|
A marketing strategy
is an overall plan, in other words: The big picture.
What are you trying to accomplish?
By what time? How
can this be done? There is
nothing wrong with high aspirations or the "Power of Positive
Thinking." But if your
goals are not realistic, and you think that you can control the market
for your seller, sooner or later you will realize the folly.
Realizing it now is best. There
are three basic strategies to consider, one of which will suit each
case. They are:
The classic
approach to a marketing strategy is the mainstream approach rather
than one of the extremes to be discussed later.
It is the correct strategy for the great majority of serious home
sellers and probably is most familiar to you.
In the classic approach, the home enters the market at exactly
the right price and sells in whatever is a reasonable time for your
current market. If a home
languishes on the market, the price has proven to be higher than the
market will bear. In many
major markets with the best advice available, often over 50% of home
sellers err on this side and cost themselves time and money.
You might point out to your seller the number of local properties
that have been on the market for too long a time. To accomplish the
classic approach, start with the expected contract price from your home
value analysis. Add to that
the proper amount for negotiation.
This amount is frequently much less than many would guess.
But why guess? It
might be a good idea to run an updated selling price to asking price
ratio calculation. This
could even be tuned in on your seller’s price range or geographic
area. Remember that the data must include at least 200 recent sales
to ensure statistical significance, the reliability of the information
generated. Why does this work?
The classic approach holds that at any time a home enters the
market, there are a certain number of ready buyers, let us assume 25,
milling around in search of such a home. They've seen everything currently on the market.
Within a few weeks these 25 buyers will notice your new entry on
the market, visit it, and form an opinion.
If everything is right, including the price, the home will sell
to one of these buyers. If
not, you will never see them again.
They will feel no need to see the home again later, even at a
lower price. After this
"initial wave" your seller’s home will be visited only by
buyers newly entering the market. This
number is comparatively low and will produce, for example, only one or
two visits weekly. But if
one of the initial wave of visitors did not buy the home, the newly
entering buyers probably will not buy it either.
Eventually it will become apparent that the home’s asking price
needs to be reduced. The classic approach
is usually the best approach, but even with the best plan, occasionally
a home will not sell in a reasonable time.
Actual results do vary. The
numbers above serve to illustrate the theory.
In the real world, the drop off in buyer visits is not
precipitous: Don't look for exactly six visits per week for four weeks,
followed by an immediate drop to one or two visits per week.
Good judgment comes with experience. The (maybe) top
dollar approach to a marketing strategy is acceptable only in strong
sellers’ markets. It
attempts to maximize price at the expense of time and will be discussed
even though it normally should be avoided. To accomplish this
approach, you again start with the expected contract price.
To establish the first asking price you add significantly more
fat for negotiation than indicated by the current selling price to
asking price ratio. Next
determine a last asking price at about 10% lower than the expected
contract price. Then,
divide the difference between the higher and lower prices into steps
equal to about 5% of the expected contract price.
Finally, schedule these price steps evenly throughout the
available home marketing period, or the maximum acceptable time for your
seller’s home to be on the market.
The following is an
example for a home with an expected contract price of $200,000 and six
months available for marketing:
In this example, your
seller wins if the home sells in March or April. The top dollar
approach seems logical enough and will sell a home for sure if the plan
is followed. If your seller
considers this approach, keep a few things in mind.
The seller’s cost to keep most homes can approach 1% of the
market value per month, or $2,000 monthly in the example above. If the home will be vacant, $10,000 could be lost in five
months. In a strong market
with rising market prices this approach has more appeal: If the initial
price is a bit high, market appreciation will overtake the excessive
price and the home will sell in a few extra months.
In a stable market it is doubtful whether this approach will mean
extra dollars. In a market
of falling prices, it can be a disaster: If your seller’s price
reductions do not overtake the falling market, the home will sell much
later at a much lower price as it "follows the market down"
never at quite a low enough price to sell until desperation shocks you
(or the next listing agent) and your seller into reality.
Because it is invariably a waste of time, this approach should be
used only with the most stubborn seller who absolutely refuses to face
reality. The quick sale
approach is not suited for many sellers.
It minimizes time on the market at the probable cost of several
thousand dollars. But if
your seller needs to sell quickly, this approach will work.
The home will enter the market at an asking price somewhat lower
than the expected contract price and should sell relatively soon.
Of course, what is "somewhat lower" and
"relatively soon" will vary depending on local market
conditions. Be prepared to be
very firm at the negotiating table.
If a counteroffer is necessary, supply the selling agent with
data to support your price: Your market value analysis, an appraisal, or
comparable sales, for example. Point
out that this information is to be shared with the prospective buyer to
support the reasonableness of your counteroffer.
Counsel your seller to be calm, reasonable, firm, and not to
appear anxious. If the buyer gets the idea you are in trouble, you indeed
will be in trouble. If the
negotiations are executed properly, the buyer reluctantly will agree,
due to the data presented, as well as from the market knowledge he has
gained from viewing other properties.
Your seller’s home will be the best option. The quick sale
approach maximizes the chance for multiple concurrent offers. If negotiations take a couple of days, your chances improve.
If you can develop a second offer, your seller could end up with
full price or more without having to make any concessions. You now have three well-defined marketing strategies from which to make a selection. There are a few additional considerations that will be very helpful. But first it bears repeating that if a home's price is too high for the current market, there will be few visitors and no offers. Even if the overpriced home is shown occasionally, it will receive no offers. Any buyer who sees 20 homes in a certain price range will be able to reject easily, as a comparatively poor value, any home that is priced very far over its fair market value. Since at least some
other homes will be priced right, your seller’s home needs to be
priced correctly in order to compete.
In short, an over priced home will be shown to the wrong set of
buyers: Those who can afford more.
It will not be shown to the right set of buyers because their
price limit is below your seller’s asking price.
It is essential that you understand this simple fact and are able
to recognize it and communicate it to your seller effectively.
Know what works, why, and sell your expertise convincingly. |
