Discounts on new build prices?
Discussion
Morning all,
Search function doesn't seem to be working this morning, so apologies if this has recently been covered.
Just wondered if anyone has any insight into the sorts of margin the larger house builders expect to have haggled out of their asking prices in the current climate, especially given the risk of further falls in value.
Property in question is one of the last on a development towards the higher end of the market. Builder thought it was sold but it's now fallen through... suspect they're keen to get off the site.
Any pointers in % terms would be really appreciated.
Thanks in advance,
LT
Search function doesn't seem to be working this morning, so apologies if this has recently been covered.
Just wondered if anyone has any insight into the sorts of margin the larger house builders expect to have haggled out of their asking prices in the current climate, especially given the risk of further falls in value.
Property in question is one of the last on a development towards the higher end of the market. Builder thought it was sold but it's now fallen through... suspect they're keen to get off the site.
Any pointers in % terms would be really appreciated.
Thanks in advance,
LT
Deva Link said:
...trying to negotiate with the woman in the site showroom is hopeless.
If you're not getting anywhere with the Sales Negotiator in the site sales office, it tends to imply that your offer is unacceptable.Sales Negs. for any competently run housebuilder have very clear bottom line figures on each plot and will be in close contact with their Sales Manager/Sales Director behind the scenes. The reason you can't get through to the Sales Director or MD is that they're not interested in talking to you: the Sales Neg. is perfectly capable of telling you to f
k off just as politely and authoritatively as the Managing Director....As to discount, there are simply too many variable to give an answer, even in a particular sector of the market in a specific area. Do your research on the site (stage of build, rates of sales, financial status of housebuilder, status of their other sales outlets, actual sales prices lodged with LR versus originally advertised prices, etc.), and structure your offer accordingly.
Sam_68 said:
... the Sales Neg. is perfectly capable of telling you to fk off just as politely and authoritatively as the Managing Director....
...telling someone to fk off just as politely and authoritatively as the Managing Director....k off (even without that exact phrase) isn't a generally recognised nogotiating procedure. 
The "bottom line" is probably always moveable - I imagine the already quiet market closes down now until the New Year and then if a buyer needs to sell their own property you're probably going to be looking towards the middle of the year before the sale completes. How much will it cost the builder to sit on a chunky house for that long?
anonymous said:
[redacted]
Your description could be said to superficially seem to apply to quite a number of our Sales Negs, including some of the very best of them, though I wouldn't dare say it to their face! However, don't be so easily misled. They are quite often 'women of a certain age' because housebuilders don't want pretty young things who (a) won't be taken seriously and (b) wind up the female half of couples who are prospective purchasers by distracting the male halves. Similarly, male Sales Negotiators have their work cut out because women can feel intimidated and browbeaten by them (Car Salesman syndrome), and men suffer from 'rutting stag' syndrome and respond with an unhelpful degree of aggression toward them... though we have had a couple of very successful, blatantly gay, male Sales Negs. working for us in the past who managed to bridge the gap. The point is that there's method in the madness; the reason they come across as non-intimidating, cozy middle-aged, middle class women is that that's how we want them to come across. Don't be misled into thinking that doesn't make them very skilled and clued-up sales professionals. It might have been the case 5 or 6 years ago, when houses could sell themselves, but the downturn very rapidly weeded out any such people, and any such companies who failed to do the weeding are now either not selling houses or, more likely, simply not in business.
However, I digress... in all companies I have worked for, the bottom-line figures provided to the Sales Negs. are reviewed on at least a monthly basis by the management team (often weekly, at the moment), and reflect aspirations for sales values that are pretty much inflexible and have been set for good reason at the highest management level.
If you place an offer that is just a few hundred/few thousand below the Sales Neg's. base figure, it will be referred immediately to the Sales Manager/Sales Director and may under certain circumstances be accepted, but that process will be invisible to you... or at least no more visible than any other negotiation: even if you place an offer that is above the minimum, it is the Sales Neg's. job to extract every penny they can and I'm sure we're all aware of the old trick of doubtfully phoning the Sales Director and making the customer think the deal hangs in the balance, when in fact it's still operating on a comfortable margin.
None of this applies soley to the housebuilding industry, of course: it's just the basic salesmanship you'll encounter on any high-value product, but don't delude yourself into thinking you're any more important than any other prospective customer, and don't be so arrogant (...with respect to them...
