Negotiating from a builder’s perspective – what builders are looking at when you ask for an incentive for your client.
One of the greatest perks a client gains by working with a realtor is that they have a trained professional in their corner to assist with negotiations. As a realtor, you may have had experiences in the past where the negotiation process with a builder seemed adversarial, and like you had to fight to get the best value for your client.
Speaking from the builder’s perspective, I’ve seen that when a realtor adopts an aligned approach to negotiations, it typically leads to a better overall experience and outcome. I thought I’d share a few strategies realtors have used to gain some alignment with the builder that result in them achieving maximum value for their clients.
It may be surprising just how many creative ways you can bring value to a builder, and therefore increase your leverage in negotiations. By clearly presenting some favorable terms to the builder, you are adding value to the builder and effectively facilitating the agreement to come to fruition. Here is a list of items where the builder can benefit from some flexibility, which may ultimately lead to greater overall value for your client.
Draw Mortgage vs. Completion Mortgage
Builders will sometimes be able to pass along savings if your client uses a draw mortgage. A draw mortgage provides funds to the builder throughout the construction process as opposed to one lump sum at the end of the build. By accessing these funds earlier and at a lower cost, the builder is able to save money on their financing for the project.
Higher down payment/deposit amount
If a client has the ability to put more money down at the beginning of the sales process, this can also save the builder on their cost to finance and it helps eliminate risk of the purchaser walking away from the agreement in the builder’s eyes.
Quicker possession date
Have clients who can move in quickly? Great! By taking possession of their new home at a sooner date, the client is saving the builder carrying costs on the home. This would be most relevant with a quick possession home purchase.
Eliminating conditions
Builders greatly appreciate the certainty of an agreement going firm. If a client has the flexibility to submit a cleaner offer with fewer conditions in their favor, this can be of great benefit to the builder.
Make it easy for the builder
If you happen to have clients who aren’t very choosy when it comes to the selections in their home, their lot, or their finishes – this is incredibly value to the builder.
Why? The builder will be able to use less resources, less time and ultimately spend less money on a client who makes life as easy as possible for the builder.
If you know your clients would be okay without making revisions to a floor plan, or could choose from a colorboard (pre-designed and determined selection of interior finishes) this is like gold to a builder. It allows them to free up internal design resources that would otherwise be needed to facilitate these parts of the process, and actually tighten the overall timeline. Time=money in this case.
Each builder will value some of the above offerings more than others and evaluate your offer based on their financing structure and their overall desire for the business. Your success will come in learning more about your each builder to gain insight about which negotiation strategy will lead to the greatest possible value for your clients.
I hope this information sheds some light on some creative strategies you can implement to achieve greater value for your clients when negotiating with a builder. In the end, when your clients have some flexibility and you know the builder well, there is likely a creative way to generate a win-win scenario that benefits both parties.
