Fifteen Words Guaranteed to Kill Your Broker Co-Op Program

"If you are not working with a broker, I could make you a better deal."

How can a professional salesperson make such a statement? Yet I've actually heard salespeople say that to prospects, with the cooperating broker in the same room. Of course, there are also prospects who are not working with a broker and therefore feel entitled to negotiate a discount. So how do you handle the dilemma of the broker's commission fee?

Shortsighted salespeople don't see the issue and blindly convince themselves that each and every sales conversation they have with a potential customer is a discrete event. Don't fool yourself. Today's savvy home buyers shout your "not working with a broker discount" from the rooftops. Eventually they might end up working with a broker and repeat the statement. Worse yet, you might create competition for your company and team members if your builder has a presence in multiple neighborhoods.

The best defense is a good offense, so prepare your prospect with the following logical explanation of how a home is priced. First, let's assume your broker (co-op sales) will be 25% of your total sales. Of course, if you are paying your broker a 3% commission, you will budget 0.75% (25% of 3%) to your total market cost to cover broker sales.

Now let's say a prospect visits your models (sales arena) and says something to the effect of: "By the way, I'm not working with an agent and want to save the 3% commission you would have to pay the broker."

Salesperson: "Am I to understand, since you are not working with a broker, you feel you are entitled to a 3% discount?"

Prospect: "Yes."

Salesperson: "You're saying, if I were to discount the home by 3%, you are prepared to own this brand-new home today?"

NOTE: If the prospect replies no, you cease negotiations and ask, "Why not?" If the prospect replies yes, then proceed with the following sales dialogue:

Salesperson: "I have good news for you. At (Builder's Name), we do not have a 3% discount built into every home. Therefore, since it's not already built into every home, we have already saved that amount in advance for you."

Prospect: "I don't understand. If I was accompanied by a broker, wouldn't you have to pay him a 3% commission?"

Salesperson: "Actually, we don't budget 3% into every home. As prudent businesspeople, we budget broker commissions into only a certain percentage of our homes, and after ___ years in business, we have determined that about 25% of all our sales involve brokers. The challenge is, we don't know which 25% of our homes sales will involve cooperating brokers. So our company's dilemma is: We could budget a commission on all our homes, but that would increase our entire pricing structure by 3% rather than the 0.75% we know it will actually be.

"Otherwise, my dilemma would be to raise my prices by 3% on all homes to maintain our margins. But if we were to do that, my prices would be so high, you would not buy a (Builder's Name) home because it would be too expensive.

"Our other option is to select 25% of our homes and make those available only to brokers and their customers and force them to a limited selection. How would you feel if I penalized you and forced you to pay a premium for a limited selection of homes? Wouldn't you be upset and confused? I'm sure you sense how brokers and their customers would feel.

"So what we do at (Builder's Name) is spread the total broker cost among all our homes and home sites, and every customer is treated equally and receives the same great value, which is the stated price. My real cost per home/home site is aboveboard and the same regardless of whether an individual sale or a broker is involved. I bet you're glad we do business that way, aren't you?"

All you need is a credible, logical explanation when you explain it to brokers and customers. It eliminates disputes and unnecessary negotiations before they occur, and benefits everyone involved.