You may have seen companies or individuals cite data that suggests customers are desperate to buy a new home completely online, but they aren’t. The most incorrectly used source appears to come from a Redfin report that states “63% of 2020 Homebuyers Made an Offer Sight Unseen, Shattering Previous Record.” While the headline certainly provides powerful ammunition for those trying to sell “buy online” tools and systems to home builders using fear, uncertainty, and doubt, the truth is much more complex.
According to the report, 20% of home buyers made an offer sight unseen in 2015 and 2016 before rising to 32% in November 2019. Then, as inventory levels plummeted to record lows and the market for homes among shoppers became more competitive, the rates jumped to 63% in 2020. This shows that making offers sight unseen became a bidding strategy used by more buyers, not necessarily a shift in preference.
Another important part to note about the methodology of Redfin’s research is they do not take note as to how many of those sight unseen offers had a contingency that allowed the buyer to visit the home in person before purchasing. In a Redfin post, a buyer who made an offer sight unseen is quoted as saying, “Critically, we did not purchase the home entirely sight unseen—we still included an inspection contingency, and attended the inspection in person. In my opinion, if at all possible, you should definitely see a home in person before fully committing to purchase it."
What Buyers Want
Someone shopping for a new home does want something from builders, but it isn’t a “checkout” feature. They want greater transparency and access that allow them to shop at a deeper level than is possible today—real-time data on availability, options, pricing, and an improved ability to visualize it all. They expect on-demand access to models and inventory homes, as well as immediate support from highly trained team members of your company. They want to remove—as much as possible—the fear of loss or making a mistake by allowing them to shop your product in a more meaningful way. They may communicate to you that they want buying a home to be more similar to how they buy from Amazon or Tesla, but they don’t mean the button they push for the purchase to be made.
There are three main phases that a buyer works through in purchasing new construction: research, shopping, and purchasing. Builders have become overly preoccupied with purchasing and are continually letting customers down at the shopping phase. In the research phase, the consumer is collecting information about the companies, locations, and potential breadth of market in order to exclude as many builders from consideration as possible. They want to narrow the consideration set. Too many executives and consultants today incorrectly confuse this activity with shopping behavior.
When a customer moves from research to the shopping phase, specific floor plans and homes take on a new obsession for them. They aren’t thinking about it in an abstract sense, but a personal one. Photo galleries and overview summaries are helpful in the research phase, but in the shopping phase they fall flat. Your prospect wants to know details about what is in each photo. What is the finish? Is that included or an upgrade? Can a substitution be made for a part they aren’t in love with? Interactive floor plans are helpful for some, but without better visuals and some pricing information they don’t allow for the type of online shopping experience that prepares someone to hit the “buy online” button at the end of their journey. The usual comparison has been with the experience of shopping for a new car online, but the actual shopping experience automotive brands offer is far superior to even an above-average home builder. Can you imagine a car dealer not telling you what the “luxury technology” package costs? The frustration would be palpable if tomorrow the Honda website changed everything on its “build and price” tool to say, “These are the base prices of our cars, but there are too many options to represent well on our website, so you’ll need to come visit the dealership to better understand the variety of selections that can be made.”
Customers want to go through the shopping and purchase experience in a hybrid approach of their own choosing. Don’t make them choose between an in-person or virtual approach to any part of your customer journey. Instead, design systems that allow the consumer to bounce between the two at any time without skipping a beat or requiring them to do additional work. You don’t want to create siloed ways of doing business with you that are “online” or “offline.” You must be able to meet the customer wherever they are and want to be—and they should be allowed to change their mind without causing internal confusion.
What Buyers Don’t Want
All of the “buy online” success stories being told today require the customer to pay up to $1,000 to secure a home. When the risks to the buyer are that low in a highly competitive market with low inventory, what would you expect to happen? Isn’t the low barrier to entry in a tight market proof that we’re still having to incentivize most buyers into using these systems? Isn’t it strange in a narrative world where customers have fallen in love with the idea of buying a home online?
Buyers today don’t want to digitally sign a 10-page sales contract on a home when they’ve only been able to select the floor plan and elevation. They don’t want to transfer $10,000 by ACH directly from their checking account based on a static rendering. They will put $500 on a credit card when availability is at record lows because they feel they must, but not because we’ve made the shopping experience so delightful that they want to. If the hot market is all that is driving the “buy online” frenzy, will all of your investment and time building it out pay off when the next downturn hits? Probably not. How the transaction finally occurs is infinitely less important than creating an unbelievable shopping experience that can easily toggle between the physical and digital worlds.
What Builders Should Focus on in 2022
If how the transaction occurs is less important than improving the ability for your customers to shop online and offline, don’t let the transaction part steal your focus for the next year. On-demand access to salespeople, models, inventory homes, designers, and even construction teams will continue to normalize in our industry. This hybrid and on-demand experience will lead us further toward what I call the “Uberization” of new-home sales, and I predict connecting sales professionals with consumers where and when they request it will be mainstream by mid-2023.
Model home hours and locations will be reengineered, as well as staffing models and job descriptions. The line between online and on-site sales teams will keep blurring, with a small segment of online salespeople taking customers all the way through the purchase agreement. New-home salespeople will begin to more closely resemble general real estate teams in terms of specialties (closers and team leads vs. support staff), and they will have the ability to turn their availability outside of normal office hours on or off similar to how Uber drivers operate today. Home builder systems will be able to route prospects to the salesperson that is a best fit for them, the closest in proximity, or with the highest closing ratio.
Base pricing and option pricing need to become more accessible than they are today. A visit to a builder’s website will show every selectable option along with a retail price, allowing for a better and more complete shopping experience. Smart builders will see this information as an opportunity to gather first-party data on customers as they shop and research, further informing where consumers are identifying the highest value in their homes. Curation of a smaller number of home designs and options—the ones that your customers really want—will allow for deeper content creation and visualization tools to improve the shopping experience and give your teams a fighting chance to keep things updated accurately in real-time.
Someone recently asked me when buying online will become a necessity for success. My answer was no time in the foreseeable future. However, improving your shopping experience in terms of its depth, transparency, flexibility, and visualization will become a necessity as soon as we come down from these historic levels of demand.