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Urgent care: with sales slowing, cancellations need to be avoided at all costs. Here's how to keep the deal alive.

NOT TOO LONG AGO, A CANcellation wasn't really a bad thing. If a buyer bailed and the house came back to the builder, all the sales agent had to do was call the next person on the interest list. And chances are, prices had gone up since the original contract was signed, so the builder probably made several thousand extra dollars for very little extra work.

Those were the days, friends. Things are different now.

With interest rates creeping up and consumer confidence shaky, new-home traffic and sales are down and builders report that cancellations are up. With that combination, a lost sale can be tough to recoup.

So the questions arise: Are there signals to alert a builder that a deal is starting to go south? Aside from requiring a massive, nonrefundable deposit, what can be done to keep a customer from canceling a contract? And, finally, if all the cajoling and soothing words of comfort don't do the trick, what's the best way to sell the house in a hurry, short of slashing the price?

This is when true sales skills come to light, the pros say.

The warning signs can be subtle, but they're easy to spot if a sales agent is paying attention. New-home buyers are excited people. They come back into the sales center repeatedly and bring their family and friends. They want to show off, and they want reinforcement from those they know and love that they've made a wise decision. If they aren't coming in, or they've been in but have stopped coming, they might be having second thoughts, says Pattie Walker, vice president of sales and marketing for the San Diego division of McMillin Homes. Or those darling friends and family members have been whispering in their ear, "Are you nuts? Why are you buying now? Prices are going down!"

Another tip that they're thinking about canceling is they're not progressing through the process. They haven't selected their options, or they're not getting back to the lender with the necessary documentation for the financing. It's vital for the sales agent to work with the design center staff and the lender as a team, with everyone keeping each other apprised of any potential problems. If the buyer has a home to sell, regular conversations need to be happening with the listing agent.

STUFF HAPPENS

Buyers cancel for several reasons, some of which have nothing to do with the house or the builder and everything to do with life. People lose jobs, they get divorced, they get transferred out of state, they get sick. There's really nothing a builder can do to recover that kind of lost sale. Just be gracious and wish the buyer all the best, because this is a sale that could be recaptured in the future. The buyer doesn't want to cancel anymore than the builder does, and things could turn around.

"You have to be careful how you treat people during a cancellation," says Delray Beach; Fla.-based new-home sales trainer Bob Schultz. "If you smack them around, they won't like you anymore. If you're nice, you can work with them down the road."

If you can legally keep the buyer's deposit, you might consider giving them a credit for a portion of the deposit if they come back in six to 12 months to purchase a home, Schultz says. "Sometimes, it makes sense to give them 100 percent of their deposit back because the house has gone up in value by then," he says.

BRING IN THE SPECIALISTS

Another major reason buyers cancel is that they couldn't qualify for a mortgage or that their old house hasn't sold yet--not uncommon in today's softer market. That's why it's more important than ever to have solid relationships with lenders that can be creative in helping buyers find financing that works for them.

"The market we're facing right now isn't doom and gloom; it's just softening a bit, so customers' current homes are selling, but not as quickly as they may have been a year ago," says Nanette Overly, director of sales and marketing services for Dublin, Ohio-based Epcon Communities. "Having a relationship with a great lender can help the customer secure interim financing with a lender both of you trust, enabling them to move forward with the home they have under construction.

It's also time for sales agents to research financing vehicles. They should be familiar with a variety of products that are tailored to specific scenarios, such as customers who plan to be in their house for only a few years.

"As a salesperson, I had one or two loans I talked about a lot, and neither of them was a 30-year fixed," Walker says.

Also, at least one of those lenders should be able to write loans for customers with less than perfect credit.

As far as contingency sales go, the word from the wise is to stay on top of them. Pay attention to the conditions surrounding the house the buyer has for sale, including the number of homes on the market in the area and whether that neighborhood tends to sell quickly, Overly says. And never, ever take a contingency contract from a buyer who plans to sell his house himself.

Schultz recommends requiring buyers to list the house with an agent and a price the builder approves of, to keep it from lingering on the market. The agent should provide a weekly report on all marketing efforts regarding the house as well as showings and offers.

READING THE SYMPTOMS

The final reason buyers cancel involves a broad collection of customer perceptions or something they're worried about that's unresolved, Schultz says. They may be nervous about the cost associated with the purchase. Someone may have told them that the builder has a bad reputation, or they may have stopped by the jobsite to take some pictures and had a run-in with a superintendent.

