“What Builder Incentives Do You Offer For Buyers?”

As a trainer, I have the privilege of meeting incredibly accomplished sales professionals across the country; they work at home builders of all sizes and in a wide range of geographic locations. And, lately, there seems to be a relatively common frustration:   

“My buyers walk in the door and want to know what our builder incentives are almost instantly. They are comparing me to other builders and their incentives before we even get started with the discovery or interrupt me during. It’s so frustrating!”

If I had a nickel for every time I heard a variation of this story… Let’s just say, I would have a TON of nickels.   

Unless you are the rock bottom price in your market, this can be an incredibly challenging conversation to have before you even get your sales process started. Let’s talk about how to handle this situation.   

Understanding The Buyer’s Perspective:  

Before we can tackle a strategy, we need to get into your buyers’ shoes. Why could it be they are acting this way? Are they just TRYING to throw you off your game? Why would they ask a question about builder incentives before we even know if we have a home they will like?   

I will offer a suggestion: It’s been hard to be a buyer in 2023.       

When interest rates doubled in the second half of 2022, many builders saw a dramatic slowdown in traffic and sales (and an uptick in cancelations) as buyers tried to absorb the shock of dramatic monthly payment shifts.   

Builders quickly adjusted pricing strategies. And where there had been minimal (or no) builder incentives for buyers during the pandemic sales booms, all of a sudden, we were seeing some pretty dramatic price concessions to earn business.   

The 2023 Buyer Experience 

Think about it. Almost overnight, as an industry we went from not being able to build houses fast enough to keep up with demand… to offering buyers money to move forward or stay under contract. The result? For better or worse, we gave our buyers whiplash on how they were being treated. And their confidence in the market was hurt.   

Let’s look at some numbers as the year began:   

In December 2022, according to the Home Price Expectancy Survey (HPES), 37% of Americans believed that home prices were going to decline in the next 12 months. Almost every major think-tank and financial institution agreed- predicting home prices to depreciate by the end of 2023.

In January of 2023, NerdWallet released an article that simultaneously stated that 83% of Americans considered buying a home a priority, 11% of Americans planned to buy a home in the next year… but the same article also stated that 67% of Americans predicted a housing crash within the next 3 years.        

Now, combine those numbers with the fervent marketing “e-blasts” from builders boasting about their price reductions and rate buydowns.   

What do these numbers tell us? Demand was still high coming into the year… but consumer confidence was very low.   

However, we all know that these dark projections did not come to pass in this past year.    

Navigating Market Dynamics 

As this year has progressed, most major financial institutions have completely changed their projections – most call for home price appreciation. Zillow, for example, in December 2022 was predicting a .7% depreciation for 2023 home values. They are now calling for a 5.5% appreciation in home values for 2023.   

Why the change? One key factor is the persistent shortage of resale inventory in many areas. Additionally, our builder sales reports continue to show strength, thanks to resilient buyers who are adapting to monthly payment affordability fluctuations. Another contributing factor might be the ability of builders to provide incentives that make it easier for buyers to afford more home for their money.

Zonda’s latest report shows us that 58% of new home communities are currently offering builder incentives for buyers. These incentives range from price reductions, closing costs, “flex cash”, design credits, and rate buydowns… all of them have value, but for most consumers, it is VERY difficult to take that wide variety of builder incentives and give them a fair “apples-to-apples” comparison.   

Is it a wonder why prospective buyers come into our models immediately questioning value?   

Now that we understand the issue, let’s talk about a three-step strategy for when a buyer comes in and wants to question your incentive and value almost immediately. 

Three-Step Strategy For Handling Buyer’s Questions About Incentives 

1. Always Start with Empathy:  

President Theodore Roosevelt said, “No one cares how much you know until they know how much you care.”  

Shore Trainer Michelle Bendien would tell you, “Empathy is the spoon full of sugar that helps the medicine go down.”  

It is vitally important that we do not become frustrated or defensive when buyers bring up the pricing conversation before it feels appropriate to us. A defensive demeanor will only create more tension in the conversation. We need to approach this situation with understanding and empathy remembering that it’s dang hard to be a buyer!!    

