Providing New Construction Buyers with "Options" Without the Overwhelm
Devin JamesPro Member
Developer · Orlando, FL · Member since 2018 · 502 posts · 306 votesProviding New Construction Buyers with "Options" Without the Overwhelm
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesQuote from @Devin James:
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
We have not utilized these with our homes - im sure once we get to a certain scale we will.
Devin we just had this conversation yesterday with another Broker here in Oregon for our 90 home project.. We in fact allowed all sorts of custom items pretty much anything within reason. And this other broker simply stated thats why you guys have sold as fast as you did AND why you averaged 50 to 100k per house higher in price than your direct across the street competition ( Lennar) and some models 200 to 250k higher price) More of a Toll Brother approach. Had we just set up like everyone else sales would have been much slower and our profit market 50% or more less as we simply cant build for the cost of a Lennar so no way to go head to head with those guys..
Ya its a pain and you mess up occasionally you know client said they were to get this or that and sub missed it.. But hey I will take some greif and pocket and extra 100k plus any day.
And Its my wife who did it. Her design concepts her coming up with what we can do .. the buyers wives you know love that crap.. Pintrist.. so many builders are male and just dont get it.
This also created a situation were 90% of all our homes were presold of course.. and closed within 5 days of CO so we had no carrying costs for houses sitting there waiting to sell and you know if you have debt that adds up .. Mtg payment tax's insurance utls etc etc you carry a house a month and it can cost to 5 to 7k in pure profit. you carry it 3 months and you start to feel a big profit suck.
11 Replies
- Lender · CA · Member since 2018 · 638 posts · 393 votes1y
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
- Developer · Orlando, FL · Member since 2018 · 502 posts · 306 votes1y
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
We have not utilized these with our homes - im sure once we get to a certain scale we will.
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Devin James:
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
We have not utilized these with our homes - im sure once we get to a certain scale we will.
Devin we just had this conversation yesterday with another Broker here in Oregon for our 90 home project.. We in fact allowed all sorts of custom items pretty much anything within reason. And this other broker simply stated thats why you guys have sold as fast as you did AND why you averaged 50 to 100k per house higher in price than your direct across the street competition ( Lennar) and some models 200 to 250k higher price) More of a Toll Brother approach. Had we just set up like everyone else sales would have been much slower and our profit market 50% or more less as we simply cant build for the cost of a Lennar so no way to go head to head with those guys..
Ya its a pain and you mess up occasionally you know client said they were to get this or that and sub missed it.. But hey I will take some greif and pocket and extra 100k plus any day.
And Its my wife who did it. Her design concepts her coming up with what we can do .. the buyers wives you know love that crap.. Pintrist.. so many builders are male and just dont get it.
This also created a situation were 90% of all our homes were presold of course.. and closed within 5 days of CO so we had no carrying costs for houses sitting there waiting to sell and you know if you have debt that adds up .. Mtg payment tax's insurance utls etc etc you carry a house a month and it can cost to 5 to 7k in pure profit. you carry it 3 months and you start to feel a big profit suck. - 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
whats a forward commitment ? is that a loan commitment or a pre sale not heard that one before .. thank you - Lender · CA · Member since 2018 · 638 posts · 393 votes1y
Quote from @Jay Hinrichs:
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
whats a forward commitment ? is that a loan commitment or a pre sale not heard that one before .. thank youWhen DR Horton or Lennar are able to offer "builder rates of 5%" and want to get around the seller concession limits to offer competitive rates, increase the buyer pool and offload inventory they purchase what is called a forward commitment or a hedge before going in Escrow to be able to offer their buyers those rates. Happy to chat more about them 👍🏼
- Developer · Orlando, FL · Member since 2018 · 502 posts · 306 votes1y
Quote from @Jay Hinrichs:
Quote from @Devin James:
Quote from @Clayton Silva:
Do you guys utilize forward commitments? Can be a great way to attract a larger buyer pool and offload inventory more quickly. Right now, buyers are just struggling to find value and affordability and forward commitments can be the key to creating those win wins for developers and buyers.
We have not utilized these with our homes - im sure once we get to a certain scale we will.
Devin we just had this conversation yesterday with another Broker here in Oregon for our 90 home project.. We in fact allowed all sorts of custom items pretty much anything within reason. And this other broker simply stated thats why you guys have sold as fast as you did AND why you averaged 50 to 100k per house higher in price than your direct across the street competition ( Lennar) and some models 200 to 250k higher price) More of a Toll Brother approach. Had we just set up like everyone else sales would have been much slower and our profit market 50% or more less as we simply cant build for the cost of a Lennar so no way to go head to head with those guys..
Ya its a pain and you mess up occasionally you know client said they were to get this or that and sub missed it.. But hey I will take some greif and pocket and extra 100k plus any day.
And Its my wife who did it. Her design concepts her coming up with what we can do .. the buyers wives you know love that crap.. Pintrist.. so many builders are male and just dont get it.
