Gaining Negotiating Leverage Through Assessing Project Performance

To successfully negotiate a discount with a builder, like any other negotiation, you need to determine how much leverage you have. One way in which to do this is to gauge a project’s performance. When a builder undertakes the process of purchasing the land to construct a subdivision, they need to forecast the project’s profit potential to determine the appropriate price to pay for the land. At this stage, assumptions need to be made on all the costs that go into the project as well as how much finished homes will sell for and how fast they will sell. Typically, builders will make the assumption that they will sell their homes at a pace of 3 to 5 sales per month.

If you are interested in buying a home in a project that has been open for at least a couple of months, you can get a rough idea of how the project is performing by asking a couple of questions and doing some quick math. First, ask the sales agent, “When did the project open for sale?” Then, ask how many sales there have been so far. You should also be able to ascertain how many sales there have been by looking at a site map, either online or in the sales office. This will normally show all the homes that have been sold to date.

For example, let us say you visit a project in April of 2025, and the sales agent tells you that the project opened in October of 2024. The project would have been open for about 6 months. Next, you ask how many homes have been sold in the project to date and are told 12. That would mean that the project has sold about 2 homes per month (12 homes divided by 6 months), which would be out of a builder’s typical target range of 3 to 5.

This would indicate that the project is probably underperforming, and the builder is likely more willing to provide a discount. Often, there is a correlation between the magnitude of the underperformance and how steep a discount the builder is willing to provide.

Conversely, if the same project has sold 36 homes, this would indicate a sales pace of 6 homes per month, and a builder would probably be less willing to provide a discount. It is also likely that prices have gone up since the project’s opening and have potential to rise even further.

Keep in mind a couple of other factors when applying this technique.  First, higher-priced (for the local market) homes tend to have a lower target sales pace. Second, builders that are not publicly traded and, hence, without the same business pressures, might be willing to tolerate a slower sales pace and be less open to discounting.

In sum, from a project’s inception through its life cycle, a builder normally targets a certain pace of sales, typically in the range of 3 to 5 per month. For the purposes of a homebuyer, knowing that a sales pace out of this range is often a good indicator of underperformance or overperformance (from the builder’s perspective) can help determine whether you are likely to have leverage or not in a negotiation with a builder.