No Soup For You!

There are all sorts of novel selling tactics that have emerged since the pandemic.  Most will disappear one of these years when the market returns to some normalcy.  More on that later.

I was interviewed this week by CBS 12 on the matter and can expand on it here (as the news can only dive so much into it) but my Soup Nazi, “No Soup for You!” sums it up.  No matter how they are being pitched, most builders are doing what serves them best in business.  Below I’ll dive into the 3 methods we are seeing most which is lotteries, reservations, and bidding. Also I’ll look at some issues you need to be concerned about.

See The CBS 12 Interview On Lotteries

1. Lotteries are being used by some and are pitched as a way to “fair things out” for the market.  Unless you win the lottery though, you have to choose a series of back up lots. You are also limited on selection and choices as the builder needs to get approval of floor plans in advance.  If you want to move that island, it’s tough tamales!  Lotteries are also causing some angst in that you must wait – and the anticipation and losing out is driving some mad.  Choosing a lot or elevation one doesn’t like must be done quickly so there is added pressure. The big benefit for the builder is that it cuts down on their selling costs and makes it easier to purchase items and not have as many delays.

2. Reservations are being used by some bigger builders.  You put your name down on the list and then you must be ready to roll when your number is called. Most of these builders are now just building spec homes and eliminating the customization.  The builders make more profit on the upgrades and don’t have to deal with product delays and all sorts of 1-off customizations that buyers want.  Again, very Soup Nazi.  Don’t like it – No home for you.

3. Another method is bidding. These developers are selling properties based on a bid.  They are breaking down the bid with 3 separate parts plus how you are paying for it. Price of the lot (you can bid over), price of the home you want to put on the lot, upgrades you choose, and then how you are paying for it.  So, a Buyer who picks an elevation where the builder makes the most money, has oodles of upgrades, and pays cash will probably win out over a buyer getting a mortgage with no extras chosen.  A word to the wise on this…pick a Realtor who is well versed and has relationships with the builders. Sometimes by asking the right questions you can figure out where a client needs to be.  You can also bid on multiple lots as a builder is often releasing a few at a time. Maybe a landlocked home, one on a lake, and one that is a difficult one like with road noise.  It’s critical to go through all of the variables with your Realtor,  like value of the view, exposure, and resale issues you might not be thinking of.

There isn’t much negotiation and usually none, but it’s advisable to read over the contract and understand what your obligations are. We put in one clause with a big builder that this week came to fruition that allowed us to do an inspection of the new home.  The builder insisted than that we couldn’t do an inspection of the roof, AC, and a few other things. However, they didn’t line out limitations in the contract, so it wasn’t valid.

Your Realtor needs to be paying attention to deadlines such as deposit cancellation dates or getting money into escrow timely, as mistakes can be amplified. A Realtor who doesn’t know their stuff or can’t go to their broker (like yours truly) to strategize is someone to be wary of.

At the end of the day, all of these selling models will disappear.  They are in place only because the demand far outweighs the supply.  Once that evens out and there is no bidding war, none of these models are sustainable.

There was also a big front-page story in the Palm Beach Post outlining tips for buying a home in a red-hot real estate market. Echo’s own Andrea Roth and Chris Burke were interviewed along with their clients for the news feature.  Here is a link to that article.

Tips for buying a home in a hot real estate market

Jeff Lichtenstein is owner and broker of Echo Fine Properties, a luxury real estate brokerage selling real estate in Jupiter  and homes in Palm Beach Gardens, Florida. He has 20 years of real estate experience, has closed over a 1,000 transactions, and manages over 50 agents in a non-traditional model of real estate that mimics a traditional business model.  Some publications he has been quoted in.

Feel free to ask him a question directly at jeff@EchoFineProperties.com.