Pricing against your competition starts with understanding who or what your competition is. Sometimes it is the house across the street. Other times it is more complicated. Are buyer’s looking for a specific lifestyle? A view? A gated community? An investment property?
Pricing higher than your competition is one of the “Seven Seller Sins” I recently posted about. To see all seven, click here.
Finding your competition
Market competition comes in many forms. Here are four areas to consider.
Take a look around your neighborhood and about a mile in any direction. What is currently on the market similar to your home? Is there anything about the same size, same number of beds and baths, same build and same age?
Take note of what is out there. How do the prices compare to your current price?
Get more complicated
Now go beyond the obvious. Get outside your neighborhood. You can use yourself as a guide.
Start by asking yourself why you bought the house you own. Was it the location? Was it the status the home brought you? Were you downsizing or starting a family? Was it a first time home purchase?
Potential buyers will likely have the same motivations to buy. Ask yourself where else they may find a home like yours. It might be well outside your neighborhood. It may be in a different city. But these homes are still competition.
Look at the market in general. Are people moving in or out of the area? Is it getting more or less expensive to finance a home? Are you competing with other homes or are you now competing with the rental market as well?
Sometimes you are competing with outside forces beyond your control. Even when there are no similar homes on the market, you will still be competing against larger trends. It is a big advantage to understand the market in general.
Get back to square one
Finally, ask if you could recreate your home from scratch. Could you build a similar home close by? How much would that cost?
Buyers might consider building a new home vs. an existing home if the cost was the same. In that case, you are also competing with new construction.
Your competitive options
Now that you understand exactly what you are competing with, here’s how you fix the issue.
Your first option is to adjust your price. It is a simple concept but often hard to swallow. We’ll go into more detail with Seller Sin Number 7. But the punch line is this: if two things are equal, the buyer will ALWAYS go with the lower price. Why wouldn’t they?
If you can’t drop your price, the second option is to identify what is unique about your house. Something that will make it stand out and that your marketing efforts can emphasize. This may be something that is not clear to the buyer. It will create a psychological justification in a buyer’s mind about why they should pay more.
To be successful with this option, you will need to execute a great marketing plan. You need to get this information in front of the right buyers. It may include a high production video or utilizing the right distribution channel. The key is to show the right people that unique element that gives you the advantage over your competition.
In a nutshell
If your home has been sitting on the market longer than you think it should, start by identifying your competition. It is likely one of four types of competitors. Once you have identified the competitors, make adjustments to your price or marketing. These will give your home an advantage in the real estate market.
To read the original “Seven Seller Sins” click here.