The best way to deal with people who push for a dollar amount before exploring the community is to say we have nothing that applies across the board. Our incentives vary from home to home. We’ve got something special for each and every home, what we need to do is go out and pick out a home for you. This is how you hold the incentive as a closing tool.

Here’s what happens when you don’t have a planned dialogue, you don’t have a planned reaction, or you just don’t know what to say. Here’s the incentive inadequacy. You must be able to stand up to that awkward question, “Hey what kinds of deals, discounts, and incentives is the builder offering?”

You can’t give a good deal on a new home if the buyer doesn’t have a basis of value for the item. I could offer you a great deal, $75,000 off that home over there, but if it’s not the home you want, then there is no value in the discount. That’s why the buyer has to pick something out before you give the incentive. Remember hold the incentives back, they are a closing tool. You can’t give someone a deal on something if they haven’t already determined the value.

In new home sales, regardless of whether you are offering a deal, a discount or an incentive, it’s a matter of when you present it. The classic mistake is giving the incentive before the prospect actually picks out a home. You must get down to the one of a kind. There is no such thing as a blanket incentive. If you give your incentives too fast you are blowing the negotiation.

Incentives are closing tools, not your opening statement. The buyer has to have a basis of value before you give the incentive. Giving the incentive before they see the home, is like spilling the popcorn in the lobby before starting the movie. Remember part of the new home sales process is about getting down to that one of a kind.

I beckon all builders to come to the edge. Stop worrying about discounting, incentives, sales events, competition. Leave all that behind and come to the edge … to the place where you draw the line and say, “I’ll go this far and no further.”

I won’t continue competing against builders with sharper pencils than mine. I won’t keep justifying the prices of my homes instead of selling buyers on their value. I won’t keep making excuses for why I’m not turning a profit. I am the producer of my circumstances; not the product of them.

I won’t allow others to define my business. I will write that definition myself. It won’t be easy, but I will take a stand on the edge … and I will fly.

When your sales run wild, your salespeople can become frustrated and overwhelmed trying to figure out what to do next. Should they offer incentives? Should they negotiate more? Should they discount the home? How will the buyers find your model homes? Is there an online marketing strategy to attract potential buyers?

They need a clearly defined set of expectations … a plan of action. Understanding what breed you are as a builder is the first step towards giving them that. The question for you is: Are you a dying breed or a breed apart? Are you old-school, relying on yesterday’s outdated methods to attract home buyers, or have you developed your own brand? Step out from the pack and say, “Enough! Enough discounting. Enough incentives. Enough justifying my prices!”

It’s time to take charge and acknowledge that you’re in business to make a profit … not just sell homes. Be the new generation builder who works within a system and can make a profit regardless of what the market is doing, which way the economy is heading, and how many builders are throwing in the kitchen sink.

Most builders say, “Hey! I’m a builder. It’s what I do.”

I understand that, but you must also be heavy into sales and marketing or you won’t be around long to do what you do.

Building and selling homes at a discount isn’t a viable strategy. That’s why, at some point in your company’s growth cycle, you have to determine, “Is my company being market driven or sales driven?”

How do you know which one it is?

Think of your company as a boat anchored in the harbor beside 100 other boats. When the tide rises, all the boats go up. When it falls, all the boats drop with it.

The housing market is like tidal water. It goes up and down. If your company is governed by the market, it will follow the ebb and flow … rising and falling just like the other boats.

However, if your company is sales driven, you will pull anchor and leave for more favorable waters. Instead of trying so hard to steal buyers from other builders whose ships are anchored with yours, you will find buyers in areas that other builders have neglected. You will show in places where buyers least expect you. And you will attract buyers from the tidal pool because you have a superior sales and marketing organization.

Don’t be lured and lulled into believing that discounting is a smart marketing tool. If there’s a hole in your business that’s leaking profits, you won’t plug it by being gullible and thinking your can discount your way to profitability. That’s like rearranging the furniture on the deck of the Titanic when it’s sinking. It’s wasted effort.

So, after preparing the paperwork and obtaining the deposit check, here’s how to proceed toward your goal:

Super Achiever: Mr. and Mrs. Prospect, I appreciate your position and understand you want assurances that this home/homesite is the best value available. I can assure you that this home is an excellent value; however, I can’t assure you that the home will become yours. In all honesty, it would be out of the ordinary for the builder to accept your reduced-price offer. I don’t want to give you false hope or have you disappointed, so how do you feel about devising a "plan B" scenario?

Let’s review the $20,000 amount that you are asking the builder to reduce from the price. I sincerely appreciate your concern and $20,000 seems like a major amount until you break it down. (Hand the prospects a calculator and allow them to work through the math with you.) At today’s interest rates, for every $1,000 you finance, your monthly investment is $7 per thousand financed. (The number will change according to prevailing rates.) That means the $20,000 difference you seek is in reality $140 a month. I realize also that, at first glance, $140 per month seems like a lot; but break that amount down on a daily basis. In a 30-day month, the $140 becomes only $4.67 a day. Mr. and Mrs. Prospect, I bet you spend $4.67 a day on bottled water, a cup of coffee, or other kinds of insignificant items, don’t you? Well, for the cost of these, you can own the brand new home of your dreams.

