Everyone in the builder community has been forced to change the way they do business in order to cope with the COVID-19 pandemic. Buyers still care about traditional things like school districts, price point and location, but builders have had to learn to interact with buyers in different ways.
Some tools that were key while most businesses were locked down were virtual tour software like Matterport, and imaging and mapping tools like Google Earth.
[Related: How COVID-19 will impact the Colorado housing market]
They’re going to continue to be important to flush out qualified buyers, and help builders have meaningful appointments. For example, instead of looking at six properties, buyers may only look at three. With a more efficient buying process, builders may only need half the sales staff.
New lending environment
Even though a buyer may have been approved for a mortgage loan prior to the outbreak of the pandemic, post-COVID and massive unemployment, they may not be. Builders need to be diligent about having a backup lender so that if something happens with their in-house lending, they can flip it without having to terminate because their buyer can’t qualify for a loan.
On jumbo loans for higher end homes, buyers absolutely need to be pre-approved with a local lender. That’s going to be critical because we don’t know what’s happening nationally. For example, some national banks are flat-out not lending on jumbo loans. That’s an issue for a lot of houses that are under contract today, so some people have to find new lending options.
Relationships more valuable than ever
Virtual tools and new lending processes will continue to be important to builders’ success because they’re going to help builders know that buyers can meet their obligation. That way builders and lenders can move forward with confidence, so we don’t have an influx of houses that come on the market without buyers. Houses will get finished either way, but if there’s a lot of inventory, housing prices are going to come down.
Smaller builders need their connections probably now more than ever, from insurance and warranty providers to framers, roofers and other trades. A lot of their subs may be financially strapped, which means the builder may or may not get a good quality product.
[Related: ‘Confusing’ housing market drives focus on affordability, home functionality]
As the economic recovery picks up, we may see some smaller builders merge into partnerships. Some may have land they want to get rid of, while others may have sales teams or established relationships that builders can leverage.
Michael Beninati is managing partner and owner of Windermere Metro Denver Real Estate. Windermere’s Builder Solutions program provides professional marketing, sales and operational support to builders and developers through all stages of new home sales. He can be reached at [email protected].