Explore the latest topics

How to Sell a Spec ...

How to Sell a Spec Home: 5 Secret Tips

By Oren Jacobson 6 min read

 

As we finish the month of June and transition into July, many home builders have reached a point where they can no longer sell a new build that can deliver in 2018. With that being said, this is the time where builders and sales teams alike should be trying to move the sitting and planned inventory in production successfully. Therefore, pressure shifts to the sales team to deliver on the two critical metrics builders care most about: delivering planned sales and margins, without the flexibility of selling dirt. Here are my top five tips for selling inventory while maximizing margins.

Stay On Process

One of the most common mistakes sales professionals make when trying to sell a spec home is that they get away from the process. For example, a client walks in and says they need to move quickly. Within a few minutes, we’re in our car and driving out to show a few different spec homes. If this sounds like the right play, then we have to talk because it is not. You’re no longer guiding the customer through the most favorable thought process, and if you get a sale, you just got lucky. Don’t let this scenario throw you off your game. Someone looking for a quick move-in home is an excellent thing for us, but that doesn’t mean our process changes. We still focus on building rapport. We still create value for the area, builder, and community. We still do a thorough job with discovery. Only after we’ve gained buy-in on the area, builder, community, and learned the key want/needs and emotional drivers, should we head out and show the customer the right spec home(s) so we can demonstrate with power.

New vs. Used

I’m of the opinion that every customer that you speak to should be educated on the differences (and value) of new construction against resale homes. If you’re not doing this every time, you’re cheating the customer, your builder, and yourself by failing to create the right value for your product. This is especially true when we think about spec homes, and in particular for spec homes that will be ready in the next 60 days. We should assume every customer looking at those specs is also looking at a resale. If you fail to create value in this idea upfront, then the customer will treat your spec home as a commodity. They will compare your price to the resale market, and usually not in a good way. Don’t let someone judge your $275,000 new home as more expensive than a $260,000 resale. The total cost of ownership for your home is probably lower, but the customer doesn’t know that.

Keep Options Open

Great salespeople never let doors close unnecessarily in the sales process. We must all learn to recognize that potential buyers are sorting things out as they go along with you. Your prospects are never going to be 100% certain until they sign an agreement, and in some cases, they may still not be fully certain even then. Consequently, there’s no reason to close the door on a viable option unnecessarily, and you serve your customer better (and set yourself up for success) when you keep the customer’s mind open to options as well. For example, imagine a customer tells you they want to build a home from scratch and hope to move in next spring. The follow-up questions might sound something like: “Help me to understand why that is the ideal timeframe for you? I know you said you wanted to be in something in about ten months, but if there was a home ready in five that was otherwise exactly what you wanted would you be open to it?” The reason to ask the first question is to understand their “why.” The reason to ask that second question is to test their commitment to the original idea they offered you about timing.

If they respond with a no: “Great, I just wanted to make sure that I gave you the information you wanted. Sometimes people end up buying something that is ready a little sooner because they want to take advantage of interest rates before they rise, so I didn’t want to rule anything out for you.” Note: This follow-up is designed as a test again. If they really won’t consider a spec they won’t push back. If they would consider something they will indicate that they would want to know about the options here; thus the door is kept open.

If they respond with a yes: “Great, let’s do this. Let’s talk more about what you’re looking for, and if I think we have something that fits that would be done a little sooner, I’ll make sure I bring it to your attention. Maybe that works out well, and you can take advantage of locking in rates sooner.” Leveraging this tip will allow you to find inventory sales that you will otherwise miss because you immediately accept their initial time frame as a hard fact and only focus on a dirt sale with them.

Interest Rate Urgency

Everyone should understand how interest rate urgency works on a move-in ready spec home. However, have you thought about how to use it on a home that is not going to be finished by November? The basic ideas remain in place. The best targets to buy the inventory home that is just at foundation today is a customer who is thinking about moving in Q1 of 2019 (or beyond). Of course, this customer would have to consider moving sooner if they found the right option for them, assuming they don’t have anything preventing them from moving sooner. “If nothing is blocking you from moving in November, and the home meets all of your wants and needs, why not eliminate the risk of continued rate hikes and lock in the best payment you can, the lowest rate you can, as quick as you can? Isn’t that better than having to sacrifice square footage, features, or homesite because rates climbed and pushed you past your comfort budget, especially when there may be a home that’s perfect for you available sooner?” You should think of this point in conjunction with the third point above.

Incentive Values > Cost

If you’re a builder, I bet you’re hoping I’m going to give you a way to sell the specs at full list price and at the same margin as a build job. I wish I could, but we both know that’s just not the way this works. Custom orders in all industries sell for more and provide more profit. However, that doesn’t mean we need to give massive discounts away, even though we may need to give someone a reason to move up and buy that November foundation instead of building. Your goal should be to offer an incentive on your inventory that has a higher total value to the customer than the cost to you and is above and beyond your build job incentive. For example, you won’t reduce the price by $20,000, but maybe you can get the rate down low enough to reduce the payment by the same equivalent. That’s the type of value to cost equation that moves spec homes and protects your margins.

Leverage these five tips. Time is of the essence.

Originally published Jun 26, 2018 under Explore the latest topics, updated February 2, 2024

Subscribe to our Blog

You may unsubscribe from these communications at any time. For more information, check out our privacy policy.