Understanding the Different Phases of New-Home Communities
Perhaps you’d like to create better relationships with builders or maybe you’d just like to know what inventory is coming soon for prospective clients; in either case, it’s important to understand the phases of new-home communities so you can help clients get into the home that fits their budget and schedule.
Here are the different phases of new-home communities:
Phase 1: Location Selection
Long before any homes are erected, developers must figure out where to build. This is the phase where developers and builders do a “thorough evaluation of zoning restrictions, architectural guidelines and requirements, proximity to services and desired amenities, etc., that must take place before purchase,” says Kim Cullum, owner and founder of Cullum Homes, Inc., in Scottsdale, Ariz.
In some cases, developers will assemble several pieces of adjacent property purchased from different owners to make one large site, says Suzann Kogen-Friedman, co-founder of Northbrook, Ill.-based KZF Development. At this point, she adds, developers have determined what “product” best suits the land and will design a plan to present to local municipalities.
Developers and builders will determine the costs associated with the project and understand all of the concerned entities with the project, such as zoning departments and architectural review boards.
Phase 2: Architectural and Site Plans
In this phase, the plan is presented to and then approved by all applicable entities. The amount of time to complete this process can range from a few months to several years, depending on the jurisdiction and complexity of the development, says Cullum.
Once zoning for the community is approved, marketing can begin. “By this time, we will have established our target market, type of product and selling prices and we’ve sourced our construction financing the project,” says Kogen-Friedman.
Phase 3: Site Improvements and Construction
All new-home communities need infrastructure. This is the phase when the land is cleared of any existing structures and grading work and installation of water, storm and sanitary sewer lines, streets, curbs, sidewalks, electrical lines and other infrastructure are completed. If the development is quite large, this phase will have two stages.
“By phasing the construction of large projects, developers are able to better manage their risk by better matching their revenues with their costs,” says Kogen-Friedman. “One thing we have all learned over the past 10 years is that even the best plans and the most desirable projects can hit a long-term snag due to unforeseen economic conditions and world events.”
Perimeter landscaping for the community are also completed in this phase, Cullum says.
Phase 4: Let the Sales and Building Begin
Cullum says that during the site improvement phase, sales can start. Builders usually open a temporary sales office in the community and model homes are built.
“A builder will build a model home at or near the new-phase entrance, then start building new homes for purchase or build new homes on lots that a customer has already purchased,” says David Shapard III, a broker and Realtor in Oklahoma City, Okla.
The amount of time that it takes to complete a new-home community can vary from 6 months for a smaller community to several years for a community with thousands of homes.
Why Phase It Out?
Some new-home communities include only a few homes, while others are large and have hundreds or thousands of homes. Shapard says the main factor in how long each phase takes to complete is sales.
“If sales are brisk, phases will be completed and new phases will be developed quickly,” he says. “If sales are slow, builders will complete phases at a snail’s pace. … The size of the new-home community may also determine the time it takes to complete.”
Why Agents Should Know The Phases
Sure, you want to be knowledgeable for clients, but understanding the different phases of new-home communities can benefit your client depending on their needs.
Brian Brunhofer, president of Deerfield, Ill.-based Meritus Homes, says depending on their needs, buying in different phases can benefit any client.
“Some buyers choose to be in a phase that is almost complete so they won’t have to live with construction traffic for a long period of time,” Brunhofer says. “Or they might want the interaction with neighbors from the time they move in. Others prefer a newer phase because of its location in the community or because there are specific characteristics they absolutely want in a home site that are no longer available in an earlier phase (a home site that backs up to open space, corner lot, cul-de-sac lot, oversized lot, etc.). Most of the time, we see folks choosing a specific location in a phase because it fits their wants and needs from a location standpoint as opposed to a focus on the community.”
Kogen-Friedman says it’s good to bring clients early in the construction process. “It’s a great time to bring in clients early, as developers are eager to sell units, provide extra incentives in hopes to create hype and early activity. We release other sites later, with the idea that the later units will have increased in value and price.”
For those who wait closer to when a community will close, the benefits can mean less construction to deal with and an opportunity to purchase a nearly complete or fully completed home.
“When a community is almost completed, builders want to sell the last couple of homes quickly and will negotiate the price to sell homes. Models are then sold and someone that is in the right place at the right time can get a great opportunity on a model home or one of the last homes built.”
By knowing and understanding the different phases of a new-home community, you can build valuable relationships with builders and provide clients with helpful information about where and when they should purchase their new home.