On its Web site, Polygon Homes of Bellevue, Wash., is offering customers who have served in the Armed Forces a $10,000 "buyer's bonus" as an incentive to purchase a new house. Employees of The Boeing Co., one of the biggest employers in Polygon's market, are eligible for a $3,000 bonus; and any buyer who also is a civil servant, nurse, or teacher receives a $5,000 "Polygon Pride" bonus.
On the opposite coast, Miami-based Lennar is also using its Web site to encourage a sense of community among its buyers and owners, whom the builder invites to submit photographs of themselves and their friends standing in front of a sign at one of Lennar's neighborhoods. By doing so, they get entered into a contest for a chance to win an iMac computer or an iPod. Lennar intends to post the winning entries on its Facebook page next month.
Two very different approaches to marketing, to be sure. But both examples stand out when compared to the sometimes less-than-inspiring come-ons that one finds on other production builders' sites.
Last week, BUILDER visited the active Web sites of every builder on our most recent top 100 list. Those trips found sites that do a good job of pointing customers to the builders' available homes and providing essential details such as price, house size, location, and floor plans. A growing number of builders offer consultation that's sometimes accessible through live chats. (The consultants invariably are portrayed as young and female, as are the models who suddenly materialize as moving images on builders' home pages to gush about their homes and communities.) Quite a few builders are using their Web sites to vie for which can offer the lowest mortgage interest rate.
Its Web site is where Ball Homes' "Let's Trade Places" program offers to accept a buyer's existing house in exchange for a new one; where KB Home plays up its cross-branding agreement with The Disney Cos.; and where Shugart Enterprises and Dominion Homes offer down payment breaks to buyers who contribute labor, like painting, to complete the houses they are purchasing. Fulton Homes in Arizona is one of the few builders brave enough to use their Web sites to challenge competition from foreclosures. Fulton asks visitors to use the "foreclosure cost calculator" on its site to compare foreclosed property with one of the builder's new houses.
But after giving away the store for nearly two years, many builders may be reaching a point of promotional exhaustion, and their Web sites reflect that. In fact, if it weren't for the $8,000 tax credit that the federal stimulus package is providing first-time home buyers through the remainder of this year, a sizable number of builders—nearly two-fifths of the Web sites that BUILDER looked at—had no other promotion to wave in front of customers online, at least based on what's currently being shown on their sites.
Builders no doubt would argue that their Web sites' main function is to lure customers to their sales offices, where the real horse trading begins. And there's evidence to support that tactic as 87% of home buyers say they use the Internet as an information source, according to the 2008 National Association of Realtors' "Profile of Home Buyers and Sellers Study."
Some builders would also argue the merits of using their Web sites to reinforce their reputations with customers who have grown wary of the trustworthiness of anything associated with the housing industry. These "institutional" sites typically include some mention of their companies' histories, the awards they've won, and the longevity of their ownership. Other builders—such as ICI Homes, Hubble Homes, Wilshire Homes, and History Maker Homes—are using the Web to trumpet their green-construction bona fides to environmentally minded buyers.
But at a time when one can find 88 million real estate Web sites on Google, and when buyers in general are window shoppers, many builders are still figuring out how aggressively they should be marketing themselves and their products via the Internet. And those builders who think their Web sites need to provide more than just directional signals to their subdivisions and their companies' latest J.D. Power rating still seem to be in the minority.
Tax Credits and Buydowns
Even though most builders wish it had been more generous, the federal tax credit has been a marketing godsend; it's front and center on most production builders' home pages. Several builders are matching that credit with their own contribution, such as D.R. Horton, which is offering an extra $8,000 to buyers in certain markets. Beazer's Web site promotes the builder's "Crazy 8s" sale, which through March 31 offers the federal tax credit with an $8,000 reduction in closing costs, another $8,000 in discounts, plus an $8 washer-dryer package, and an $8 upgrade package.
McCar Homes in the Atlanta market is combining its promotion of the tax credit with a "price protection" guarantee (which McCar has been offering since July 2008) that promises "the lowest available base price at the time of closing" along with a 90-day interest-rate lock and a 15-year structural warranty.
Builders with communities in California have the luxury of being able to promote the federal tax credit with that state's $10,000 home buyer credit. Shea Homes marries the two tax breaks under a "No Games. No Gimmicks. Just the Facts" banner on its site. The Olson Co. used the St. Patrick's Day weekend as a premise to offer customers the federal and state tax credits along with $7,500 the builder is contributing this month. And Taylor Morrison's "Stimu-Plus" program promises to kick in $8,000 to the state and federal credits for first-time buyers through March 31.
