Custom or Production: Which is Right for Your Buyer?

Couple reveiwing home design.
Knowing your clients’ lifestyle and budgetary needs will help you identify if a custom or production home is right for them.

Buyers sometimes become confused or overwhelmed by the wide selection of newly built homes that they can purchase. Fortunately, a savvy Realtor can help them find a home that fits their lifestyle, needs and budget.

The initial step is for the Realtor to determine the buyer’s needs and intended uses for the home, says Steve Appel, a Realtor at Berkshire Hathaway Home Services Florida Properties Group in Wesley Chapel, Fla.

After that, the next big question is whether the buyer wants to purchase a custom-built home or a production or spec home in a new-home community.

Customize It

A custom home offers more options for, well, customization. But financing all-custom construction can be a stopper for some buyers because they’ll typically have to buy the land on which to build and qualify for a construction loan, which can be costly and challenging.

“A custom home requires pretty deep pockets,” Appel says. “Typically, a lot of normal folks can’t afford that because their equity is tied up in their current home and they have to sell that first.”

A production home also offers options choices — though fewer than custom homes — but financing is much easier. “The builder sells the lot and house at the same time,” Appel explains, “so you make a down payment upfront and then you don’t owe anything until you close.”

The buyer’s timeline is also a crucial factor, says Ken Pozek, a Realtor with Keller Williams Realty in Northville, Mich. Buyers who have a relatively short timeframe during which they need to move might not be able or willing to wait for a custom home to be built.

“It could be a year to two years to buy the lot and a custom home job in our area is usually 10 months to a year,” Pozek says. “With the (production) home, a production builder can knock it out between six and eight months.”

A Realtor can help buyers figure out which option best fits their timeline.

Models, Floor Plans

A Realtor can also help buyers compare new construction model homes and floor plans. Many buyers opt to purchase the same home as the builder’s model simply because that home “is there and they can see and touch it,” Appel says.

Understandably, not all buyers can visualize the architectural features of a floor plan without a model. For them, the Realtor can ask whether the builder offers the same floor plan in another community where the buyer can see it or whether the same floor plan is already under construction in the new community for another buyer, Appel suggests.

“If the home is far enough along in construction — it has been dry-walled and the countertops are in — you can see that floor plan as well as the models,” Appel says.

Other times, it takes a “leap of faith,” to use Appel’s characterization, for buyers to purchase a floor plan other than the model. That’s especially true if the floor plan itself is as brand-new as the home will be.

Call, Visit, Ask

Realtors who want to help buyers choose a newly built home need to educate themselves about homes that local builders plan to construct and offer for sale. One way to learn about that information is to call local builders’ sales offices periodically and ask specific questions, Pozek suggests.

“I ask, ‘Are you building any spec homes? How are your sales? Is your pricing going up or down? What incentives are you going to be offering? Tell me about your traffic,’ ” he says. “That way I can get a feel about what’s going on with new construction in the area and that way I can help a client.”

Boots On

Lisa Alyn, a Realtor at SilverPointe Properties in Brentwood, Tenn., who sells homes in Franklin, Tenn., also says Realtors need to interact with builders, ask questions and educate themselves if they want to help buyers purchase newly built homes.

“A new construction Realtor needs to be willing to put on her boots — not her high heels — and her blue jeans and go out and walk the site. Anybody can memorize a floor plan, but how are the homes being built? Builders don’t mind showing you the differences,” she says.

Resale Value

Another way a Realtor can help is to attend design meetings with the builder and help the buyer understand the resale consequences of his or her choices. Some floor plans, fixtures, finishes and other options might have a better potential to hold their value over time than others.

“Giving those tips will help you build the relationships and help your client long-term,” Pozek says. “You eventually want them to sell their home through you down the road, too.”

The bottom line is that a new construction-savvy Realtor can make an important contribution to any buyers’ purchase of a newly built home, whether it’s a custom job or a production house.

About the author 

Marcie Geffner

Marcie Geffner is an award-winning freelance reporter, book editor and blogger whose work has been published by a long list of financial, mortgage and banking websites, trade magazines and newspapers.

She holds a bachelor’s degree in English with high honors from UCLA and a master's degree in business administration (MBA) from Pepperdine University and has completed advanced novel-writing courses at the UCLA Extension Writers’ Program. She is a second-generation native and lifelong resident of Los Angeles.

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