“If you are not working with a broker, I could make you a better deal.” How can a professional sales person make such a statement? Yet, I’ve actually experienced sales people relating that exact expression to prospects, with the cooperating broker in the same room. Of course there are also prospects that genuinely 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?
The short sighted sales person doesn’t see the issue and blindly convinces themselves that each and every sales conversation they have with a potential customer is a discrete event. Don’t fool yourself. Today’s savvy homebuyer shouts your “not working with a broker discount” from the rooftops. Eventually they may end up working with a broker and repeat the statement, or worse yet, you create your own 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 percent of your total sales. Of course, if you are paying your broker a commission of three percent, you will budget 0.75 (25 percent of three percent) to your total market cost to cover broker sales.
Now 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 three percent commission you would have to pay to the broker.
Salesperson: “Mr. and Mrs. Prospect, am I to understand, since you are not working with a broker, you feel you are entitled to a three percent discount?”
Salesperson: “You’re saying, if I were to discount the home by three percent, you are prepared to own this brand new home today?”
NOTE: If the prospect replies no, you cease negotiations and ask, “Why not?” In the event the prospect replies yes, then proceed with the following sales dialog: “Mr. and Mrs. Prospect, I have good news for you. At (Builder’s Name) we do not have a three percent 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 them a three percent commission?”
Salesperson: “Mr. and Mrs. Prospect, actually we don’t budget three percent into every home. As prudent business people, our builder only budgets broker commissions into a certain percentage of our homes, and after ___ years in business, we have determined that about 25 percent of all our sales involves brokers. The challenge is, we don’t know which 25 percent of our homes sales will involve cooperating brokers. So, our company’s dilemma is we could budget a commission on all of our homes but that would increase our entire pricing structure by three percent rather than 0.75 percent we know it will actually be.
“Otherwise, my dilemma would be to raise my prices by three percent 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 they would be too expensive.
“Our other option is to select 25 percent of our homes and only make those available to brokers and their customers and force them to a limited selection. Mr. and Mrs. Prospect, 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 do 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. Mr. and Mrs. Prospect, my real cost per home/homesite is above board, 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?”
Keep in mind, all you need is a credible, logical explanation when you explain it to brokers and customers. This way it eliminates disputes and unnecessary negotiations before they occur, and benefits everyone involved.