Now that you have sold them you also need to manage those who have bought them. When your agent sells your existing house, you may not even meet or know who purchased your home and probably will never have anything to do with that person ever again. The agent, at best, may deliver flowers on settlement and keep the buyer in their sales database, following up every year or so. However, when you sign up a buyer for your subdivision then you will be making a significant commitment beyond the assistance your agent provides.
The commitment is proportional to when you make the sale in the development process. Before the section or house settles the agent has a vested interest in maintaining good relations with the purchaser — for the one simple reason they have a commission payment riding on there being no issues until settlement. After the property has settled, the agent has little incentive (except for repeat clients) for engaging with the purchaser (probably also low motivation as it can only mean there are problems). Therefore the agent will be motivated to assist you before closing, and you are largely on your own afterwards.
You will most likely need to deal direct with purchasers on upgrade selections, colour options and physical variations that have been agreed to in their contract. In addition, if you are pre-selling homes or sections before you have consents or before construction has started you will need to keep the buyer’s enthusiasm up with progress updates. Even if you have unconditional buyer contracts, this communication will help you if you encounter problems and need to engage with purchasers to renegotiate items. It can also smooth the wheels for when they take over the house. Signing up a purchaser on a new subdivision that will be 18 months before it is delivered requires some commitment by the developer. Don’t underestimate the amount of purchaser liaison required.
Purchaser management involves different facets during each stage of the development sales cycle:
- Pre-Contract. As developer you may find yourself directly involved in the selling process, helping the agent as you attempt to convert a buyer to a signed contract. Some buyers will have a lot of questions on timing, quality, design and product specifications beyond what you have presented in your marketing materials. A good agent will sell without providing the buyer with additional detail (the details of which may not even be known when first marketing). However, there will still be questions that get through to the developer. To be prepared, before the next time the same question is raised, prepare and update a list of frequently asked questions (FAQs) for the agents to refer to. You could also put this on your project website and hand out with the brochure.
- Contract Signing. Once the purchaser is unconditional (at least from their side), they are now in your system — so you better have a system! Do not leave managing purchaser information, correspondence and requests to the real estate agent, as they simply won’t be as good as you need them to be at it. Too much will be open to assumption and misinterpretation. Your lawyer, who administers the legal side of the contacts, if experienced with projects, should have an electronic database recording and updating all the key details. This database is a good starting point to append all the requirements you will need in managing purchasers. It will be prudent to protect the information the lawyers are responsible for from mistakes by using a shared but un-editable system where you can link that to your own information requirements. I have developed purchaser management systems and commonly find each project has so many bespoke requirements that you end up using a spreadsheet. A relational database, if properly set up and maintained, is ideal but, just like most proprietary feasibility models, nothing tends to completely fit the uniqueness of each project. There is a lot of information to keep track of and updated, for example:
- Purchaser name and contact details
- Purchasers’ lawyers name and contact details
- Section and house number or address
- Plan type
- Sale date
- Sale price
- Variations to sale price
- Deposits paid
- Deposit interest accrued
- Settlement costs to be added (land tax/rates)
- Settlement sum remaining
- Upgrade costs paid
- Colour option selected
- Upgrades selected
- Variations to plans, design, specifications
- Special conditional clause dates (planning approval, presales, sunset, pre-settlement access)
- Special terms (variations from standard contract)
- Agent details who sold, commission paid and outstanding
- Scan of actual sale and purchase agreement.
- During Development. During the pre-sales, consenting and construction period it is mainly a one-way communication approach with you updating the purchasers on the expected completion date and showing progress. It will quickly become two-way if you do not provide regular enough updates, or the updates don’t reflect the purchaser’s original expectations. This correspondence is also an ideal marketing opportunity to use your purchasers to help market your development to their associates, friends and family. The way you do this is by providing high quality communications emphasising smooth progress (regardless if it is or not) that include subtle incentives for your buyers to forward it on. Consider these categories of communication:
- Section or Home Specific. This is primarily to show where you are at in the delivery programme with the purchaser’s individual house, section or super lot. You could provide a site photo and extract where the builder is currently at from your project minutes, for example, ‘roof complete, pre-lining commenced’. This one to one correspondence will be via email and you may also be addressing specific requests from the purchaser at the same time.
- Project Specific. This is to give updates to all purchasers in the project. This is best done regularly (say every two months or at milestones when you have something new to convey). It could be acknowledgement that consent has been approved, a drone flyover showing progress of civil works, a photo of the ground breaking, the first roof on, the first houses settling and buyers moving in. You could use email, social media, a mailed project newsletter or link to a progress page on the website. You may discuss how well sales have gone if you are almost sold out, use it to profile the next stage or discuss new amenities in the area that will add value to any buyer’s purchase. Put enough in the communication that the buyer feels proud of their purchase and wants to spread the word.