I know this may seem ridiculous, but if you reflect on it, $20,000 isn’t really that much over the long term. So, as a backup plan, if your offer is not accepted as presented, you’re not going to let $4.67 a day stand in the way of owning the home you really want and deserve, are you?

When presenting the counteroffer to the prospect that evening or the following day, you can soften its impact by translating the counter-amount into to a daily figure. Seeing it in a smaller number may speed up their decision-making process and lessen the blow of having to make a concession.

Here are some additional scripts that will provide you with insight into how to effectively respond to these statements:

Super Achiever: Mr. and Mrs. Prospect, in many ways, a discount is really an admission of guilt by builders that they made a mistake and that they overcharged many other homebuyers in the past. Now they’re saying, "We overcharged for them at first, but this is what the home is really worth."

Beyond their admission of guilt, this pricing strategy is the fastest, surest way to insure a meltdown of your personal equity and the meltdown of equity in the entire neighborhood. You won’t get that from this builder or this community.

I’m curious. Mr. and Mrs. Prospect, are you familiar with how true real estate value is determined? In reality, the developer/builder or the salesperson representing the homesite/home does not determine value. Value is based on comparable sales. In other words, a professional appraiser says the property’s market value is a certain amount based on recent sales of comparable properties.

If someone purchased a comparable home yesterday for $350,000, and today you purchase the same model for $300,000, and tomorrow someone negotiates the builder down to $275,000, then what is the true value of that home?

Mr. and Mrs. Prospect, we do everything we can to protect the values of homes within our neighborhood and, consequently, the equity in your home. If a brand new home is going to be one of your single largest investments, then isn’t it reassuring to know that you are doing business with a builder who is concerned with guarding your personal equity and protecting the assessment value of the community?

Our builder knows what his homes are worth. He built value into these new homes from their blueprint conception. This builder has a reputation for not sacrificing superior value for quick sales. He didn’t cut corners or use less-expensive materials so he could afford to reduce prices later when the market tightened. If he didn’t discount them when they were under construction, why would he discount them now?

If the customer firmly demands that you submit a written offer and you are forced to write the agreement for less than the stated value, then proceed with the following strategy:

Super Achiever: Do I understand you correctly, Mr. and Mrs. Prospect? Are you saying you like this home and, if it were $20,000 less, you would own it today?

Prospect: I suppose I would.

Super Achiever: Then may I suggest that, since you seem firm in your position, we prepare the paperwork "subject to" the builder meeting your request for a $20,000 price reduction. This way the process has begun. We have secured your home and if, by chance, the builder does not agree, we will simply start over. That makes perfect sense, doesn’t it?

Prospect: Rather than prepare the paperwork, can you first check with your builder and see if this is even possible?

Super Achiever: For any type of offer to be valid, consideration and an agreement are necessary. In other words, to have a valid and binding agreement, we need to prepare the paperwork complete with your request and the initial investment. So, let’s do that now and I’ll present it in writing to the builder along with your deposit check, okay?

Prospect: We would be much more comfortable if you would simply run this by the builder first verbally and see where he stands. If it’s acceptable, we can prepare the paperwork afterward.

Super Achiever: In addition to not having a valid agreement, Mr. and Mrs. Prospect, without the paperwork and the deposit check, my builder would not even consider your request. And without him looking at it, your answer is an automatic "no." However, if I present your request with consideration and an agreement, then possibly the answer would be yes or he’d give us a counteroffer. So, as you see, in order to move your request forward, we must prepare the paperwork first. Let’s do that now, so I can present your request by the end of the business day.

This approach has the added benefit of being able to find out how serious your buyers really are.

Next time, we’ll discuss how to proceed with the prospect after preparing the paperwork and obtaining the deposit check.

However, since they ask for them anyhow, we’ll consider the purchase from their point of view and the best way to respond.

To begin with, you shouldn’t be surprised that they do ask for a discount. Almost daily, the media reinforces the concept that this is a buyer’s market – that inventory exceeds demand – that we’re in a housing "bubble." The not-so-subtle message from the media is: There are a bunch of homes for sale, so you can take your time shopping for one and negotiate when you find it.

As a professional salesperson, you should realize that although customers bring up the topics of discounts and reduced pricing they actually are concerned with more than that. Asking for a discount is frequently a form of entitlement, a way of saying, "Hey, I feel this is a benefit I deserve, so how about giving me a discount?" That sentiment is even more prominent today because they perceive that, since homes are not selling quickly and they are one of the few buyers out there, they should be entitled to something extra such as a discount.

Compounding the salesperson’s frustration is having the prospect say, "It costs too much;" or "Your competition is giving bigger discounts;" or the classic, "You’ll have to do better than that."

Check back, as I will discuss how to effectively respond when you are confronted with these kinds of statements.