Understanding Your Customer: Why Cost Matters and How it’s More Than Price Alone

While the Current Dissatisfaction and the Future Promise work together to move clients forward, two Inhibitors can hold them back. The first one of these is Cost.

Most homebuyers associate Cost with the total price tag on a home, the bottom line sales price as stated on the purchase agreement. We all know, of course, that one cannot consider price alone. So Cost is better defined as representing every price the client will have to pay, even the non-financial ones.

Cost Examples

• Selling Price – Think of its price as a value gauge on the home. The selling price is not in and of itself a financial burden unless the client is paying cash. The price represents a sense of comparative worth, an indicator of the ability to pay and qualify for loans. 
• Payment – The price is a value gauge; the payment is where the rubber meets the road. Mortgage payments – the only part that hurts every single month. Is this new pain worth it? What sacrifices will I have to make when purchasing this home? Can I still live the lifestyle I desire? Will we have to suffer regarding the quality of vacations or how often we eat out? 
• Time – Buying a home and moving takes time. Your client has to take time from work or use weekends to look, get qualified, pack, unpack, and so on. Purchasing a home is not a simple endeavor; the process takes a significant amount of time for any home buyer. 
• Hassle – Imagine if I asked you to take two days off for a project and, on day one, instructed you to pack up your garage and let the boxes sit where they were. Then on day two, you’d unpack the boxes and put everything back. How do you feel about that? Horrified, probably! But your client has to think in terms of the whole house: all of the garage, all of the kitchen, all of the knickknacks collected over the years, all of the yard toys! Buying a home is a gigantic hassle. Inconvenience is a considerable cost. 
• Down Payment – Paying 20% down on a $300,000 home is $60,000. I don’t know how to look at it except to say that’s a lot of money. Does your client want to part with something that probably took years to acquire? Will The return be worthwhile? What are the other investment options for that cash? Will it drain the reserves? 
• New Costs – Is there a homeowners association with monthly fees? Will the taxes be higher in the new home versus the old home? Will the clients have to put their kids in a new or private school? Will the energy bills cost more? Is there a garbage service, and will it have an out-of-pocket cost? And then there’s always this thought: “What else am I missing?”
• Compromise – Every dollar spent is a dollar that’s unavailable for something else. So, when clients buy a home, they are committing to that mortgage payment, often at the expense of other things they’d like to have and do.

Assuming the Cost Burden

Undoubtedly, Cost is a significant inhibitor. The Cost factor scares a great many salespeople. Many sales professionals take a proactive (though faulty) approach by immediately discussing discounts and deals. (Big mistake, by the way.)

Sellers who lead with their discount or willingness to deal do more than just lower their profit. They cause a devaluation of the product. And not just a financial devaluation. Clients think less of what they’re buying. 

When this strategy is encouraged, the clients question if the house is overpriced. So then, they suspect the home isn’t worth the asking price. The perceived value has already dropped and may deter them from making an offer. 

Therefore, as a salesperson, you may be doing your clients a huge disservice by discussing discounts. You may, in all reality, be steering them away from the house of their dreams – their future promise!

Helping your buyers understand and overcome Cost concerns is part of the sales process we need to be confident in. You’ll learn all about doing this and much more in my book The 4:2 Formula® Getting Buyers Off the Fence and into a Home. Order your copy and/or a copy for your team and you’ll be well on your way to changing people’s worlds!