This also created a situation were 90% of all our homes were presold of course.. and closed within 5 days of CO so we had no carrying costs for houses sitting there waiting to sell and you know if you have debt that adds up .. Mtg payment tax's insurance utls etc etc you carry a house a month and it can cost to 5 to 7k in pure profit. you carry it 3 months and you start to feel a big profit suck.This is awesome - im sure we will get there one day. At the moment we dont have the bandwith to offer many "options"
It is a good way to increase profit
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
OK got it.. I dont think I could ever qualify for that.
But thankfully we did not need to give any concessions of any kind.. I had folks ask what are your builder incentives IE window coverings Refer washer dryer ( like Lennar does) or buy downs etc etc.. just about half of our clients either paid cash or put very large down payments we were 50% empty nesters who sold larger properties 1 to 3 mil and were down sizing to our 750 to 1 mil..
As we simply did not have to give any concessions since we allowed these folks to customize so we took those buyers from the other builders .. We simply built a far superior home with all sorts of extra's that they cant get from the production builders.. Different product. WE were totally blessed And my wife gets the credit.. I just do what I am told.. and of course I made sure we had the funds to close on the dirt and banking relationships for horizontal and vertical vertical is pretty easy but getting Horizontal NOT so much.
- Lender · CA · Member since 2018 · 638 posts · 393 votes1yAnyone can qualify for it, and doesn't have to be for new builds either. Rental property owners can do the same thing if they own a couple of rentals and wanted to offer it to their prospective buyers. Typically the cost gets somewhat reincorporated into the property. Since you can offer a lower rate, you can justify a slightly higher price.
Quote from @Jay Hinrichs:
OK got it.. I dont think I could ever qualify for that.
But thankfully we did not need to give any concessions of any kind.. I had folks ask what are your builder incentives IE window coverings Refer washer dryer ( like Lennar does) or buy downs etc etc.. just about half of our clients either paid cash or put very large down payments we were 50% empty nesters who sold larger properties 1 to 3 mil and were down sizing to our 750 to 1 mil..
As we simply did not have to give any concessions since we allowed these folks to customize so we took those buyers from the other builders .. We simply built a far superior home with all sorts of extra's that they cant get from the production builders.. Different product. WE were totally blessed And my wife gets the credit.. I just do what I am told.. and of course I made sure we had the funds to close on the dirt and banking relationships for horizontal and vertical vertical is pretty easy but getting Horizontal NOT so much.
And yes horizontal financing is much more difficult indeed haha I feel your pain there!
- 1yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Quote from @Clayton Silva:
Anyone can qualify for it, and doesn't have to be for new builds either. Rental property owners can do the same thing if they own a couple of rentals and wanted to offer it to their prospective buyers. Typically the cost gets somewhat reincorporated into the property. Since you can offer a lower rate, you can justify a slightly higher price.Quote from @Jay Hinrichs:
OK got it.. I dont think I could ever qualify for that.
But thankfully we did not need to give any concessions of any kind.. I had folks ask what are your builder incentives IE window coverings Refer washer dryer ( like Lennar does) or buy downs etc etc.. just about half of our clients either paid cash or put very large down payments we were 50% empty nesters who sold larger properties 1 to 3 mil and were down sizing to our 750 to 1 mil..
As we simply did not have to give any concessions since we allowed these folks to customize so we took those buyers from the other builders .. We simply built a far superior home with all sorts of extra's that they cant get from the production builders.. Different product. WE were totally blessed And my wife gets the credit.. I just do what I am told.. and of course I made sure we had the funds to close on the dirt and banking relationships for horizontal and vertical vertical is pretty easy but getting Horizontal NOT so much.
And yes horizontal financing is much more difficult indeed haha I feel your pain there!
Ok thanks did not know that.. Its what I love about RE and BP you learn something new everyday.. I understand the product exists I just thought the only ones using it were the big boys and girls.. not us little guys/gals
- 1yRobert EllisBusiness MemberDeveloper · Miami, FL · Member since 2014 · 3k+ posts · 1k+ votes
Quote from @Devin James:
We haven't offered any “options” to buyers because it creates a lot to manage during the build process. But we’re starting to realize that not all upgrades have to be complicated.
There are a handful of simple, affordable upgrades we can offer while under contract that add real value for buyers—without adding major complexity for us.
Things like:
- Screened lanais
- Upgraded light fixtures
We’re exploring the idea of having a model home that includes these upgrades, and giving buyers the option to add them in for an additional cost. Clean. Simple. Valuable.
I think spec is better at the most affordable price. We are looking at selling whole communities without having to ever talk to one buyer. Let them rent one of the 100 houses an institutional level investor builds to rent for them. as we entitle larger sites we are focused more on BTR than individual home sales or taking it horizontal. faster exits.
Section 8 Launch52 Reviews - Lender · CA · Member since 2018 · 638 posts · 393 votes1y
We made it smaller and more "bite sized" and we do some unique stuff with the fee itself to make it much more affordable and give the "little guys" as you put it an advantage!
And same here, I am always learning new things and new ways people are expanding their business!
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