Selling $50 million worth of real estate — before it’s actually been built — in one day isn’t unusual for some developers. In fact, one Winter Park property recently sold $26 million worth of townhouses in just a few hours.
It might sound too good to be true, but it’s part of a sales process referred to by some as “Reservation Selling” or “Launching Real Estate” that is helping to bring tremendous profits to developers before construction actually begins, and giving consumers added benefits as well. The key to the process is a very targeted marketing plan, coupled with a single day sales event that is the result of months of planning, communication and anticipation, all shared by the developer, his team, and most important – the potential buyer.
The keys to success include:
The “Right” Vision
In order for a development to be ultimately successful, it must be unique. It must have some attribute that sets it apart from the competition. It can be as simple as the location, or involve special amenities or a unique design. If it can be clearly defined what makes the development special, it will stand-out. It also gives potential buyers a clearer understanding of the things that will make the project so desirable. This clarity makes the vision for the project much easier to share and communicate to others, getting potential buyers emotionally involved in something they want to eventually own.
As potential buyers (“Reservation Holders”) begin to involve themselves in the vision, they can contribute their own ideas and share their desires with the developer. This adds tremendous value, as it provides the developer with important information regarding what his customers want, and also helps to define the overall target market for the property. It’s with this direction that the developer can begin to solidify plans, confident that his blueprints are in-line with what buyers want. In return, potential buyers will appreciate the fact that the developer will address what they want to see in the development.
As the vision takes shape, the marketing and sales team is able to analyze the number of reservations to help the developer begin to lock-in pricing with potential buyers. This guarantees a fixed-price, sometimes 18 to 24 months in advance of the development’s completion, providing incentive pricing to early buyers and a better opportunity for the property to appreciate in value. This early pricing also provides buyers with a chance to lock-in and even float down their interest rate.
A reservation system is a critical step in this unique sales process, as it provides everyone involved with important guarantees and incentives. For potential buyers, the reservation system gives them the chance to: lock-in their purchase before the general public becomes aware of the project; receive incentive pricing; have time to think about their decision before they sign final contracts and gauge the project’s appreciation before it enters the public market. For developers, the benefits are equally significant: construction financing is easier to obtain based on a lengthy list of qualified potential buyers; the number of qualified potential buyers is more clearly defined; it maximizes pricing based on demand and the reservation system serves as an insurance policy of sorts, helping the developer to realize if they have the right product at the right time.
A Day of Sales
Over the course of several months, the excitement and anticipation among potential buyers builds. This occurs as the developer shares information about how the vision for the development is being realized and what will make the property so special. Everyone becomes part of the story of the development as they watch its vision become reality. Based on this anticipation and excitement, a one day sales event is scheduled for all of the “reservation holders” to finalize their contracts.
During the preceding couple of months, buyers have had the chance to decide on important details, look at designs, learn more about the location and immerse themselves in the features and amenities of their new home. When the sales event takes place, potential buyers are ready to finalize their decision and move quickly to get the home they’ve helped plan in the development they’ve helped to envision. It becomes a natural sales event, and is the reason properties have been known to sell-out in as little as an hour.
This unique sales process has become a popular approach among developers throughout the nation, yet it’s an approach that many people aren’t entirely familiar with. However, if done correctly, the process can help buyers and developers alike realize tremendous value and benefits before the project actually begins construction. Once construction is complete, everyone can be satisfied with a property they were very involved in and helped to create.