Back to Basics: Builders Rethink Sales

As the economy continues to slow and the housing inventory increases, home builders are searching for ways to bolster sales. While economists, banks and politicians scratch their heads looking for a way to prevent the economy from further decline, builders may have it a little easier. Though it may sound naïve, the answer to the dilemma may be simpler than most builders think: emphasize the fundamentals of selling.

“Correct strategy, correct marketing, correct location,” says Dan Levitan, president of Levitan and Associates, Inc., a Fla.-based company that provides strategic consulting services—nationally—for the housing industry. “Going back to basics,” Levitan adds.

In the case of selling homes, the basics are listening to what the buyer wants and understanding the buyer’s motivation, or emphasizing relationship selling. Salespeople should also sell the advantages of home ownership, such as asset appreciation, tax deductions from the interest paid on a home loan and creating equity. And they should be aware of buyer motivation and traffic. “If people are coming out, there’s a reason they’re coming out. If you can find out that reason, you’ve got a chance to make a sale,” says Levitan.

Basic sales skills have been largely forgotten, says Levitan, because the boom in the housing market didn’t require new salespeople to actively practice the fundamental selling skills, and experienced salespeople forgot much of what they had learned in their early experiences. Those days are over. “I’m sorry, but no demand lasts forever. It’s a cyclical business and a cycle has ended,” warns Levitan.

Rebuilding Relationships
The change in the market has been drastic enough that home builders have to make active changes in marketing strategy. For Mazomanie, Wisc.-based John Wick Homes, the company regularly collects market data that has provided some interesting information about potential home buyers. “One of the things we’ve found is that people don’t trust builders as much as we thought they did,” says Ron Boehnen, vice president and general manager of John Wick Homes. “The trust was really diminished.”

In an effort to combat the public’s eroding trust in builders, John Wick Homes’ salespeople make a strong effort to sit down and determine the finishes of the house before building begins, and to prevent change orders down the road. Once the type of house and its finishes are selected, a firm price can be provided to the customer. Sticking to that quoted price is an important step for maintaining the trust between builder and buyer. “We lock in. We are holding to that price. No surprises there,” says Boehnen

The company also offers rewards for customers who keep to their original plans and pass along the efficiency gains to the builder. If a consumer doesn’t make any changes to a standard plan, then they can get a discount of up to 10 percent on the total price of the house, says Boehnen.

The Long View
According to a 2008 study from the Joint Center for Housing Studies of Harvard University, vacant housing units increased by more than 600,000 from the last quarter in 2005 to the same period in 2007.

The study goes on to say that in the short term, housing prices won’t recover until the inventory glut has been absorbed, credit becomes less expensive and the bottom of the market has been reached.

The good news is that demand for housing is expected to get better—eventually. In the long term, the Joint Center study says that assuming immigration trends continue and the excess inventory diminishes, average annual production will creep back up to 1.9 million units over the course of the next decade. “The long-term potential for housing sales is phenomenal,” agrees Levitan, who cites population growth and increasing demand as likely future drivers for home sales. But, he says, it’s essential for the current market turmoil to be fixed correctly in order to drive long-term demand.

However, for the time being, survival depends on keeping the approach simple and focusing on the basics. “If you do your homework, it’s an easy business,” says Levitan. “It’s a result of good marketing and strategy.”