For many buyer looking to buy their dream home or condo, they often loose out because most agents lack the experience to assist the home buyer in understanding what they are really paying. This exercise works very well for first time buyers or any person not planning on spending the rest of their lives in the home they want to purchase.
Known as the Ben Franklin closing technique, (often used in the car industry years ago) the sales agent introduces to the buyer to this sales technique by showing the buyer how he/she can afford to buy the car by reducing the price difference into smaller amounts such as the cost per day or even cost per hour worked.
Let say the buyer of the car and the sales agent are three thousand dollars apart on the price. The sale agent simply divides the three thousands dollars by four years, which equal the length of the loan. In this case the buyer is shown a number of seven hundred and fifty dollars per year, not bad! The sales agent goes one step deeper and shows the buyer another figure of sixty two dollars and fifty cents, which represents the cost of the three thousand dollars broken down in forty-eight monthly payments. How about on a per day basis? You’re looking at two dollars and five cents, the price of a small coffee. Can a good sale agent convenience a buyer to give up a one cup of coffee per day or some other trivial expense? Most likely the agent can. (This example does not include the interest rate involved in the loan)
From a housing point of view, the numbers work very well even if the difference in asking price from the sellers and buyer is over ten thousand apart. The key is to find out how long the buyers are planning on staying in the new home or condo. Nationally the average person moves every three to five years, especially young single people. Once you figure out if the buyer plans on stay for five years or so, you’ll be in better position to show the buyer the numbers broker down.
So, ten thousand dollars divided by thirty years equals three hundred and thirty three dollars per year or twenty seven dollars and seventy-seven cents per month. Most agents stop at this point. However the buyers still recognizes they are paying ten thousand dollars more than they want too. By adding the next step into the equation you see the ten thousand differences are much less.
Let’s work with months. We’ve established it cost twenty seven dollars and seventy seven cents per month more to buy the home or condo. (no interest rates involved) If you’re able to determine the length of time the buyer plans on staying in the home (five years in this case) we can figure out the actual cost to the buyer to live in their dream home or condo. Five years or sixty months, because we’re working in months, times the twenty-seven dollars and seventy-seven cents cost the buyer one thousand six hundred and sixty six dollars and twenty cents. Would the buyer be willing to pay a little more to live in their dream home? Remember the extra cost ends when the home is resold. You’ve just showed the buyer and perhaps the seller the actual cost for them to live in the home went from ten thousand to just over sixteen hundred dollars. A much more manageable number for the buyers to work with once they understand the added expense ends once the unit home/condo is resold. As you can see once a time frame for reselling is established, the numbers drop sharply. Could you even get the seller to agree to pay half of the amount to put the deal together, most likely especially if the market is slow or the seller is motivated?
