Publication Date:
Tue, 2002-07-23 19:00
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Myers Barnes' Editorial Archives
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It is a misconception that, in the case of a new home or home site, customers are concerned only with the lowest price. Many salespeople and builders/developers think this is so. As a professional, you must realize that customers are concerned with more than price, even though you hear them ask, "How much per square foot?" when you haven't even had a chance to fully present your neighborhood and homes. Hearing that question early in the presentation is just as frustrating as the prospect's responses: "What's the best you will do?" or "Will you take less than the listed price?" or "We can't go over a certain amount" or the classic "Your competition is cheaper."
The Basics of Price Resistance
It always costs too much: A price objection is an automatic response. Everybody asks how much it is and then flinches at the price. All customers, yourself included, become intoxicated with the idea of obtaining the best price possible. Regardless of the cost, their initial reaction is, "It's more than we wanted to pay."
Are they objecting to the price or are you? For the sales professional, this must be clear. Often the price objection appears in the salesperson's mind first. If you have issue with your neighborhood values, then you won't be able to overcome the objection if your prospect voices it.
The Four Phases of Negotiation
I. RELATE: Before you begin to negotiate, you must establish if your counterparty sincerely wants to own a new home or home site.
II. EXPLORE: Verbal offers are a worthless sign of commitment. Commitment comes in the form of a check and a contract. Unless you have a check and a contract, you are merely having a conversation. If prospects are hesitant to issue that check, continue exploring until you find out where their minds are and what is prompting their reluctance.
III. PROPOSE: In most real estate transactions, the prospect wants to negotiate based on tradition. The tradition is based on your propositions or how you present the contracts.
If your contracts say "Offer to Purchase," change them. Avoid using the following phrases:
"Let's make an offer" or "You will never know unless we ask."
"By law I'm obligated to present any and all offers."
"This home is listed at $__" or "The price they are asking is $__."
IV. AGREEMENT: You arrive at an agreement by working through the written proposal one provision at a time, by answering the customers' questions and allaying their fears, and by showing that you truly do have their best interests in mind by helping them find the home of their choice.
The Fundamentals of Negotiation
Never indicate that there might be room to negotiate. If you are working for the seller (builder or developer), by law you are representing the seller's best interests. You are not a buyer's agent, and the moment you negotiate for the buyer, you have crossed the line.
If you must make concessions, negotiate only terms, conditions, closing dates, initial investment, etc. Never the price.
Negotiation is a mind-set. If you believe in the value of the offer, you will stay strong.
Both sides want something. You want them to become owners, and they want to own a home/home site. There is equal pressure, and you should never approach the negotiation table feeling that you are the only one in need. Both parties desire a specific outcome, or there would be no reason to conduct the negotiation.
Developing Negotiation Power
Before covering the tactics, you must understand antecedents to negotiating.
The first is emotion. The more you are able to keep your emotions out of the negotiations, the better you perform. The key is not to get so caught up that you become overwrought.
Second, by controlling emotions and appearing as a reluctant seller, the skilled negotiator possesses "walk-away" power. This means you must decide in advance that you are willing to walk away from the negotiation table altogether.
Negotiation Tactics
The purpose of a tactic is to cause the other person to move from his or her position without your moving from your position. Tactics must be memorized to learn not only their applications, but also how to deflect a tactic when it is used against you.
1. Will You Take Less Than the Listed Price?
Prospect: "We would like to make an offer," or "Will you take less than the listed price?" or "What's the best you can do?" or "What's the bottom line?"
Negotiator: "Are you saying you like this home/home site and would like to own it?"
Prospect: "Yes, but only if we can get it at the right price" or "at a deal."
Negotiator: "Let me ask you this: When you move into your new home and meet your neighbor who says, 'How much of a discount did you get?' or 'What kind of deal did you get?' how are you going to feel? The reality is if we offered discounts to everyone, your neighbor might look at you and say, 'Is that all?' At this point, how would you really feel? I sense now you understand why we don't negotiate. Everyone who owns in ___ gets the same value. After all, that's what's really important, isn't it?"
Prospect: "I'm concerned only about the deal I get. If my neighbors get a better price, then good for them," or "I've never paid full price for real estate."
Negotiator: "I'm curious: Are you familiar with how real estate's true value is determined? In reality, the developer/builder, or the salesperson representing the home/home site, does not determine value. Value is based on comparable sales. In other words, a professional appraiser says property is worth only the last price for which a home was purchased. If yesterday someone purchased a comparable home/home site at $__, and today you purchase it at $__, then what is the true value? We offer value protection and feel everyone should pay the same fair price. Wouldn't you agree?"
2. We Could Have Bought Months/Years Ago for a Lot Less Money
Your strategy is to help them discover that their failure to act in the past will only cost more in the future.
Negotiator: "There are only two things that will occur with future real estate values: price and availability. First, whatever you are looking at today probably will not be available tomorrow, and second, you can in all probability count on the value increasing.
"What's important is not to focus on what you could have done in the past but on what you will do in the future. Let's go ahead and secure your home/home site today, and next month/year you can sit back and realize you received today's best value in the time frame that was perfect for you."
3. Negotiating with a "Buyer's Agent"
When a buyer's broker is negotiating on a customer's behalf, the strategy is: Make sure the broker understands why you do not negotiate price.
Negotiator: "You have access to the local MLS and can see that everyone paid the same fair price, which is the stated value. We've promised our customers value protection. Don't you think your customer wants to invest in a community where the developer/builder is committed to the homeowner's best interest?"
4. The Competition Will Discount Its Homes
Negotiator: "I do not want to appear discourteous, but I'm puzzled. If you feel that it's such a great price, why haven't you purchased one of its homes?"
Remain silent and let them state their reasons: They might like the homes but not the community, or they like the price but not the designs, quality, etc.
Negotiator: "It seems that price is not the true issue. What you're really concerned with is obtaining the best value, is that correct? Let's take a moment to discuss what's truly the best value for your family and/or investment needs."
5. We Can Get a Better Price Per Square Foot
Negotiator: "In searching for a new home, there are three points to consider: 1) price per square foot, 2) quality and 3) service. Unfortunately, as a builder/developer, we can deliver only two of the three at the same time. Which two are you most interested in receiving?"
Next installment: Goals: Taking Charge of Your Destiny
Myers Barnes writes articles for many of the nation's top sales-related magazines and trade publications. Myers is also the best-selling author of Reach The Top In New Home & Neighborhood Sales [1] and Closing Strong: the Super Sales Handbook. [2] He is a nationally known motivational speaker and a consultant on new home and resort property sales. You may visit Myers' web site, www.myersbarnes.com [3] or reach him at his e-mail address sellmore@myersbarnes.com [4].
