New unsold homes shouldn't ever have birthdays - Kevin Oakley breaks down why, and how to never do it again
A few days ago, I received the following from a smaller builder in the upper midwest - “How do we make sure we're handling our approach to inventory homes the best?”
After working directly for three different builders from 2003 to 2014, I’ve seen what works and what doesn’t when managing inventory homes. Interestingly, only one of those builders intentionally maintained a significant amount of finished inventory as part of their strategy. Because of that, they were better equipped to handle it. They always had inventory homes available, and their systems were tuned for that reality. For most, this is not the case. So, what to do with those sitting homes?
At the heart of this question lies another: Why is there so much inventory in the first place?
Since COVID, many builders have shifted from a presale model to being more inventory-heavy. When demand surged and costs became unpredictable, builders reasoned that skipping the lengthy customer build process could smooth out the settlement cycle.
Regardless of how we got here, the fact remains: there’s more finished inventory sitting on lots than ever before. Yet, many companies don’t have clear processes in place to manage this volume.
One concept that has stuck with me came from my first boss, Mark. He shared a simple but powerful rule of thumb:
For every 30 days a finished home sits unsold, assume you’re losing about 1% of the purchase price in potential profit.
That 1% loss accounts for taxes, utilities, maintenance, marketing costs (think staging, tech for self-tours, advertising), and other holding expenses. So if a home was projected to make a 10% net profit, it could actually slip into the red within 10 months, and have almost no profit even after a few months.
Sure, this metric may not show up clearly in accounting spreadsheets, but it’s an effective way to build urgency, especially with your internal teams. They need to feel the urgency as much as potential buyers.
At my second builder, we ran into trouble simply because they weren’t building many homes and weren’t prepared to handle finished inventory. The sales team lacked experience selling quick-move-in homes, and as a result, some houses sat unsold for 400 to 600 days after completion (finished homes should NEVER have birthdays!).
There was no urgency, no focus. Had someone done the math, we’d have seen that these homes were financial sinkholes, regardless of what accounting said on paper. In hindsight, the team should’ve acted sooner to get those homes off the books.
So here’s where you begin:
“We have X months to sell this home before we lose our profit, or worse, start losing money.”
You’ll want more detailed guidance from leadership, of course. But in the absence of granular data, the 1% rule is a practical baseline.
2. From there, define a company-wide threshold:
“How many months do we have post-completion before we stop trying to make a profit on this home and shift our focus to simply moving it?”
This clarity helps your team pivot their mindset and strategy.
While comps and perceived value certainly matter, every home site is unique. This is key. At one company, we would frame price reductions as discounts on the land (homesite), preserving the perceived value of the house itself.
At NVR, the third builder I worked with, they had a clear pricing policy:
If a home didn’t sell or attract serious interest within 30 days, the division president discounted the price weekly.
Some builders might prefer a one-time significant price cut. Others like the incremental approach. There’s no one-size-fits-all solution. The point is you need a strategy: one that fits your market and your business objectives. Then you need to stick to it.
The most dangerous mindset is the passive one: “Let’s give it another month and see what happens.”
No. You need a proactive plan.
One of the best tools for this is the Marketing Action Plan (MAP). If you missed Jackie Lipinski’s presentation on it at the last Online Sales and Marketing Summit and you're a Do You Convert partner, reach out and we’ll get you a copy.
The MAP equips your team to act before a home hits that costly 1% mark. It helps shift your efforts from reactive to proactive. Proactive is always where you want to be, because it is 10x harder to build momentum than it is to keep it moving forward.