) as to think that you are exercising mastery over those poor, befuddled 'women of a certain age', because the chances are that the very result of your arrogance and condecension means that you're making it easy for them to play you like a stew-pond trout.Deva Link said:
The "bottom line" is probably always moveable
No it isn't. Really it isn't. If you genuinely believe that, you'll keep on negotiating until the developer pays you to take the house off his hands. The bottom line figure given to the Sales Neg. might have a little comfort built into it (often dependent on the degree of confidence the management has in the individual Sales Neg. on the site), but the management will always know what the 'absolute' bottom line is and will respond to the Sales Negotiator on that basis for any bid received.Deva Link said:
Obviously Sam68 knows his business better than we do, but that's certainly the sort of person I had in mind, and have experienced (not in that way) several times.
I ought to say that when I worked in private practice Architects' offices (the first half of my career, basically - where you don't come into contact with a lot of the day-to-day operations of within the housebuilders you're working for), I shared Tonkers' and you own view on the subject. Sales Negotiators? Just a cosy little part-time job for a middle-class housewife who wants to get out and meet people, and earn a bit of pin-money, isn't it? A bit like doing a couple of hours down at the charity shop?It's only when I started working directly for housebuilders, and having contact with the Sales personnel on a daily basis, that I very rapidly developed a great deal more respect and appreciation for their skills. There's more to that game than meets the eye, I assure you...
Edited by Sam_68 on Sunday 23 October 21:13
anonymous said:
[redacted]
How long ago was this? As I said, 5 years ago, houses sold themselves, and less-than-competent Sales Negotiators could be tolerated. I'm sitting in the office (on Sunday 
) with a list of our sites and Sales Negotiators pinned to the wall behind me and I can count on the thumb of one hand the number who are still with us from that period. I can't think of any who left entirely voluntarily, and the one who is still with us would be a remarkably good fit for your 'woman of a certain age' description. It doesn't stop her being a bloody good Sales Negotiator (our best, in fact), who really knows her stuff...But are we talking about Sales Negotiators employed directly by the house builder or Sales Agents, as your post above seems to imply? There is a HUGE difference, in terms of the access they have to the housebuilder's sales management team, just as there would be a huge difference in the quality of knowledge and information you'd get from me, as the housebuilder's in-house Architect, versus ringing up the CAD monkey at the external architectual consultants who created the CAD layout for the site and whose name might be on the Planning Application: external consultants in whatever field are never going to come close to having their finger on the pulse in the same way that the in-house management team does. We only use Sales Agents when we've basically built-out the site, closed down the site sales office and moved on to the next development(s), leaving an agent to sell the last 2 or 3 'stock' plots: so please note, OP, that it isn't necessarily the big deal 'getting off the site' that some people think it is. We don't like having more than a couple of stock plots on a site, with the WIP implications that that entails, but the big costs are the 'prelims' (costs of maintaining the site compound and welfare facilities, etc.) and Site Sales Centre operational costs, and these go away when you close down and leave the last plots with a local agent to sell.
... but then I'll admit that I'm speaking from the perspective of working for a very competently run company (don't tell our Sales Director or MD I said that... they're full of themselves as it is) that has held its own and continued to build (and sell) successfully through the downturn. But I guess that will have to be part of the research and value judgement that the OP has to make when deciding on his negotiating strategy?
eta: Certainly, you can get end-of-site 'bargains' when a developer wants 'out' at the tail end of a site; but you've got to remember that to some extent (although perhaps ameliorated a little by practical constraints of build direction), what will be left at the end of any site will often be the s
tty plots that nobody else wanted... they're often the ones I look at myself to learn where I went wrong and what I need to avoid when I'm designing future sites. It may be worth asking yourself, OP (and that's not to say there may not be a perfectly reasonable explanation), why the plot you're looking at is one of the last handful left on the site.Edited by Sam_68 on Sunday 23 October 16:41
Thanks to all - Sam in particular - for all the useful insight.
Our impression is that they know they have a bit of a job to get off site (I know that the last six months they've only sold one property, with another that's fallen through - leaving them two left), not to mention that shifting these wouldn't hurt either cashflow or balance sheet. Gut feeling is the early phase sold quickly but they may have exhausted their main pool of buyers now.
Good to know that the sales person on site is aware of what is/isn't possible - confirms what we suspected as she seemed VERY good (indeed we left thinking that they'd thought "who can we put there to shift these?").