- Company General Newsletter. Use email, social media, and/or mailed (yep, via a postman) newsletters to correspond to your buyers about your company’s projects, success, interesting facts, milestones, introduce new employees and profile recent buyers. Set the newsletter up to be regular and have someone dedicated to producing it. Demonstrating the success of your company will instil confidence in the buyer that you can deliver. You could include a ‘For Sale’ page, showcasing other projects with sections and homes for sale. You could offer preferential terms before public release of new projects or invite them to events. Consider interviews with key partners such as financiers, urban designers, architects, interior designers and contractors. You could interview local politicians and key people in the community like principals and retailers. You can also include testimonials or quotes from buyers who have recently settled and moved in.
- Pre-Settlement. As the section or home nears completion you should increase correspondence explaining when completion is likely. Provide buyers an estimate of when a call to settlement will be made and manage expectations around the margin of error. Most likely you will be relying on a local authority approval for meeting all conditions of building consent or the legal certificate of title. These approvals can take time and experience delays so you can only give your buyer an approximate settlement date. The buyer will push for exact dates for a number of their own reasons (for example, they have to organise funding or cancel the agreement on the place they currently rent). Don’t over promise, and make the purchaser well aware of potential delays.
- Purchaser Inspection. Prior to settlement you should organise a purchaser inspection — at least if there is a house. This inspection is the best time to note down any defects as it is before they or their tenants move in and start to damage things themselves. Items identified now can be relayed to the builder to be fixed before the home is occupied. You or your project manager should be present with the purchaser and take great notes and photos. Don’t leave a pre-purchase inspection to the agent because defects often become a point of contention with the purchaser later on. Also refrain from making promises that any defect will be remedied before the purchaser settles and certainly do not leave the purchaser with the expectation that fixing something minor is a condition before they settle. It shouldn’t be. At this time the buyer may require other documentation for funding, so have a pack of information ready that can be quickly tailored to each buyer and their valuer if requested.
- Settlement. Finally, you will start to receive income, but plan ahead to limit inevitable last minute hiccups. Have your lawyers followed up to make sure settlement does happen within the contractual period? Have requests to extend settlement been dealt with? Do they have all the correct information as to the full cost of options and variations so they can adjust the settlement price? Have you organised the set of keys (and security alarm codes, garage door openers, swipe cards)? Ensure all official documentation has been provided to purchasers. This can be provided as part of a ‘New Property Owners Welcome Pack’ including:
- Warrantees and guarantees from suppliers.
- Maintenance guidelines and schedule.
- Manuals (appliances, security systems, plant, fire systems).
- As built drawings, specifications, colour schedules, utility maps.
- If delivering sections, any house plans promised, geotechnical completion reports and consents to be complied with.
- Any Home Owners Association or Body Corporate rules and regulations and contact details of the manager.
- Documents required for insurance.
The welcome pack is to look professional and to pre-empt inevitable questions later. Provide a compendium that includes photos (perhaps at milestones during construction), describes amenities in the area and summarises, in everyday language, key purchaser questions like connecting utilities, security systems, evacuation processes, limitations on noise, signage requirements, business use restrictions, visitor parking, garbage collection, mail, couriers, use of loading areas, allowable times for moving furniture and replacement of smoke alarms.
7. Post Settlement. Now that the agent has fulfilled their commitment (they have their cash) you are on your own with the purchaser. The main communications will concern remediating defects. It pays to have a good record and scheduling system to manage defects as the process can get very cumbersome. Consider this approach:
- Clearly advise the buyer of the procedure and deadline for notifying the developer of defects and the period the developer has to complete defects. This should be spelt out in the sale and purchase agreement but there may also be legislation that regulates this. Limit multiple off-the-cuff requests by asking buyers to submit one full and final remedial list. This won’t always happen but use your best efforts to minimise the back and forth to make it easier for you and your builder to get the work done.
- Have defects agreed first. Some items the purchaser will raise will not be a defect — it may just be how something is designed. You may have to argue some points with correspondence from your architect.
- Reconcile the purchaser’s remedial list with the builder’s to-do list that has already been provided by the architect (if these issues have not been dealt with prior to settlement). Give the builder one list per house and as many houses at the same time as possible — this helps them organise sub-trades more efficiently.
- Where defects need to be fixed when the house is occupied a degree of decorum and practical sense is required. Allow direct contact between a sub-trade and the occupier for access only when you have established the relationship will work. You want to first ensure that the sub-contractor will leave the place clean and that the occupier commits to being available if required for access.
- Database everything: when remediation works are scheduled to be complete; who is doing it; and contact details for owner, tenant, subcontractor, main contractor, property manager. Tick off issues when the works are complete, inspected and have been ‘approved’ by the purchaser.
- Communicate with each purchaser, using one updated master list, showing what has been completed, what is outstanding and when it will be complete. This helps mitigate multiple lists appearing for each house and incorrect assumptions from all involved. Communication can often get murky when the owner does not occupy the home and there is a tenant and a property manager involved.
- Where the issue is a manufacturer’s defect, encourage the home owner to contact suppliers direct, especially for items like appliances. This will ultimately be easier for buyers moving forward.
8. Post Project. Continue distributing your company newsletters, emails and social media feeds to your previous buyers. They can be a valuable revenue source for your next profitable project.
Andrew Crosby
+64 21 982 444
andrew@xpectproperty.com
