By Thanh Phong Trieu | Sell

Mar 23
real estate positioning strategy
[Reading Time: 7 min]

Most realtors/sellers don’t know or understand how to use this strategy. No realtor association in Quebec gives a training about this advanced selling concept. Positioning strategy focuses on how you will be competing in the market versus the other sellers.

An effective positioning strategy considers the strengths and weaknesses of your property (aka product benefits), the needs of the customers, target market and the position of the other sellers – you need to do basic market research.

It is a dynamic strategy, which means your price needs to be adjusted as often as needed. An important element of the market change such as your macro or micro economic conditions (interest rate change, new rules to get a mortgage, socio-economic cycle change, etc.), the conditions of your competitors (price change, change in number of units available for sell, etc.) and conditions of your property change (your roof start leaking, etc.) needs to be re-analysed.

If not, your price will be over or under priced with the new conditions even if you have a home evaluation that was done recently by a professional that shows a different price.

The home evaluation proposes a listing price at specific conditions within a specific moment in time. The positioning strategy helps adjust the home evaluation price, in real time, as the market conditions change so you can keep your listing as competitive as you want to.

Example 1:

A home evaluation rapport done 7 days ago is suggesting to list your property at 300,000$. A week after, you are putting your property up for sale. A day later, a similar property at a similar price and conditions goes on sale. This situation most likely won’t change much in your selling price.

But, what if there are 4 more similar properties that go on sale. Half of them are listed under 300,000$ and half over. In this specific scenario, this will have an impact on your selling price negatively for sure. A lower price for sale can represent a buyer in financial difficulty, a divorce or any other reasons that makes the seller want to sell their property faster.

As you can see, the fair market value can change if the market conditions change. Not adjusting to strong stimulus is a major error. Here is why; the Positioning strategy also said that if you are asking a higher price than your comparable competitor, then you will sell near the lowest price but at later date.

Example 2:

  • Condo #1 is asking 280,000$
  • Condo #2 is asking 290,000$
  • Condo #3 is asking 300,000$ (you)
  • Condo #4 is asking 310,000$
  • Condo #5 is asking 320,000$

Let’s say all 5 condos have comparable characteristics such same number of bedroom, similar living space, etc. If so, what is the condo that is most likely going to sell first? Rule of thumb, the seller with the lowest price is usually the most motivated. If all condos are equivalent, buyers would prefer to negotiate with the lowest price first. So the answer would be condo #1 at 280,000$. Which becomes the new comparable.

Then the condo #2 would be the most likely to sell next. Since the condo #1 was sold at 280,000$. With a quick search, buyer #2 will see the last comparable sold is condo #1. This buyer will most likely try to negotiate a price as close to 280,000$ as possible since all units are similar. So let’s say condo #2 is sold at 282,000$.

Now there are two comparable sold one at 280,000$ and the other 282,000$. The more units sold around that price, the more the new fair market value will be adjusted to around 280,000$. Then the higher prices are less and less justifiable!

So now you are third in line to sell, but the new average fair market seems to be 281,000$ (which is average price between 280,000$ and 282,000$) and you are asking about 19,000$ more. How can you justify that spread for buyer #3? You cannot! Unless the buyer and his realtor live under a rock. They will do a comparable search and see quickly their two units sold with similar conditions at a much lower price. There is no way that the realtor can justify your price to his or her buyer.

Then, let’s say a buyer offer you 285,000$ which you refuse. What do you think he will do? Buyer #3 will most likely try to negotiate with condo #4 then #5 since they have similar options. Condo #4 doesn’t want to drop their price either. But Condo #5 takes the offer because his realtor shows him the two comparable sold at 280,000$ and 282,000$.

If there are no more important shift in the fair market value, the new price for this type of property is between 280,000$ and 285,000$. Sellers that don’t understand this concept will wait until the next important change in the market which can be good or bad, but one thing is for sure, it might take a very long time

Can you see even if you don’t want to lower your price, the market will force to you accept a lower price by comparison? Buyers, in average, are not stupid. They won’t throw their money away that easily.

That is why positioning strategy is very powerful and important. But, you need to truly understand all the aspects of the market conditions to apply this strategy efficiently.

To sum up, you can sell now at the right price. Don’t waste your time and do it right from the start!

Note: if you know the number of similar properties that are competing with you, and you know the number of sale going through each month, you can predict when the unit will be sold. That information is free and available on the net if you know where to look!


About the Author

With my extensive background in finance, work experience and my love to share my knowhow, I have been able to make the most novice clients become a smarter and savvier buyer, seller or investor.

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