Tuesday, December 29, 2009

Should you save the best for last?

September 2nd, 2009
Should you save the best for last?

I bought my lot during the last big housing crises when a 13.5% interest
rate looked good. The neighborhood was built out by a production builder who
had held back 8 lake view lots that backed a park trail. I bought the first
of the 8 and was hesitant to build a house twice the value of neighborhood.
I'm glad I did because I love living here. But the neighborhood, though its
aged well and is nicer than when I bought, still depresses the home value of
the lakeview lots.

The developer held the lake lots of the market because a) they didn't build
custom homes; and b) he believed it made the lots across the street more
appealing because their front view was the lake without obstruction from
houses. Is this a good strategy?

I visited a development this week with a similar strategy. But the sales
were slow on the non lake front lots so the lake lots landed up going back
to the bank.

Some developments have a few premium lots. I would argue you should offer
these lots for sale right away. You get your money quicker. You get activity
going. And nice homes may encourage other nice homes-as opposed to the
hesitancy of overbuilding that I had to battle.

Say you lots are all similar-which do you sell first? Another issue I've
encountered will touring subdivisions this week is interior versus exterior
lots. I saw a nice development with a couple dozen lots that were the victim
of speculation and had gone back to the bank. The problem I had is
everything had built up around them and these lots were tucked way in. So I
didn't show this development to my builder client because I thought he would
struggle with exposure when trying to market his homes. Granted, I have a
horrible sense of direction. But if I had trouble finding the lots,
prospective homebuyers may as well.

The best strategy in this case is to place your model/sale center at the
edge of the development, closest to the highest traffic road. Then start
selling lots from the the farthest point and work your way to the busiest
road. This strategy also makes sense because the interior lots are likely
the ones homebuyers want-when they can find them.

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