NOT TOO LONG AGO, A CANCELLATION wasn't really a bad thing. If a buyer bailed and the house came back to the builder, all the sales agent had to do was call the next person on the interest list. And chances are, prices had gone up since the original contract was signed, so the builder probably made several thousand extra dollars for very little extra work.
Those were the days, friends. Things are different now.
With interest rates creeping up and consumer confidence shaky, new-home traffic and sales are down and builders report that cancellations are up. With that combination, a lost sale can be tough to recoup.
So the questions arise: Are there signals to alert a builder that a deal is starting to go south? Aside from requiring a massive, nonrefundable deposit, what can be done to keep a customer from canceling a contract? And, finally, if all the cajoling and soothing words of comfort don't do the trick, what's the best way to sell the house in a hurry, short of slashing the price?
This is when true sales skills come to light, the pros say.
The warning signs can be subtle, but they're easy to spot if a sales agent is paying attention. New-home buyers are excited people. They come back into the sales center repeatedly and bring their family and friends. They want to show off, and illustration: randy pollak they want reinforcement from those they know and love that they've made a wise decision. If they aren't coming in, or they've been in but have stopped coming, they might be having second thoughts, says Pattie Walker, vice president of sales and marketing for the San Diego division of McMillin Homes. Or those darling friends and family members have been whispering in their ear, “Are you nuts? Why are you buying now? Prices are going down!”
Another tip that they're thinking about canceling is they're not progressing through the process. They haven't selected their options, or they're not getting back to the lender with the necessary documentation for the financing. It's vital for the sales agent to work with the design center staff and the lender as a team, with everyone keeping each other apprised of any potential problems. If the buyer has a home to sell, regular conversations need to be happening with the listing agent.
STUFF HAPPENS Buyers cancel for several reasons, some of which have nothing to do with the house or the builder and everything to do with life. People lose jobs, they get divorced, they get transferred out of state, they get sick. There's really nothing a builder can do to recover that kind of lost sale. Just be gracious and wish the buyer all the best, because this is a sale that could be recaptured in the future. The buyer doesn't want to cancel anymore than the builder does, and things could turn around.
“You have to be careful how you treat people during a cancellation,” says Delray Beach, Fla.–based new-home sales trainer Bob Schultz. “If you smack them around, they won't like you anymore. If you're nice, you can work with them down the road.”
If you can legally keep the buyer's deposit, you might consider giving them a credit for a portion of the deposit if they come back in six to 12 months to purchase a home, Schultz says. “Sometimes, it makes sense to give them 100 percent of their deposit back because the house has gone up in value by then,” he says.
Learn more about markets featured in this article: Los Angeles, CA.