About Lesson
Step Four
Investment VS Expense/Price Conditioning:
The Purpose: Making Money Make Sense
Oftentimes when customers decide to upgrade their roofing system, their goal is to avoid any future damage or unforeseen circumstances that may arise with the roofing system. The unforeseen damage can include weathering, poor ventilation, natural wear and tear. All three of these can impact the overall health of the home.
A Healthy Roof is an Indication of a Healthy Home
In terms of protecting the home, there is no greater role than the roof. A failing roof through improper ventilation, weathering, aging or even insufficient insulation levels in the attic cavity can lead to soaring energy cost, weather that be heat loss or heat gain. All these factors contribute to the financial burden a family experiences in their home.
The Elephant in the Room- What does a New Roof Cost?
In order to establish a new benchmark for the roof cost, the representative will have to become familiar with using third party sources. Home Remodeling Magazine issues a cost report every year for several home improvement projects, this study is referred to as the Cost vs Value Report
This study is by far and away the gold standard for roofing cost estimators. The Cost vs Value report provides the benchmark average cost for 22 home remodeling projects, they then send this bid out to 150 US Markets to establish the recoup, or the initial return within the first calendar year from the date the improvement was made.
Fiberglass/ Asphalt Roofing Options:
National Average Cost: 31,755 with a recoup of 55.7%
All benchmark averages are based off of an average size home in the United States- 25 Squares.
Metal Standing Seam Options:
National Average Cost: 51,795 with a recoup of 52.4%
All benchmark averages are based off of an average size home in the United States- 25 Squares.
As we may know, inflation plays a very large role in cost with any purchase made in life. Over the past 20 years, the cost for a new roofing system has increased by upwards of 10% each year and will continue to increase as the years continue to pass. The fact of the matter: roofing will never be more cost effective than RIGHT NOW.
There are many third party pricing sources that are credible on the internet but there is one other resource that would be given the golden standard label, This source is known as HomeWyse- HomeWyse in our industry is the equivalent to Kelly Blue Book in the car industry.
This source will provide honest cost estimations for homeowners specific zip code, size of roof, type or product and the shape of their home. This tool is very easy to navigate and extremely effective in this step, as well as negotiation.
Please see the “How To” examples below:
Appreciating Investments vs Depreciating Expenses:
Purpose: Make the Money Make Sense II
This next portion of the Concept Selling System will deep dive into how to make the money make sense. Homeowners, if they could receive almost 100% of the cost of the improvement back in return, it would, oftentimes, dictate the product they decided to put on their home.
Understanding Appreciation vs Depreciation
Appreciating items are purchases that you make that increase in value over the course of time.
It is a wise financial decision to invest money in appreciating items, due to the return provided later in time. It is also a wise decision to use a financial institution’s money to make these improvements
The reasoning is, if at the same point in time the items purchased with the money borrowed exceeds the amount borrowed in value it is a sound financial decision.
Depreciating items are purchases that you make that decrease in value over the course of time.
An example of a depreciating item would be buying a car, and knowing that over the course of time that car will lose value. It is an unwise financial decision to borrow money from a financial institution to purchase unless you can pay the car off prior to the reduction in value. Most often, human beings refer to this occurrence as being upside down on their purchase .
Understanding Equity Appreciation as a Homeowner:
What is Equity Appreciation? Equity Appreciation is the increase in the value of an asset or investment over time. This term is commonly applied to investments, real estate, ect. When the market or asset’s value rises, the equity with that item increases.
Equity Appreciation in our industry is related to the initial value of the home and the anticipated value of the home years later, on average most homes in all 150
US Markets experience an increase of 3 to 5 % of the equity appreciation per year.
Understanding Price vs Cost:
Most homeowners see no difference between price vs cost. As an effective sales professional we do not get these two concepts confused, and they are very different in definition:
Price is what you pay from something ONCE ( investment)
Cost is what you pay for something over and over ( expense)
Understanding Return on Investment: With Equity Appreciation in Mind
As mentioned before, homeowners are much more willing to purchase superior options when they know, for a fact, that the option purchased will return in full.
The simplest way in our industry to educate the customer on this financial potential, is to use their current home’s appreciation factor with nothing changing for the next 5 years, how much equity appreciation/ equity gain in their home would they experience.
For example: Using the appreciating percentage via zillow or above statistical data of an annual average increase on most homes of 3 to 5% on a home valued at $225,000- what would the equity gain be with no outside contributing factors? Please see example below:
Present Day Home Value: $225,0000 *always use 5 years for this example:
Year 1 at 5% Appreciation: 236,250
Year 2 at 5% Appreciation: 248,062
Year 3 at 5% Appreciation: 260,465
Year 4 at 5% Appreciation: 273,488
Year 5 at 5% Appreciation: 287,163
Over the course of 5 years with no outside contributing factors, with an annual increase to value of 5% this home ha gained in equity $62,163
To put this in perspective for not only the homeowner but the sales professional- if the benchmark cost of 2500 square feet roofing project cost $31,755- this specific homeowner paid for investments in full in 3 short years through equity appreciation.
In almost any case, when using the above example, you can provide the customer the timeframe of when they will experience a full return on their investment, It is critical as a sales professional to review this data with the homeowner to be effective in their presentation.
The Investment vs Expense Pledge:
Mr and Mrs. ( insert customers last name) after understanding how the roof is an investment into your home and not an expense- a wise financial decision would be to invest in a permanent roofing solution? Would you agree…?
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