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  • Writer's pictureBill Maltbie Jr

Resale is New Construction's #1 Competitor (From "The Top Ten Reasons Builders MUST Know Resale)

As we shared with you in an earlier blog, The top 10 Reasons Why Builders Must Know Resale, New Home Marketing Services believes strongly in the power of resale to affect a residential builder’s success in the marketplace. What we do as a company; the products we deliver; the services we offer, and many of the blogs we write are geared towards helping builders appreciate how resale can impact their business. For that reason, we believe it is paramount for builders to know resale.

The list of 10 items we identified as the critical reasons why builders need to know resale comes from years working with builders and brokers. In this blog, we’d like to explore item 1 – “Resale is New Construction’s Number 1 Competitor”.

We know builders spend a large amount of time and money learning about their new home competition. Most builders require that their sales reps perform periodic shops on their new home competition. Through these shops, builders have a pretty good handle on the base price of their competitors’ plans, their lot costs, and the price of key upgrades. Builders also know what their competition is doing as it relates to energy saving devices or green building technologies or even the finishes that are offered in the kitchen. Supplement those shops with research material that builders can purchase which summarizes new home closing details, lot transfers, and permit activity, and most builders are “experts” relative to their new home competition.

Acquisition Decisions

But guess what? New home sales make up ONLY 8% of all real estate transactions. The vast bulk of real estate activity, 92% as a matter of fact, is the listing and selling of RESALE properties. To further demonstrate the magnitude of that number, in 2013, it is expected that of the 5.5 million real estate sales that will occur nationally, only 450,000 of those will be new construction. When you also realize that 50% of home buyers are willing to consider new OR resale, then builders must not only accept that resale is their number one competitor, but also, they must take the same steps to understand resale as well, or even better, than they do new construction.

The reality is, however, that many builders don’t really have the tools or processes in place to understand their resale competition. In large part that’s because it’s hard! In even a relatively small metropolitan area, no less than 200-300 new resales are coming on the market every dayand hundreds more are going through pricing changes or other listing modifications.

But we’re here to tell you that if you really make an effort to understand and track your resale competition, you’ll start more specs; you’ll turn inventory faster, and you’ll see better margins. And it’s all because you’ll plan, place, price, and promote your specs better from the very beginning.

What about you? Is it time for you to better understand your resale competition? What will you do to be smarter?


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