Our initial response could start with something like this:  

“I’m so glad you asked about our builder incentives. I get it. When I’m shopping, I want to make sure I’m getting the best value for my money too.”  

2. Have an “Auto-Response” Full of Transparency:  

I hate car shopping. It’s so irritating to me that the price can change relatively dramatically based on the dealership’s need to “make quota”. Nothing makes me roll my eyes more than the salesperson I’m negotiating with putting on some kind of song/ dance and saying in a conspiratorial tone, “Since this is a special circumstance… let me go talk to my financing manager.” He leaves the room to have a secret conversation that determines my financial future.  

Pa-LEEZ! Can we just cut the “cloak and dagger” secrecy act?     

The vast majority of buyers HATE feeling like there is some kind of secret mystery to our pricing, incentives, and negotiations. They crave transparency. The NeilsonIQ report revealed that 72% of consumers say transparency is important or extremely important. A recent Salesify survey says that 45% of consumers are willing to pay more for a product or service to buy specifically from a brand that they trust (up from 30% in 2021).     

So, after leading with empathy, it’s important in our conversation to have a consistent, transparent, and simple message. Try something like:  

“We offer an incredible value here. Every one of our houses has a $X closing cost incentive for using our preferred lender. After that, the price will vary depending on the home, homesite, and time frame that works best for you and your family. And let’s face it, there is no such thing as a ‘good’ incentive on a home that won’t work for you! Let’s get those details ironed out, and I’ll give you the best price we can offer on that home. Sound like a good plan?”  

This is just one example. You’ll want to create an auto-response that suits your circumstances and write it out (and practice saying it) in your own words.  

3. Get Back on Track Seamlessly:  

I love hiking with my kids. They are ages 6 and 3. They are energetic, curious, and love the outdoors. But when we go on a hike, we need to have a plan and a path. We frequently go slightly off the path and explore- throwing rocks into a stream, wanting to see where a little critter that crossed the path went. But, after that detour, we need to get back on our path or we might NEVER get to our destination.  

Every customer comes in with a mission – a mission to improve their lives. We need to help them determine if we have a solution that could work for them. So, it’s vitally important that we keep our party on the path to our destination.  

After your auto-response, you’ll need to get the customers back on track:  

“Great! I just need to ask you a couple of quick questions to determine if we have a home that is a good fit for you. Sound good?… Okay! Let’s start here. Why are you thinking of moving in the first place?”  

If you are further down the path, “Cool. Based on what you said is most important, I believe I have a floor plan that could work! Do you want to hear about it?”  

The Whole Conversation:  

Customer (paraphrased): “Before we go further. I need to know what the interest rate and builder incentives are here. Every builder is offering something different. What can you do for me?”  

Sales Pro: “I’m so glad you asked about our incentives. I get it. When I’m shopping, I want to make sure I’m getting the best value for my money too. We offer an incredible value here. Every one of our houses has a $X closing cost incentive for using our preferred lender. After that, the price will vary depending on the home, homesite, and time frame that works best for you and your family. And let’s face it, there is no such thing as a ‘good’ incentive on a home that won’t work for you! Let’s get those details ironed out, and I’ll give you the best price we can offer. Sound like a good plan?”  

Customer (paraphrased): “Yes.” 

Sales Pro: “Great! I just need to ask you a couple of quick questions to determine if we have a home that’s a good fit for you. Sound good?… Okay! Let’s start here. Why are you thinking of moving in the first place?”  

Pro-Tip: Confidence is Contagious  

When I’m in an airplane, and turbulence strikes, I look at the flight attendant. If they are calm, it’s very reassuring. When they start to panic or act like the bumps are out of the ordinary, that raises alarm bells. Why? Because they are the experts. They fly every day. They should know when to panic and what’s just a normal bump in the journey.  

It’s been a bumpy ride for our home buyers the last few years. Turbulent even. And when the bumps are hitting, they are looking for their cue on how to act from the experts – us!  

If you are confident in your price, product, and abilities, you will be able to bring an incredible gift to your buyers – the gift of confidence. And you will be able to change their world by helping them find the right home. Happy selling out there!