Builders’ pricing strategies try to create sales urgency

The LATimes has a well written article on pricing strategies of home builders. Even before the first home is built the home builder creates price increases:

Savvy builders raise their prices several times before they ever get to a grand opening, which is the event most buyers take as the signal that the builder is ready to start taking orders.

“Price increases don’t start when you have models,” said William Becker, a veteran consultant who has been advising builders and developers for more than 40 years. “They start when you get zoning.”

The first bump occurs when ground is broken for the project. Then builders up the ante when the streets go in, and again when the model homes begin to take shape. Prices go up for a fourth time with the big opening splash.

And what if, like now, prices are tending down? No problem…

What if sales are not going so well? Rather than cut prices, he advises his clients to release fewer homes for sale.

S. Robert August of Denver, another marketing and sales consultant in the building business, wants his clients to increase not just the price of the house on a monthly basis but also the cost of options, upgrades and lot premiums.

There also are several other pricing techniques designed to get buyers’ juices flowing. Buyers who are aware of them may be in a better position to negotiate their purchase prices downward:

Please read the “other pricing techniques for yourself. It is a very interesting read.


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