Getting to the heart of those reasons takes some real skill, Walker says, because the buyer probably isn't going to admit them right off the bat. They'll say they can't afford it or they've decided it's just not the right time for them, but the real reason could be something very different. That's when they need to be reminded of all the reasons they decided to purchase in the first place.

"You have to do a better job of uncovering the objections," Walker says. "Ask them, 'What are you having second thoughts about? You picked the house you love and the location you love. Is that still OK?' If the answer is yes, then ask, 'How about the mortgage broker? How is that going?'"

BEDSIDE MANNER

No matter the underlying reason, if the decision to cancel is a discretionary one, the best way to save the sale is to maintain consistent communication and help the buyer feel invested in the community from the time the contract is signed, says Mark Hodges, senior vice president of corporate operations at Hovnanian Enterprises.

Hovnanian's buyers quickly receive a letter from the division president thanking them for their decision and inviting them to call him with questions or concerns. That's followed up by an introductory call from the construction manager to welcome the buyer and to schedule a meeting to explain the building process. Meanwhile, the salesperson calls at least every two weeks until closing to maintain "continuous, reinforcing contact with the customer," Hodges says.

Walker agrees that in today's market, every contact from the builder needs to assure the customer that he or she has made a wise choice. "It's continual selling; from the time they leave the check, it's reaffirming their decision. ... It's the same thing with the mortgage rep, who says, 'Gosh, you made a great decision. You're probably going to hear crazy things out there [about prices], but you're buying a home to live in.'"

At Hovnanian, each buyer is also invited to meet the community team, including the mortgage representative and the warranty service manager. The meeting, which brings together every customer who has signed a contract within the previous month, assures buyers that the builder cares about them and introduces them to other people who made the same decision they made. "It lets the consumers reinforce each other," Hodges says.

Connecting buyers to the community immediately is a strategy that's worked well for several builders. It was one of Io tactics the Talega master planned community in San Clemente, Calif., instituted this summer to reduce cancellations, says Tami Newcomb, director of marketing for the developer, Talega Associates. Buyers with open escrows were invited to Talega's summer concert series and encouraged to bring their friends and family members.

Overly says staying connected has been a big hit at Epcon Communities as well. "When customers get involved and meet their future neighbors, they become invested in their new community before they move in," she says. "Then, if they hit a bump in the road along the way, they're more inclined to do everything possible to work through it. And if they can't, at least you have a higher probability of getting them back once they've sold their home or overcome whatever was standing in their way."

BACK ON THE MARKET

Selling the house the buyer walked away from

Sometimes, despite everyone's best effort, the deal just isn't going to go forward. What then? It's time to be aggressive with marketing before the house gets unjustly pegged as someone else's problem.

"When a house comes back, it's more apt to be stigmatized," says Mike Forsum, western regional president for Bradenton, Fla.-based Taylor Woodrow Homes. "It's no different than someone who gets jilted right before the prom."

First, assess where the house is in the building process and review the original buyer's selections to see whether they're a help or a hindrance to resale. Are the paint and carpet colors fairly neutral, or are they a bit out of the mainstream? Are the appliances too high-end to appeal to the average buyer? If changes need to be made, the forfeited deposit can be used to offset the costs involved.

Avoid the temptation to simply slash the price, which tends to get back quickly to other buyers who paid full price. Instead, offer buyer incentives that add value to the home or to the home-buying experience, such as assistance with closing costs or design-center credit for upgrades.

To market the house, prominently display photos in the sales center and on your Web site as the featured house of the week. Sales agents should go back to their file of prospective buyers who were interested in that floor plan and contact them to let them know it's now available for quick delivery.

And don't forget local Realtors. They typically work with buyers who are looking to move in sooner rather than later. Offer an additional bonus to sales associates or Realtors to move the house quickly.

"Spiff it on the sales side with the brokers and incentivize on the buyer side," says Mark Hodges, senior vice president of corporate operations at Hovnanian Enterprises. "But you also have people in the market looking for a home, so advertise it as a ready-to-move-into house."

Most important, don't get discouraged. "The home sold once; it will certainly sell again," says Nanette Overly, director of sales and marketing services for Dublin, Ohio-based Epcon Communities. "The more a sales consultant believes that, the higher the probability they'll turn the home in no time."

FOR MORE INFORMATION ON THE COMPANIES MENTIONED IN THIS STORY, VISIT OUR WEB SITE AT WWW.BUILDERONLINE.COM, CLICK ON "THE MAGAZINE" TAB, AND THEN CLICK ON "BUILDER ARTICLE LINKS."
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Author:Curry, Pat
Publication:Builder
Geographic Code:1USA
Date:Sep 1, 2006
Words:1942
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