The best marketing tool we home builders have is getting any number of potential buyers to be standing in one of our finished homes. In this situation, the house is new, it looks great, and the potential buyer can see and touch the top quality of your product, firsthand.

One of the most common methods builders use to put themselves in this wonderful situation is to build a spec home. This involves purchasing a lot, obtaining construction financing and preparing plans. If the home is not sold during the construction process, the builder will landscape and furnish the home. Usually a realtor is retained to put the home on MLS and the commission is built into the house price.

All this adds up to an enormous amount of money, requiring a commitment of the builder’s financial resources and cash flow. In our market lots run from $400,000 to $1 million and a home might cost from $1 to $1.5 million. For the past 27 years, we have been partnering with homeowners and suppliers to presell our model homes without any of the costs and risks associated with a spec.

As background, in Minneapolis/St. Paul we have model home events put on by the local builders’ association. These events have 35 years of tradition, and are spread over the 12-county metro area. Hundreds of homes in all price ranges are involved. Recently, a luxury home tour had been planned, and was limited to 25 builders with model homes ranging from $1 to $3 million. For many reasons, we have gravitated toward participating in this particular event.

These events can extend from three to five weekends in a row. Attendance runs from 1,000 to 2,500 people. Of this year’s 25 luxury model homes, builders presold two-thirds of them to homeowners. When we haven’t been able to match a home completion date to the dates of these events, we’ve partnered with a charity such as the Children’s Cancer Fund to create our own model event.

The process

We begin with our typical design/build process. The homeowner buys the lot, or already owns it, and we enter into a design contract. During the design process the possibility of being a luxury model home is discussed. We get several requests a year to be “the model home,” and interestingly, our client usually raises the subject. If the timing, design and client look good we pursue the possibility.