Going to take a spin round later in the week and tie up land registry data with properties and see if that gives more of an idea about asking vs. recent sales.
Our impression is that they know they have a bit of a job to get off site (I know that the last six months they've only sold one property, with another that's fallen through - leaving them two left), not to mention that shifting these wouldn't hurt either cashflow or balance sheet. Gut feeling is the early phase sold quickly but they may have exhausted their main pool of buyers now.
Good to know that the sales person on site is aware of what is/isn't possible - confirms what we suspected as she seemed VERY good (indeed we left thinking that they'd thought "who can we put there to shift these?").
Going to take a spin round later in the week and tie up land registry data with properties and see if that gives more of an idea about asking vs. recent sales.
LooneyTunes said:
Good to know that the sales person on site is aware of what is/isn't possible - confirms what we suspected as she seemed VERY good (indeed we left thinking that they'd thought "who can we put there to shift these?").
Try and get her to start chasing you - perhaps ask her questions that she's got to call you back on.One further thought that it occured to me I hadn't mentioned: obviously the amount of discount you'll be able to negotiate will also be heavily influenced by the number of units on the site.
You've said that the site in question is 'toward the higher end of the market', so I'm making the assumption that it will be quite a small number of units?
At risk of stating the obvious; a 15% discount on the last, circa-1000ft2, unit of a 500-plot scheme would represent bugger all, as a percentage of the overall revenue generated from the site. A 15% discount on a 3,000ft2 property that's one of 5 on an up-market site (probably with high land value), would make rather more of an impression on the percentage profit margin acheived for the site, and is likely to be less well received...
You've said that the site in question is 'toward the higher end of the market', so I'm making the assumption that it will be quite a small number of units?
At risk of stating the obvious; a 15% discount on the last, circa-1000ft2, unit of a 500-plot scheme would represent bugger all, as a percentage of the overall revenue generated from the site. A 15% discount on a 3,000ft2 property that's one of 5 on an up-market site (probably with high land value), would make rather more of an impression on the percentage profit margin acheived for the site, and is likely to be less well received...
Edited by Sam_68 on Monday 24th October 12:54
I had dealings with a new homes builder some years ago. The end of financial year was the 31st of December, the silliest discounts came as the year progressed with people agreeing to buy up to about the 10th of December as long as they could complete before the 31st. As it was so close to Christmas not that many people wanted to buy at such a late stage, so there weren't so many chasing the discounts. Might be worth a bit of investigation?
Sam_68 said:
I'm making the assumption that it will be quite a small number of units?
Yes it is quite small but ~60% sold fast, 20-30% more slowly and the rest have been languishing. If my intel is correct, they've only sold 1 in the last six months. They've also started putting the remainder with estate agents (which says to me that they know they have an uphill struggle?).Was offered ~5% discount in a matter of seconds of walking in, so wondering *just* how keen they are to be shot.
Thanks also for year end suggestions - will see what the lie of the land is there.
Well you could always raise your offer if it wasn't enough. Provided you start off low enough for it not to be enough.
As others have said, an offer isn't only about the money, it's also about the ability to complete the contract. If you are truly able to complete, not dependent on a sale or yet to be arranged finance; then you are in a bargaining position. Otherwise you'll only be seen as a hopeful.
As others have said, an offer isn't only about the money, it's also about the ability to complete the contract. If you are truly able to complete, not dependent on a sale or yet to be arranged finance; then you are in a bargaining position. Otherwise you'll only be seen as a hopeful.
Paul Drawmer said:
Well you could always raise your offer if it wasn't enough. Provided you start off low enough for it not to be enough.
We've not made an offer yet. Trying to work out where their min acceptable level lies before I do so in order that I can pitch something that sees us close at a point we can all live with... hence trying to avoid pitching too low as to turn them right off from the start, but conversely don't want to leave money on the table by starting too high.
It's a funny market out there at present and know precious little about the new build market.
LooneyTunes said:
.... hence trying to avoid pitching too low as to turn them right off from the start, but conversely don't want to leave money on the table by starting too high...
IMHO if you construct your offer so as to convince them of the quality of it (ability to proceed) then I'm not at all sure that you need worry about turning them off with an offer that is too low.My point is that if your first offer isn't rejected out of hand, you will have started too high. If you make sure that the buyer knows that you are genuinely interested, want THAT property, and are able to complete, then they will want to do their very best not to upset you.
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