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New-Home Sales: It's Halftime in This Year's Sales Cycle

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New-Home Sales: It's Halftime in This Year's Sales Cycle

In new-home sales, it's important to stay focused midgame

By Bob Schultz, Contributing Editor July 2, 2014
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This article first appeared in the PB June 2014 issue of Pro Builder.

We are at the midpoint in this year of what many are calling a good, if not great, time for the housing industry. Much like halftime in a football or basketball game, the perception of how the game is going depends on the point of view of all the participants, such as the players, coaching staff, owners of each team, fans, and the media. Our industry has a number of participants with differing points of view, too, including sales and marketing team members, Realtors, builders, prospective and actual homebuyers, subcontractors, financial institutions, Wall Street, and the media.

Media reports for the first half of the year about the status of the current housing market vary from place to place and from time to time. Some markets are doing better than others. Some say there has been a slight slowdown in sales over a period of a few months. Others contend that the market is going gangbusters, while some argue it is just stabilizing. The rental market is heating up with rising rents and reasonably strong demand. Big-time and small investors have bought up much of the overlapping inventory, and Wall Street is investing in housing through a variety of mechanisms. All in all, though, in the short view, things are looking good.
For those in the trenches, in particular salespeople and sales and marketing management personnel, when we are making sales—in some cases at record rates—the game is going just fine. If we are the builder, with a much longer-term investment on the line, and we are seeing almost daily increases in construction costs and reading about the potential for pending affordability issues for many prospective buyers, the game may look a little different at halftime. Midway through the year is a good time to assess where you are at this point, how you got there, and how to make the necessary adjustments to come out a winner at the end of the game. In football and basketball, it’s not uncommon for a team that is well ahead at halftime to come out flat in the second half, while the team that was behind comes out much more focused than it was in the first half and plays extremely well. The Big Mo, as it is called, says that the flow of a game can be dramatically influenced by one or two plays, an injured player, or a bad call from the refs. This can happen in our industry as well; the housing market can turn on a dime, as we saw in the not-too-distant past.
In life and in business, just as in sports, winning often times provides a breeding ground for complacency. We all know that great housing markets can provide cover and forgive a lot of fundamental errors and mistakes. In his book, “The Winner Within,” NBA legend Pat Riley observes that complacency comes when you feel good about who you are and what you have achieved. Sales are good. We’re ahead of projections. Margins are on target. All is well. Riley says it’s a subtle erosion, and people start feeling entitled to things that they really may have no special right to. A good, healthy awareness of reality can help counter that. The legendary player, coach, and general manager goes on to say that when you stop trying to get better, you’re bound to get worse. Players cannot be just game players. They can’t turn it on and off. They have to always be doing things well and push to accomplish their best. Riley instituted a program called Career Best Effort after his Los Angeles Lakers won the championship in 1987. The team started tracking all sorts of stats and measuring players against their counterparts on other teams. This was his way of spurring the team on to new heights. He encouraged players not to try to hit home runs, but to go for small improvements in their performance so that if they all improved just a little bit, then the team would improve a great deal.

Sales Metrics to Watch

For those of us in new-home sales management, there should be a similarly consistent and diligent focus on metrics such as these: 
The sales presentation process. Just recently I was told by a mystery shopper about a sales presentation at a “hot selling” beachfront condominium in southern Florida that was over and done with in less than 4 minutes. It went like this: “We sold two units this morning, so if you are interested, you’d better sign up today, or they won’t be here tomorrow.” The shopper asked if he could see the other two models, which seemed to be locked and unavailable. The reply was, “They’re just like this one, so there’s no real need to see them.” Obviously for those involved at this developer’s place of business, it really didn’t matter what their presentation process was because, after all, their place was a “hot seller,” and they had probably cashed some large commission checks already. I expect that this example is far from the norm and would never happen in your sales arena. However, I suggest as a precaution, especially now, that you focus attention on regularly scheduled sales development meetings and, at minimum, conduct at least two mystery video shops per salesperson per game year. 
Conversion Ratio. This is the real measure of how well a salesperson is performing. How many sales are being accomplished in measured relation to the number of prospects you are paying to provide for them? 
Cancellation Rate. Are they closing or simply just allowing buyers to buy? 
Market Share. Is yours increasing or are you losing share?
Cost of Traffic and Cost of Sales. Are you getting the maximum ROI for the money you are spending?
Referral Rate. Are your buyers raving fans and bringing you customers?
Net Profit. Is it all that it can be and is it sustainable?
Another basketball coaching legend, John Wooden, said it’s what you learn after you know it all that counts. That is also true for new-home sales: Excellence is the gradual result of always wanting to do better. Couple that concept with what Stephen Covey exhorts in “The 7 Habits of Highly Successful People,” to “constantly be sharpening the saw,” and with what Harvey Mackay admonishes in the title of his best seller, “Dig Your Well Before You’re Thirsty.” While the market is strong, we should always strive to be fully equipped, ready, and hungry to get all the sales we can get. When the time for a market adjustment does come along, whenever and wherever that may be, you’ll be poised and ready in an instant to take more than your fair share of the market.
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Written By
President and CEO

Bob Schultz is president and CEO of Bob Schultz & The International New Home Sales Specialists. His Guaranteed Commission Program provides tools and knowledge that help builders establish the responsibilities and limitations of a real estate agency relationship for mutual benefit. Contact him at Bob@i-nhss.com and use “Guaranteed Commission Program” in the subject line.

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