Is there a secret to launching communities before the walls are even up? My answer is that success in any area of sales is usually based on a system—a proven strategy and process that can be replicated and duplicated. (We talked about five strategies for successful pre-sales in my last blog post.)
In my seminars, I teach that “Success is simple, it’s just not easy.” The pre-sales process outlined below is quite simple; it becomes difficult to follow, however, when the home builder can’t resist the temptation to change the steps to the pre-sale process. The armchair quarterbacks within your company (who have never run a successful pre-sale program before) will advise you to tweak the system. Whenever implementing a new process, the temptation is there to modify the “secret sauce” that has worked well for others in the past.
This is because building a home is a speculative business where a home builder risks, ventures, and gambles a huge amount of capital on one roll. Case in point: A home builder client of mine opens a new neighborhood. The average purchase price of his homes is $475,000. That takes into account buying raw land, the entitlement process, all infrastructure and development cost to build the homes, the marketing expenses and selling commission. Cleaned and pressed, he is now marketing homes for around $475,000 each. Now, let’s assume he has 92 homes to sell. That means, at the end of the day, he has a community of homes that totals $43.7 million.
Let’s expand a bit further. Suppose my client builder has 11 other communities. Now the builder is gambling with hundreds of millions of dollars. Some builders construct fewer homes and neighborhoods. Other builders construct infinitely more. Nonetheless, to be a home builder means you go to the gaming tables of business, literally betting the farm, all the while eating a triple-decker stress sandwich every business day as you’re trying to carve a profit.
And therein lies rub…the pressure to produce sales. Pressure from the banks, stress from investors, and the internal meter ticking within you that will cause you to want to push the envelope of your development timelines. Resist that urge. Simple advice: For the process to work, just emulate—don’t innovate.
Check out the path to pre-sales below, developed by marketing expert Mollie Elkman and Group Two Advertising, and let me know what you think. Blue boxes indicate homeowner steps, green builder steps, and orange are lender steps.