best housing market in the world, buyers who must sell an existing home to buy a new one can feel anxious. Many of them are hesitant to make an offer on a new property before closing on their current home.
To help alleviate this uncertainty, sellers are turning to web-based companies such as OfferPad, Opendoor, and Knock for easy, no-hassle transactions. Although these firms do simplify the sales process, the customer is still responsible for doing most of the legwork, and the high commissions and lowball offers don’t help much either. This means that builders have an opportunity to beat these new companies to the punch. By offering their own buyout programs — where they purchase their client’s previous home — they can eliminate the home-to-sell hassle while creating a new source of revenue for their businesses.
First, consider the logistics of implementing a buyout program. If your company doesn’t have the cash or resources to start your own program, you also have the option of partnering with a property management firm. Many of these firms offer builder-friendly terms, including fair prices and reasonable commissions, and they can help you execute the program on a national level so you can reach customers wherever they are.
A builder who offers a one-stop shop for buying and selling immediately becomes more appealing to prospective customers. When customers compare buyout builders to their competitors, they see ease versus hassle. One can get them on track to a new home in one day, while the other can take months and requires them to do most of the work. With a buyout program, one sales representative can take care of everything, leaving customers more time to focus on what’s most important: moving into their new home.
In addition, property management partners can also help builders secure customers outside their existing regions. With buyout options for out-of-area buyers, builders can win more deals from transplants and see an immediate, sustainable boost in revenue.
Nothing hurts a builder more than last-minute cancellations. Not only do you lose a sale, but you also end up with unexpected inventory that you may or may not be able to resell profitably. Some cancellations are unavoidable (in the case of life-changing emergencies, for example), but others are 100 percent preventable.
A homeowner’s inability to sell his or her previous home, for example, should never be a reason to cancel a deal — and for buyout builders, it doesn’t have to be. Further, builders who find themselves saddled with extra inventory can leverage their buyout program to sell the extra homes to customers who immediately want to move into new construction. Some people simply don’t want to wait several months for you to build their dream home.
In my experience, builders who open a buyout program see a 5 percent to 10 percent increase in incremental sales. It’s easy to see why: Buyout programs give sales teams a closing tool that competitors simply can’t match.
Offering a buyout to an uncertain client can be the difference between a big sale and a missed opportunity. Buyout programs allow salespeople to say, “If I give you a great price on your current home, will you move forward today?” All of a sudden, you’re no longer negotiating on the price of the new home — you’re talking about selling their home. It’s a completely different sale, and it can help customers envision the future and get excited about moving forward in the sales process.
A builder who sells 100 homes a month can boost that number to 110 by offering a buyout program. Combined with the extra revenue from the purchased homes, that can mean big gains in a short amount of time. In 2012, for example, one large builder I worked with increased its sales by more than $250 million just by adding a buyout program.
Builders currently have a golden opportunity to outsmart the competition and provide customers with a helpful service before the market catches up.
