Cracking the 50-plus housing market is tough. Most buyers in that age group don’t need to move. And chances are the house they have is worth less than what they think it is, and they aren’t keen on selling at a loss.
But there are builders who are making it work with these discriminating and discretionary buyers. And some shared their secrets at the International Builders' Show in Orlando, Fla., this week.
Schell Brothers, which builds only active-adult communities in coastal Delaware has never failed to turn a profit in the downturn, said Chris Schell. He boils down the company’s success to branding, marketing, product desirability, and company culture.
“We have spent a ton of time on branding. People want to buy a Schell Brothers home because the branding is working,” said Schell, adding that the builder’s customers brag that they own a Schell Brothers home.
“Branding brings pricing power,” said Schell, adding that its homes sell for $82,000 more on average than NVR’s, its nearest competitor in the market.
Some characteristics of its buyers include more involvement in the process than younger buyers. “They have more time to research on the web. And some of them have been burned before,” said Schell.
“They do not consider themselves old, and do not make the mistake of treating them that way,” said Schell. “We ran an advertising campaign showing older people doing what we thought were older people things. We screwed up. People complained.”
Instead, the company now focuses on advertising campaigns that show residents having fun and partying. One advertisement says “It’s like college without the studying!”
Schell said his customers don’t care about energy efficiency. “The average buyer still believes that the money they will spend (for energy efficiency) is greater than the money they will save.”
Instead, Schell focuses on creating an atmosphere of happiness within his organization with the thought that it will be contagious to buyers, whose main goal is happiness for themselves.
“All things being equal people will do business with the person they like the most. All things being unequal people will do business with the person they like the most,” said Schell.
“We have remained profitable by not focusing on remaining profitable,” he adds. “Focus on happiness and I think the profits will follow.”
If selling happiness to older buyers works for Schell, selling love has worked for Ivory Homes in Utah. Ivory has a marketing campaign called “Love Matters.” “It matters that you love your family. It matters that you love your kitchen,” said Chris Gamvroulas of Ivory.
So Ivory has had success creating homes that buyers fall so in love with that they have a huge desire to leave the house they have. To help buyers get past the fact that they might lose money on their existing home, Ivory offers a guarantee that they will lease out their existing home for three years.
Ivory also hires someone to give the buyer an accurate appraisal of their existing home’s value “to give them the hard medicine.”
Energy efficiency in a new home isn’t a priority for Ivory buyers either. “They don’t care about spending $25 a month on power bills,” says Gamvroulas. “Energy efficiency in this market is not a mover at all. They would rather have granite countertops than tankless hot water heaters. They really care about loving their house.”
Nathan W. Jameson, director of operations for Traditions of America, a Pennsylvania builder of active-adult communities, says his company doesn’t compete against other builders for customers; it competes against its buyers’ existing homes.
“They know what it feels like to go to bed in their home,” said Jameson. So Traditions offers a program where potential buyers can try its homes before they buy under a guest home program. Customers who do that have close to a 75% conversion rate to sales, he said
The company’s models are booked at least once a month. Traditions also soothes its customers’ worries about falling home values by offering a price protection program that guarantees nobody else will pay less for the same home after they close.
“They are not going to move until they find a house that they like better than the one they have,” he said.
Teresa Burney is a senior editor for Builder magazine.