Another "Plus" can be found on Eastwood Homes' site in its "Employee Pricing Plus" program with savings of up to $45,000 on its inventory homes in North and South Carolina. Those discounts—along with the federal tax credit and 4.875% APR financing on a 30-year fixed mortgage that buyers can negotiate through one of Eastwood's mortgage partners—add up to as much as $53,470 per home in potential savings.
It is clear that many builders believe that promoting low interest rates on their sites will have gravitational pull with their customers. McBride & Son Enterprises' "incredible rate" this month is 2.5% for the first year on contracts written this month, which increases to 3.5% in the second year and 4.5% in the out years of a 30-year fixed-rate mortgage. Arbor Custom Homes' "interest rate of the year" is 3.98% APR on a 30-year fixed it's offering through Wells Fargo. Centex's "Start Smart" interest-rate buydown program uses a big red chart on its site to compare today's rates with those in 1971, and promises 4.734% APR on a fixed-rate, 30-year FHA loan.
To get those rates, most builders require buyers to put down 20% and to finance through one of the their preferred lenders. Fischer Homes' enticement for "the most affordable financing we've ever offered" is a 4.3251% annual percentage rate that requires 10% down (or 3.5% on an FHA loan). The Drees Co.'s "Wow Now!" sale, through the end of this month, combines 4.75% APR with free closing costs and up to $100,000 in savings on purchases of its "ready to move in" homes.
Still Discounting Options
Virtually all builders are saddled with some unsold inventory, and many Web sites direct buyers to those homes specifically, usually with significant price reductions attached. For example, the "Deal of a Lifetime" for Great Southern Homes of Elgin, S.C., offers up to $25,000 off select inventory homes. Grand Homes in Dallas is offering $50,000 off of selected inventory homes.
One of the boldest price marketers is John Wieland Homes & Neighborhoods. Its "101 Home Sale," in which it has selected 101 inventory homes, promotes this builder's "lowest prices in our 39-year history" as well as a lifetime structural warranty, a five-year construction warranty, and a 20-year mechanical warranty. As a further inducement, buyers also get "value protection" at no cost, where five years after closing Wieland will pay buyers the difference if their homes don't appraise for at least what they paid for them.
Few builders, however, are knocking down prices for homes they haven't started yet (at least on their Web sites); instead, builders continue to be more comfortable lowering what buyers would pay for options and upgrades. These range from Ole South Properties' $3,000 discount to Gemcraft Homes' "Pricing of a Lifetime" that includes "50% off unlimited options."
Builders are trying all kinds of gimmicks to hook buyers. Florida's Centerline Homes is taking a humorous approach with its "Prehistoric Pricing Principles." Visitors are directed to a 36-second ad Centerline has posted on YouTube, showing one of its contractors digging in one of its neighborhoods and "discovering" pricing "you thought was extinct." On March 21, Corey Barton Homes in Utah will conduct a "Free Tax Day," during which it offers prospects free tax preparation and the opportunity to put any refund toward a down payment on a new home.
Builders' Internet come-ons aren't necessarily confined to their own Web sites, either; last week, the Indianapolis Star's site displayed a pop-up ad for Ryland Homes that offered $30,000 in "free options." The Internet also allows builders to customize their price message for different markets. David Weekley Homes' "Flex Dollars" promotion, for example, ranges from $8,000 to $20,000 for homes in Panama City and Jacksonville, Fla. Mattamy Homes' Web site is offering $10,000 in upgrades but only for its Parade of Homes models in Minnesota.
Picking Their Spots
On March 10, Taylor Morrison launched its "I Do" program, which offers newlyweds in Orlando and Jacksonville a $3,000 incentives package. That promo, though, is nowhere to be found on the builder's corporate site or on pages for its Florida divisions. Indeed, what builders choose to promote online isn't always coordinated with their larger marketing efforts. For example, more builders are offering buyers mortgage payment protection in the event buyers lose their jobs within two years of closing on a house. But at least three builders with such programs—Toll Brothers, Bowen Family Homes, and Main Street Homes—currently don't mention the incentive on their respective sites.
And maybe it's a sign of the times, but relatively few builders use the Internet to drum up referrals. Those that do typically offer referring parties a gift card valued at $100 when a recommended prospect closes. Leave it to Polygon to put some teeth into its referral program by offering on its Web site a Hawaii vacation to anyone who refers four people who buy houses; an evening on the town in Seattle for three buyers; a dinner for 12 for two buyers; and dinner for six for one buyer.
John Caulfield is senior editor at BUILDER magazine.