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A Crisis of Confidence and Attitude

Written by: Gary Silverman

Article Overview: There is no avoiding hearing about the plight of Home Builders and the Automotive Industry in today’s headlines. Even Toyota and Honda sales were down as much as 30% in November. So it is no longer a fact that American consumers are just avoiding the offerings of the domestic automaker. They are avoiding ANY big ticket commitment. Granted the October “shock to the system” was monumental. Customer’s have headed for the hills...or have they? I do consulting work in the Home Building industry and found that our traffic hasn’t been off as much as our sales over the past 60 days. We have prospects who select a new home, pick it apart (which in the past was a buying signal), make offers and then “freeze up”. All objections and excuses have been overcome but they cannot “pull the trigger”. Why is this?

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A Crisis of Confidence and Attitude

As a sales person or manager we have sold ourselves, our product, and built value in our pricing yet we come up empty. What we haven’t done is eliminate the fear associated with the transaction. This was never a concern in the past but it surely is now. Everyone is waiting for the price to go down on cars and homes, not realizing that if they do there will be no more housing or auto industry, or an American economy. The one thing that they are most fearful of they contributing to. Let’s use Wall Street as an example of what has happened to our economy in the short term (I believe we have had a serious economic “spasm” that won’t last as long as so called experts predict). Fearing a recession, Wall Street created one when they were tired of waiting for the evidence. Nice work. But how do we as a selling organization help prospects who have the resources and ability to buy...to buy? First of all any product has a “market value” as well as an “asset value” according to British Real Estate guru Andy Shaw. He defines “market value” as the value of an asset if it has to be sold “now”. That price is below the true value of the asset. Anyone looking to buy a home to live in for six or more years should only be concerned about the viability of the home’s characteristics and suitability to their lifestyle, NOT whether the market value will diminish in the near term. that decline, if any, will be absorbed once the market comes back, as it always has. The price of one share of stock is reflected in the last transaction before the closing bell. If that share sold all day at $5.50 but the last seller was willing to take $5.45 for it at 3:59.59 than that is the stated “market value”. The next day it will change, millions of times. Market value is based on supply and demand. In the super heated market of a few years ago the “market value” was greater than the “asset value” that is why we have had a decline in real estate prices. Based on my own analysis the price of homes today are about where they were in 2004. The market has wiped out the gains of the past 4 years. In 2004 people were fighting over houses. In 2008 buyers can’t see the value of the home priced at 2004 levels. My conclusion is that we are at a point where market value has intersected asset value. I would consider that a bottom. As supply diminishes prices first become stable and then they begin to rise. That is what we have to sell our prospects today. If the auto manufacturers build only the amount of vehicles they can profitably sell, the incentives and price reductions go away. If the inventory of new houses diminish because nobody is replacing a sold new home with new construction then the incentives will go away as well as the most desirable homes. That is precisely where we are today. Builders stop building, Fannie and Freddie stop foreclosing, GM shuts plants down, and there becomes a balance between supply and demand. That’s when the bottom will be called and that’s when it will be TOO LATE to take advantage of the deals. Now is the time to buy. Your sales force and sales management must first be convinced and then the story must be shared with your prospect to show a greater risk of inactivity than buying close to the bottom. Although the value of some homes purchased between 2006 and today have undoubtedly been reduced by as much as 25% the value of the Dow and S&P and the related 401K’s and IRA’s have dropped 45%. Nobody guarded themselves against that. The benefit of a depreciating home is the fact that you still get to live in it. Try sleeping in the halls of Lehman Brothers.

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Home > Sales > Gary Silverman > A Crisis of Confidence and Attitude
Article Tags: automotive industry, home builders

About the Author: Gary Silverman
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Based in Atlanta, Gary takes a unique and innovative approach to the daily realities of the business world. A contrarian and eternal optimist his spin on life is always entertaining and thought provoking. With over 25 years as a top executive in the Retail Automobile Industry, Gary is no stranger to cyclical businesses. He focuses on simple solutions with proactive change, always looking for opportunities to expand the business within the business. As a trainer and seminar moderator, Gary tailors his message with a common sense approach to problem solving. Always committed to team building and personnel development, he manages with an eye on reducing turnover by creating an environment that builds a bank of promotable employees, believing this is the most effective way to advance a company to the next level. For the past three years Gary has been committed to measuring the “Customer Experience”. There is more to learn from prospects who are NOT buying from you than those who are. His analysis has been an eye opener to his clients which leads to extensive changes in the way they do business.

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