Are you following these tips to survive the housing downturn?

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AVID Ratings Company's Paul Cardis names 10 things homebuilders can do to keep customers walking through the sales room door.

December 01, 2007

Think 2007 was a difficult year? For some exhausted and fatigued builders, it's hard to imagine things getting much worse, but we don't know what's around the corner. Here are 10 home building survival tips to ensure you're around when the opportunity bell comes ringing again.

  1. Combat the media. There are a lot of good reasons to buy a home today: interest rates are still low, housing prices are falling, home builders are offering sizeable cash credits and incentives, and a surplus of new homes means that there are a lot of choices for buyers. This information needs to be shared with prospective buyers in a convincing way that counters the negative news they hear.
  2. Revamp your lending. Consider working with brokers who are better equipped to shop around for the best deals. Opt for a variety of partners who are willing to hustle for your home buyers' best interests.
  3. Tap your HBA. Now is the time to work with fellow builders for the sake of the entire industry. In Atlanta, the local home builders association launched a public relations campaign to promote why now is a great time to buy. Jointly produce an educational brochure that is distributed through banks, home improvement stores, home shows and targeted mailing lists.
  4. Share selling tips. Share real estate best practices with buyers. Consider providing a home staging guide or offer to list the home. One builder I know has its own realty company and is offering a 4 percent commission instead of the standard 3 percent to the buying agent.
  5. Promote your successes. Because the high number of foreclosures has made prospective buyers nervous, let everyone know if any of your communities have zero or very few foreclosures. If they see evidence that you don't close on homes buyers won't be able to afford, they will have more confidence in partnering with you.
  6. Offer credit advice. Consider partnering with a credit improvement service that can help customers correct false information and resolve credit problems that are preventing them from getting the best loan.
  7. Maximize referral marketing. Your delighted customers are your best sales tool. Sponsor weekly events and activities that bring prospects and loyal customers together so that potential buyers can hear first-hand what a great builder you are.
  8. Realize that all prospects are not the same. You should be identifying how each prospect comes to you and spending time where it is most likely to pay off — with referred buyers. To help build trust with referred buyers, share something with them about the home buyer who made the referral: a simple remark about a special feature of their friend's home, for example.
  9. Create organic compensation plans. Now is the time to make sure your sales staff is compensated in a way that motivates them to deliver the best service while closing the most sales. For example, what would happen if your sales staff was guaranteed commissions on any buyers who came in because of a referral from one of their previous clients?
  10. Achieve customer loyalty. The businesses that are holding their own during these tough times have a pipeline of happy customers making referrals. By maximizing referrals, some builders have been able to keep sales steady instead of declining. If you don't have many sales coming from referrals, you have much lower chances of survival.

No single strategy is going to save a struggling home builder. Rather, it will take a holistic approach that attacks the problem from every angle and perspective. Quality home builders are going to be the last Mohicans standing — be one of them.


Author Information
Paul Cardis is CEO of Avid Ratings Co., a research and consulting firm specializing in customer satisfaction for the home-building industry. He can be reached at paul.cardis@avidratings.com.

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