How homebuilders can improve negotiations with home buyers

Ask builders what they hate most about the current market and chances are "prolonged negotiations with customers" will be near the top of the list. Yet few builders are working to improve the negotiation process within their firms. Most seem to take the position that there is little they can do to improve the situation until the market improves.

Many forward-looking builders see customer negotiations as a way to get more than their fair share of sales at better prices than their competitors. To get better results and more sales, builders must train their sales team on the essentials of negotiations with customers.

Get your goals straight

Begin by defining your goals. I suggest three:

1. We want to receive more offers.
2. We want customers to understand we will consider any fair value offer.
3. We want to empower the sales team to become the point persons in the negotiations, representing the builder rather than the customer.

Consider why you may not be getting the most from customers looking to negotiate; most potential offers never make it to serious discussion stage; most sales professionals take the side of the customer and try to achieve the lowest possible price for the home; and most owners and managers are spending far too much of their time negotiating with customers — and are not trained in basic negotiation skills.

So what should you do to improve the atmosphere and receive additional offers at the better prices?

Step 1: Create an environment where every offer — even unrealistic offers — are viewed as a positive event and worthy of serious consideration.

For example, if the customer says, "We really like your home and are prepared to offer you $250,000," your sales professional should say, "Wow, $100,000 under our asking price is really a big discount. Let's talk through how you arrived at that price."

Step 2: Have the sales professional and customer create a worksheet that details how the customers arrived at a fair market price. It should include a comparison to the homes they are considering and adjustments to show why their offer is reasonable. Both the sales professional and customer should initial the analysis. If they really want your home, they will spend the 15 minutes needed to do the comparison.

Step 3: Require a deposit prior to submitting the offer to management. Customers need to know that you consider all offers seriously but only if you are dealing with a bona fide customer.

This negotiation process requires more discipline but rewards you by gaining the ownership of the sales professional and receiving more offers at better prices.