What's the Difference Between a Homebuilder and Developer?
Tuesday, February 2, 2016
By Drew Knight for New Home Source
If you’ve been in the real estate market for a while, you’ve probably noticed two words used interchangeably: homebuilder and developer.
While both are key players in bringing new homes to your clients, they’re not synonymous and both are completely different — yet symbiotic — entities.
To help you discover the difference, we decided to let the professionals speak for themselves. Below you’ll hear from Teri Slavik-Tsuyuki and Livian Jones of developer Newland Communities, Dave Spetrino of homebuilder Plantation Building Corp., and Cheryl Julcher of Zoetic Home Development.
NHSPro: What is the difference between a homebuilder and a developer?
Slavik-Tsuyuki: Developers and builders have a great symbiotic relationship. A developer finds the right land to develop, has a vision for its layout and intended use, does the research to determine who will live there and how they want to live, works with government agencies to source proper permitting and puts in the roads, sewer system, electric lines, homesites, curbs, civic space and amenities. A developer then selects builder partners who will buy homesites from the developer to build the homes that will meet the needs and wants of home shoppers today.
Julcher: It is somewhat common for a company to be both the developer and the builder. There are many different types of builders ranging from large-tract home production builders, who build thousands of homes a year in different markets around the country, to small custom homebuilders who build two or three homes per year in one specific market.
NHSPro: What advice can you give an agent trying to make the distinction?
Jones: Fortunately, in many cases a real estate professional doesn’t have to choose. In a master-planned community, the developer’s staff is there to help them and potential residents learn more about the community and what it offers to residents. Newland Communities doesn’t sell homes within the community; it’s their homebuilder partners who do.
A real estate professional would work with the builder team based on the home and location a client is interested in and the developer is there to provide whatever information the real estate professional needs to communicate the long-term vision for the community and give buyers confidence that the vision will become reality.
Spetrino: There are two great ways to explain the differences — the most basic is to think of the developer as being in charge of the “horizontal” improvements (roads, curbs, utilities, sidewalks), while the builder is managing the “vertical” component within a community: the homes. More important, the developer is who drives the vision for the community as a whole. Beyond just acquiring land, getting approvals and building the horizontal elements, the developer establishes the look and feel for a community and then relies on its builder partners to deliver on that vision through design and construction of homes. Together the builder and developer are able to attract new neighbors through appropriately designed floor plans and within targeted price ranges that meet the original objective for a community.
NHSPro: How might their building processes differ?
Slavik-Tsuyuki: When a developer creates a new neighborhood, market demand and consumer preferences for different home styles and sizes, as well as specific consumer preferences for certain amenities and other land uses including retail, civic and commercial are factors that are considered when developing the land plan overall. The character of different neighborhoods within the community and how homesites are oriented are part of the overall consideration. For instance, homes that have a view of a fresh-water lake may have different architecture than those that are built near a walking trail amenity. The decisions regarding home style and placement are made long before homes sales begin and are intended to offer a diversity of product to meet various buyers’ needs, so it’s important for a real estate professional and client to know what’s most important to them. A developer’s on-site staff can help explain the different available homesites and builders for them.
NHSPro: How will their day-to-day business differ?
Slavik-Tsuyuki: Quite simply, their names explain the differences. A developer develops a new community, whereas a builder builds new homes within that community. They work in partnership to ensure the original vision for the community is maintained. A developer tends to be involved in the community longer, as they are there from the beginning before permits are acquired and land development can begin, until the community is complete. A builder may build one or more different product types, depending on market demand and their particular area of expertise, and it’s their teams that are on site actually constructing the homes.
Spetrino: We are in closely aligned businesses, but our worlds could not be more different. Sure, we may both worry about the weather or a construction schedule, but the developer agonizes over the most important decisions when it comes to overall community design, homesite sizes, underground utilities, as well as administrative or municipal requirements. After years and years of effort, the developer delivers a parcel of land, basically a blank slate, to a builder who, in turn, builds something tangible, something beautiful.
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