By: Bob Romano

As we look at the next 12 months and the opportunities available to builders and developers, we recognize a few traditional opportunities in the market place.

Buy and hold homesites

Because banks are selling foreclosed homesites at a fraction of their original costs, many investor groups are buying them to hold for 3 to 5 years until the demand for homesites returns.  But this also provides a profit opportunity for builders who are able to buy and hold homesites in isolated sub markets and then sell them for a profit in a few years.

Look to infill neighborhoods and subordination opportunities

As we rebuild our single family market in the 15-county area, we see a greater influence from national and regional builders who are increasing their marketshare considerably from years past. They have the resources to purchase lots from banks, developers and investor groups and often focus on the larger scale communities, making it more difficult for the small- to medium-sized builders to compete. The opportunity remains for the smaller communities or close-in infill neighborhoods that the national builders find difficult to manage. Custom builders and lot owners may find subordination resurfacing as a viable method of stimulating construction and securing construction loans. Determine if there’s an opportunity to establish a partnership with the builder and agree to subordinate the lot value in return for a percentage of the sales price once the home has sold.

Reengineer homes and reduce size and features

The downward pressure on prices from new and resale homes in the 15-county market area means that builders are often competing with new bank owned homes and short sales that are priced below the replacement cost of a newly constructed home. As a result, builders should re-engineer their homes and reduce the size and features to help offset the costs to compete, even though this strategy may be difficult in the short term, because purchasers have many choices for both new and resale homes with loads of features and space.

Reinvent yourself

There are opportunities for builders to reinvent themselves for service banks, home owners and other industry professionals. There are many banks that choose to sell homes “as is” and there are many buyers who would like to take advantage of these great deals, but both need qualified builders to finishes these homes and bring them up to move-in quality. Repackaging your skills in today’s market will help you survive this down turn and be ready to capitalize on the numerous opportunities available in the next 12 to 18 months.