When Mike Bychowsky and his wife, Jennifer, decided to make the move from their old home to a newly built one, they didn’t have to look far for a real estate agent. In fact, they didn’t have to look at all.
Their builder, Orleans Homebuilders, had already suggested one to them even before the couple signed a contract for their new four-bedroom home in Lake in the Hills.
The agent, Cathy Leonard of Coldwell Banker Primus in Algonquin, gave the couple a free comparative market analysis and suggested pricing for their old home, one of several for sale in the subdivision.
As a result, the Bychowskys hired her to sell their previous house, in part because they saved on the traditional sales commission.
At a time when a growing number of homes are on the market, new-home builders stand ready to help a buyer get rid of an old address if they will buy a new one.
Pennsylvania-based Orleans, with nine Chicago developments from Lake Villa to Bolingbrook, is among the builders that will suggest the name of a real estate agent to do a comparative market analysis and advise a buyer of the timing, pricing and steps necessary to market a current home.
The goal: to help a buyer avoid being saddled with two mortgages and cut the number of cancellations for the builder’s new homes.
In addition, the builder has increased the traditional commission it pays to realty agents whose clients buy so-called inventory homes, which are available for 30- to 60-day closings.
Kensington Homes of Naperville, following the lead of Neumann Homes of Warrenville and Naperville-based Gladstone Homes, will take over, under certain guidelines, the payments on an existing mortgage for a period if a buyer has not sold the old house by the closing date of the new one.
The builder began the “Buy Early, Rest Easy” program in August and has sold some homes because of it, company officials said.
Michigan-based Pulte Home in some markets is helping sellers turn into buyers by giving $2,000 toward professional stagers. These are people who will visit a home that is on the market to decorate it so that it will stand apart from the pack when it is shown.
Builders are adding these and other tactics to the now-familiar upgrade incentives that have been used to lure buyers for the last year.
Traffic and sales at Chicago new-home centers are down about 25 percent from 2005, said Steve Hovany, president of Strategy Planning Associates, Schaumburg.
Though that drop is dramatic, it is not nearly as bad as the falloff in some other parts of the U.S. The figure has been consistent in the Chicago area for most of this year, convincing most local builders there will be no quick turnaround in sales, Hovany said.
The growing number of existing homes on the market and softening prices for resale homes are making buyers even more skittish so builders are working hard to give buyers new reasons and new confidence in buying a new home.
“It needs to be done,” said Isa Noe, director of marketing for Orleans. “You need to react to the market.”
First-time home buyers usually buy because of changing needs–triggered by events such as a marriage or the impending birth of a child–and they often shop and buy on their own.
But the majority of new-home buyers are so-called move-up or move-over buyers. They already own a home that they are outgrowing or that they would like to trade for something better. Those buyers usually work with a realty agent.
“In the last few years, there was a lot of order-taking,” said Juli Jacobs, director of marketing for Jacobs Homes, Deerfield.
“Now what’s happening in this market, because it is a little more complex, we are going to have sell,” she said.
Builders are wooing realty agents both to bring customers to developments and as counselors to ensure that potential buyers are realistically pricing and marketing existing homes.
“We have gone to the point that we are proactive in calling Realtors, especially for active adults if they have not been in the market for 15 years or so,” said Cheryl Bonk, director of sales and marketing for Kensington. “Sometimes they will come in to the sales center and say `I don’t really know what my home is worth.’ We will call on the spot just to get a range for them.”
Real estate agents typically have received a 2.5 percent commission if they bring a client to buy a new home. But a some builders are paying as much as 4 percent to an agent on the sales of inventory homes which are available for 30- to 60-day move-in.
In some developments the commission has jumped to 5 percent or more, said Jacobs.
“Realtors have the most viable home candidates,” Bonk said.
Noe estimated about one-third of the buyers who walk into sales centers are accompanied by a realty agent.
In pursuit of more buyers, builders are using a range of techniques from hosting open houses for sales agents, complete with goodie bags, to thanking an agent with gift cards worth up to $5,000 upon completion of a sale.
The effort is not limited to suburban developments.
In Chicago, agents who brought buyers to condo buildings traditionally were paid when a unit was closed. But as projects have gotten larger and the time between contract signing and closing becomes a matter of years, those patterns are changing, with a portion of the commission paid at contract signing and another portion at closing.
“The trend is toward higher broker commissions and sometimes rewards for volume sales,” said Cyndy Salgado, vicepresident of the development division of Koenig & Strey GMAC.
Her firm is launching “a pretty aggressive” marketing program at the Park 1000, 1000 S. Michigan Ave.
Agents who bring prospective buyers will be paid 2 1/2 percent at the signing of a contract and an additional 2 1/2 percent when the unit is closed.
“It’s a win-win situation for everyone,” said Noe. “The builder sells houses, the sales agent gets a little extra for the holidays and the homeowner is in a new home before the holidays.”
Noe said that recommending a real estate agent to buyers “had been an option before, but it was done very rarely, maybe two times one year and once in another year.”
Mike Bychowsky said at first the couple didn’t think much about the suggestion.
The Bychowskys hired Leonard because her 4 percent commission was the lowest among the agents to whom they talked.
Leonard priced and marketed their 3,300-square-foot home in a Crystal Lake development where several other homes were on the market.
The Bychowskys sold the house for $427,000 within 60 days. They moved nine days later into their current home, a $636,000 four-bedroom residence.
“They were part of a system. Everything flowed together. They weren’t two distinctive activities,” Mike Bychowskysaid of the experience of working with a realty agent already acquainted with the builder.
Builders are not depending upon a stepped-up outreach to real estate agents alone. Within the last 90 days, Kensington joined a number of builders with programs designed to reassure buyers worried about being stuck with two mortgages. Several builders are advertising no payments for six months or offering to pay the mortgage of an unsold home under certain conditions.
Although the Kensington “Buy Early, Rest Easy” program to pay for an existing mortgage applies to a limited number of properties, it has convinced several buyers to buy a home, Bonk said.
Some builders have lowered prices.
Mark Rodocker, division president for Illinois/Wisconsin of KB Home, said his firm had “adjusted prices” in some communities, including Creekside of Inverness, where base prices have been dropped by $75,000. In addition, KB is one of several builders which have introduced at least one lower-priced floor plan in some developments to reach a wider number of buyers.
The Illinois division of Centex Homes has been testing a program of on-demand video tours of model homes on cable television.
“It’s just another way of getting to an audience that may not follow advertising” in traditional newspapers, said Laura McKay, operational marketing manager for Centex.
McKay said the company is still assessing how well the program is working.
“At a minimum we will have nice video footage of all of our models,” she said.
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