Thursday, May 28, 2009

Marketing FAIL

by Osman Parvez


Price your listing too high in a strong market, and the market may forgive your mistake. Make the same mistake in a soft market, and it will be painful.

When you price high in a upward trending market, buyers might decide to meet your asking price.  If not, you'll end up dropping the price, and buyers might give it another look. As a seller, your opportunity cost is low.

Meanwhile in a buyer's market, there is plenty of inventory and few buyers. If you price your listing too high, buyers will dismiss the property without even stepping foot inside. When they later see the price reduced, they'll want to know what's wrong with the house. Even new buyers in the pool ask this question after they learn how long the house has been on the market. Sellers who over price, expecting to reduce the price later, are working against the psychology of the market.

This is why it's so critical to price it right the first time. One way to do this is to carefully analyze the market and set the price so it slightly leads the price trend. In a soft market, sellers should aim for slightly less than the maximum price the market will bear. The challenge is that when owners consider agents to list their house, it's tempting to choose the one who thinks their house is worth the most money. Agents know this and because they bear little risk if the house doesn't sell, many are tempted to exaggerate the value of the property to get the listing.

It's a classic real estate blunder.

Finally, there's one more thing to consider. Advertising on value, particularly on a recently reduced price, has a negative impact on buyer psychology.

A few years ago I came across a study that examined the effectiveness of certain language in real estate listings. It clearly showed that "value terminology" was far less effective than language which spoke to the emotional appeal of the property.

If you're marketing a home, what you want is for a potential buyer to experience first the emotional attractiveness of the property. After they fall in love with it, you want them to realize it's priced right too. Ideally, you want this to happen in the first month or so of the listing (the honeymoon period), leading to a short listing period and a successful sale.

For most buyers, choosing a house is largely an emotional decision. The "value logic" usually comes in after the buyer has already made their choice. Once they've decided, they look for numbers that support their decision.  In this environment, there's a delicate balance to maximizing price. Sellers need to structure their marketing strategy around buyer psychology.

Ultimately, whether you're buying or selling, choose an agent who really knows the market. At Realty Unique, we study the market obsessively because it allows us to better advise our clients. When we work with you to sell your home, we want you to get the highest possible value for your property.  We know you worked hard for your money, spent years maintaining and improving your house, and you deserve to get the most for it. We'll advise you on what's really happening in the market but in the end, you'll make the decision on what price to list your home.

Our goal is help you make a smarter real estate decision. If you'd like to talk to me about your situation, please give me a call at 303.746.6896.

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The ideas and strategies described in this blog are the opinion of the writer and subject to business, economic, and competitive uncertainties.   We strongly recommend conducting rigorous due diligence and obtaining professional advice before buying or selling real estate. 

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