With construction costs rising and an ongoing land and labor shortage, it’s no secret that today’s home builders are struggling.
New home inventory has dropped in recent months and prices on these properties remain high, sitting at a median sale price of $328,700 as of July—more than $73,000 over the national average.
But all hope isn’t lost for cash-strapped buyers on the hunt for new construction. In fact, if they’re willing to get a little non-traditional in their approach, a great deal might not be that hard to come by—even in today’s inventory strapped market.
With the help of a new digital platform called Edgewise, buyers can purchase new and in-the-works properties from builders, all online. The tool lets users reserve lots, make and negotiate offers, pay deposits, upload financial documents and even make design choices and upgrades to their property in its built-in “Design Studio.” Buyers can also get updates—via photos and videos—as their home’s build progresses.
Streamline, a Philadelphia-based real estate developer, was one of the first builders to come on board the platform. According to Tristin Fletcher, director of sales and marketing at the company, Edgewise has made buying new construction more accessible—and more affordable—for many Americans.
“Technology has heightened the home buying process for the new construction consumer, giving buyers within any price point the opportunity to build their dream home,” Fletcher said. “Since adopting the Edgewise platform, home buyers, for the first time, are able to negotiate with Streamline and reserve homes directly from the builder online. Buyers can review and select units that meet their criteria while having the opportunity to customize their home through selecting finishes throughout.”
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Streamline currently has about 30 projects on the platform. Including Streamline, Edgewise has about 30 builders and 60 current projects that span Austin, Chicago, Denver, Los Angeles, Miami, Philadelphia and Toronto.
Cutting Out The Middleman
Though buyers can certainly use real estate agents to aid in their Edgewise purchase, the platform is designed with direct buyer-to-builder transactions in mind. According to Edgewise Founder Bobby Juncosa, removing these middlemen is what saves both buyers and builders cash on the platform.
“There seems to be this long-running and heavily guarded myth that agents are absolutely necessary and without them, it’d be cats and dogs living together in mass hysteria. It simply isn’t true,” Juncosa said. “We truly feel that by replacing traditional agent services with technology, the commission savings can be distributed back to the buyer and builder, making homes more affordable for buyers and more profitable for builders.”
Builders pay a flat fee to list properties on the platform—usually around 1% of the purchase price. Using an agent to list that same property? That would cost 6% of the sales price. Because builders are able to save so much (about $15,000 on a $300,000 home, for example), they can typically make properties more affordable, as well as offer financial incentives to buyers.
“Most buyers who have used Edgewise are unrepresented and purchase pre-construction. The combination is something that builders greatly discount,” Juncosa said. “Early in a project, builders highly value pre-construction sales as it helps them with construction financing, so buyers can usually get a great deal then. As they say, ‘The early bird gets the worm!’”
Streamline’s Fletcher confirms as much, saying pre-construction buyers get the best deals. They also have more opportunity to customize the home to their needs and preferences.
Edgewise can also help cut costs when a community is built-out—and builders are ready to clear out inventory and move on. Builders using Edgewise also get the benefit of built-in customer management tools, payment processing and other services that would cost extra to bring in-house. For smaller builders, who Juncosa says have “razor thin” margins, this can be a game-changer.
“The main takeaway is that with more breathing room on their costs, builders have more flexibility to offer promotions, discounts, etc.,” Juncosa said. “The end result is that homes are more affordable for buyers and more profitable for builders. It’s a win-win for the main parties.”
A More Millennial Experience
So far, Edgewise buyers have been largely Millennial. Though this could be due to the large share this cohort commands in the overall housing market, the platform’s more digital, streamlined experience may also play a role.
“In the beginning, it was almost exclusively Millennials,” Juncosa said. “ As we’ve added more projects, the average age has gone up somewhat. I think a large part of it is definitely the techie approach.”
That “techie approach” is an obvious winner with Edgewise buyers who, Juncosa says, have championed the no-agent, all-online experience from the very beginning.
“One thing that was clear early on was that buyers wanted what agents would belittle as an impersonal experience,” Juncosa said. “They preferred getting email updates, as opposed to taking time out of their day to go to an office and chat. When we tried experimenting with walkthroughs, they just asked us to send pictures and videos instead.”
Take early Edgewise buyers Kimberly and Tom Lehman, for example. In their late 20s at the time, the two Millennials started off their home buying process using a traditional agent, but eventually cut ties. In the end, the pair bought their new home solo using Edgewise’s tools.
On top of the “very easy” experience, according to Kimberly, the couple was able to customize the property to their needs completely.
“Since Edgewise specializes in pre-construction builds, it was great to have the option of making some changes to our floor plan that better suited our needs (outside of traditional design options offered),” Kimberly said. “Such examples were turning a bedroom into an office, upgrading select parts of our kitchen, and maximizing basement mechanical space.”
On top of all this, the Lehmans were able to reserve their home with just a $1,000 deposit—a fraction of what most builders require on new construction. When their home’s build was delayed, Edgewise also covered the couple’s rent (about $9,000 total) until the property was finalized.
Though their purchase and move are long over, the Lehmans might not be done interacting with Edgewise yet. The platform is planning to roll out additional features to improve post-purchase life as well. Community portals, warranty repair tools and more are in the works.