Chuck Paustian is a former REALTOR® Magazine senior editor.
A Positive Spin: Existing vs. New
April 1, 2005
Whether it’s a condominium high-rise nestling into the urban skyline or a cluster of homes rising on a once-vacant parcel of suburban land, new-home construction is likely to generate competitive heat for your resale listings. Meeting this challenge head-on will keep interest in your existing homes from cooling.
Your best competitive weapon is market intelligence, say practitioners who sell existing homes in a new-home environment. “Get over to the development and find out everything you can about what you’re competing with,” says Honore Frumentino, CRS®, broker associate with Koenig & Strey GMAC Real Estate in Deerfield, Ill., located just north of Chicago in Lake County, an area that’s seen a lot of new-home construction in recent years. Among the things to note are lot sizes, location, delivery times, whether the builder is accepting sale contingencies, and the cost and extent of available upgrades.
You also need to ensure your listing’s shipshape. “Condition must be as perfect as it can be,” says Patti Smith, associate broker with Windermere Real Estate in Bellevue, Wash., who notes that even a burned-out lightbulb takes on greater significance when competing with new construction.
One way to add charm and desirability is to stage your listing. In addition to the little things, such as burning a scented candle, don’t hesitate to suggest that sellers move—or even temporarily eliminate—major pieces of furniture. Smith once asked a client to relocate a sofa and remove a hutch and four-poster bed that were overwhelming a room. “A lot of buyers have a difficult time visualizing beyond what they actually see,” she says.
Sellers also may want to consider more elaborate improvements. “New carpet and a fresh coat of paint are the two most effective things a seller can do” to up the ante against new homes, Smith says.
Perhaps most important, say practitioners, is to make sure sellers understand what they’re up against. Show them the comps for new and existing homes. “You must have the best-priced home for whatever category you’re in,” she says.
Ultimately, if the home needs work and the sellers are reluctant to make changes or averse to a realistic price, you have to decide whether you want to take on an albatross. “I won’t list a home until it’s ready,” she says. “But if the owners are willing to [make big changes], then they’re really ready to sell their house in a competitive environment.”
Accentuate the positive
Once you’ve gathered market intelligence and put your listing in its best possible light, develop a marketing plan that pits the strengths of your existing home against the builder’s weaknesses. There are several fronts on which you can compete.
- Price: “Typically, there needs to be an incentive for someone to opt for resale over new construction. That incentive tends to be price,” says Leslie McDonnell, e-PRO®, a salesperson with RE/MAX Suburban Inc. in Libertyville, Ill. The median price of resale homes was expected to rise 5 percent to $193,300 in 2005, compared with a 6 percent in-crease, to $232,100, for new homes, according to NATIONAL ASSOCIATION OF REALTORS® research. McDonnell notes that existing-home owners often are more flexible negotiators. Although the builder needs a base price to cover expenses, the resale seller who has owned the property for a long time may have more room to negotiate thanks to significant appreciation.
- Improvements: “Buyers don’t always realize that existing-home owners have [added a lot of value] to their listings,” says Frumentino. She asks her clients to provide a list of all the expenditures—repairs, upgrades, or additions—they’ve made on the house. “New construction has a magical effect on people,” she says. “But buyers don’t realize they might spend $20,000 to $70,000 on upgrades on top of the base price of a [new] house.”
- Surroundings: Existing homes tend to be more established, in terms of both the property’s features and the community. “With new homes, you don’t always have 100-year-old oak trees, the park down the street, or a short walk to a commuter train,” says Frumentino. “Typically, most new construction is built on flat lots with no landscaping, often in a farm field,” says McDonnell. Existing homes most likely will have at least some landscaping, as well as decks, patios, and fences. They’re also frequently located near shopping, restaurants, transportation, and entertainment.
- Quality: Older homes often have architectural details, higher-grade materials, and a degree of old-world craftsmanship not commonly found in newer homes, McDonnell says. “In new construction, you’re likely going to pay dearly to have hardwood floors added,” Frumentino says. She also says the quality of the home’s location can be a factor. Unless the buyers are early birds, they’ll miss out on the desirable lots in a development. So, if their hearts are set on being on a golf course or having a spectacular view, they might need to consider existing homes.
- Timing: If buyers require a specific move-in date or need to sell their current home before purchasing another, a builder might not be able to accommodate them. Construction delays due to weather or material shortages can mean a new home won’t be ready when it was promised. The buyer might need something sooner than the builder can physically create it. In addition, some builders won’t accept offers with contingencies. Existing-home sellers often are more flexible on these points, say Frumentino and McDonnell.
- Space: Land is scarce today. Existing homes often come with larger yards than their new counterparts, says McDonnell.
Next time you go on a listing appointment, learn which of these many advantages you can leverage to market an existing home. That’ll surely tilt the scales in your favor.