As we get closer to building the first set of 100K Houses, we have been discussing the sales price a bit more. One of the subjects that has come up is the possibility of using a ‘No-Haggle’ policy for the first and every 100K House we build similar to what the GM brand, Saturn, instituted years ago.
Buying a house has always been similar to buying a car in that consumers rarely want to pay the full sticker price and usually haggle the seller down to a lower price. The sellers know this as well so they will often artificially inflate the advertised price of a home or car in order to hit whatever their “target price” might be. This is not always the case with homes as we saw a few years ago in some markets that saw steeply escalating home values and multiple offers over asking price. These situations are usually short lived as the market will quickly correct itself.
Getting back to our analogy, Saturn has experience great success with their no-haggle policy. Many consumers hated to haggle over the price of a new car and welcomed Saturn’s new strategy. In fact, Saturn posted the highest customer satisfaction statistics of all non-luxury brands. I have never purchased a Saturn before, but from what I can see the dealerships do a lot of things different to make their customers happy and confident in their decision. Things like taking pictures of the buyers with their new cars and welcoming them into the Saturn “family.”
Could this policy also work for the 100K House brand? One of the main essences of the brand is to make every effort to offer the best home for the best price to buyers that are stuck in between sub-par and high-end products with few decent options available. This includes everything from seeking out affordable land, to value engineering the design, to creating a business model that can survive on reasonable profit margins. It could make a lot of sense to put the same effort into determining a fair price for each home and sticking to a ‘no-haggle’ policy.
I am coming to realize that the ongoing strength of the business model may come from standardizing aspects of the home design, building process and sales process. The more efficient these things become, the more time we can spend on continually improving the design and seeking out more affordable land. This will then lead to more value being passed on to the buyers.
The flipside is that trying to institute a ‘no-haggle’ policy could fail and come back to bite us because everyone may still want to negotiate no matter how well we justify the price. Our margins could then suffer, which would possibly jeopardize the quality of our future developments.