Selling Against Rising Interest Rates
Welcome to a very special conversation with our own Ryan Taft. We sat down to discuss the number one rule when selling against rising interest rates. There’s no secret that sales during rising interest rates can be challenging but surely not impossible.
As sales professionals, there will always be things we can’t control. Interest rates are a prime example. Fortunately, we can control how we react to these variables, and that’s exactly what we’ll help you focus on here.
JEFF: Rising interest rates are a hot topic among new home sales professionals. When we think about the buying formula (CD x FP > Cost + Fear), people buy when their current dissatisfaction times their future promise is greater than their cost and fear. Let’s talk a little bit about it from that perspective. Maybe a little on the cost side, a little on the fear side. Let’s talk about how interest rates affect the right side variables on the formula.
RYAN: Right now, it seems like the media is trying to scare everybody. I’m looking at articles in different publications and emails I’m getting, and even in our industry, that scares people. It’s not that it isn’t significant. It is. But it’s pushing fear as we know the media does. Any time you have fear being the focus, what you focus on gets magnified.
As a result, you have people who, if they were on the fence, are out of the game and not coming in. But what is interesting to me is the folks still coming in, despite the perceived fear of rising rates. This is where our focus needs to be.
JEFF: On the cost side, some buyers have been removed from the market. They’re now called non-buyers. We don’t want to lose sleep over people who just can’t buy anyway. However, I think it’s the fear side of things that has been elevated, which is interesting to me because when we consider interest rates, we’re talking about payments, right? Isn’t that the real issue we’re dealing with?
RYAN: Yes, absolutely. If you go back to the Warren Buffett quote, “Price is what you pay, value is what you get.” Well, that’s payment. That’s what you’re paying, and that’s what it’s about.
JEFF: I’m trying to think of a time; remember that time when people were thrilled with their payments? Oh, wait, that never happened!
It hardly matters where interest rates are; people have always been concerned about their payments.
What do we do about that? How do we help people over that fear that they’re paying significantly more? Make no mistake; they are paying significantly more than they were a short time ago. So how do we help people with that massive discomfort?
RYAN: The first thing to recognize is that if someone is standing in front of you, an interesting story is going on because there’s a new behavior, especially with buyers who are afraid. It’s not like they’re rushing and saying, “I want to buy, I want to buy.” They’re sitting in their car, game planning with each other, on a strategy, maybe even coming up with a safe word on how to get away from you. I say “buffalo,” and we run!
However, they’re still coming in. This automatically tells you that it’s not all about cost and fear. The current dissatisfaction and future promise side of the formula always have and will continue to influence your buyer’s motivation to change.
Something is going on in their lives that determines their need to move. Now, of course, they still have fear. They’re demonstrating all these behaviors that say, I’m not a real buyer. But the reality is they probably are. We need to focus on shifting to that dissatisfaction and future promise.
JEFF: That speaks to the idea here that I sometimes think the focus on the interest rates and what we see in the media or hear from others, whatever it is, takes us off of rule number one. My greatest concern here is when buyers get misdirected.
Talk about rule number one and why it’s an important grounding point for salespeople to keep them out of the conversation about the rates and payments.
RYAN: Live in the right home. No one lives in the interest rate. Live in the right home because you can change the interest rate later. You’re not going to change your home; it’s a much bigger undertaking.
We want to ensure that we don’t get stuck in a pricing and interest rate conversation on the front end. If we say the price is what you pay and value is what you get, then the value is largely defined by your motivation to move in the first place.
What is wrong with where they’re coming from? What problem are they trying to solve? Without this information, prices and payments will always have more influence than they should. In my opinion, it’s a losing conversation because you’re going to fall into the trap of, well, down the street, they’re doing this, and this competitor has this. It’s a race to the bottom to see who will lower their margins and devalue their brand the fastest to win the sale. In the end, the buyer loses because they don’t live in the right home, which is a problem.
So how do you say, you know what, forget the price, forget interest rates, take that off the board? We’ll look at the home that improves your life the most and then determine if that home’s cost is worth that life improvement. That’s the home you should buy. That’s the right home.
JEFF: It makes a lot of sense here because it speaks to what people are really trying to accomplish here. How are they going to improve their lives? And when we get sucked into a conversation about price terms, timing, discounts, incentives, whatever it is, it will stray them from their main objective. They will make what they think is the right decision on the wrong home, and that’s tragic.
Ryan Taft, thanks for the wisdom here as we deal with this issue of higher interest rates and how to sell around them. Always remember rule number one, live in the right home.
Until next time, my friends, learn more to earn more!
