APPLYING PROPERTY POSITIONING STRATEGY

[Reading Time: 7 min]

The positioning strategy focuses on how you are competing in the market versus other sellers. Most realtors (and sellers) don’t know or understand how to use this strategy. To date, in Québec, none of the realtor associations give training about this advanced selling concept. 

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

Basic market research is a dynamic strategy, which means that your price needs to be adjusted as often as dictated by the housing market such as:

• Your macro or microeconomic conditions (interest rate change, new rules to get a mortgage, socio-economic cycle change, etc.),
• The conditions of your competitors (price change, change in the number of units available for sell, etc.)
• Conditions of your property change need to be re-analyzed (if your roof starts leaking, etc.).

If you overlook these factors, your property will inevitably be over or underpriced with the new conditions even if you have a home evaluation updated by a professional that shows a different price.

The home evaluation proposes a listing price at specific conditions within a specific date in time. An effective positioning strategy helps adjust your home evaluation price, in real-time. Even if market conditions change, you’ll keep your listing as competitive as it needs to be.

Example 1:

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

But, what if there were 4 more similar properties that did go on sale. Half of them listing under 300,000$ and the other half over. In this specific scenario, this will have a negative impact on your selling price. Compared to the market, a lower listing price may represent a buyer in financial difficulty, a divorce or any other reason that makes a seller want to sell his/her property faster.

As you can see, the fair market value will change if the market conditions change. Not adjusting to a strong stimulus is a major error. Here is why; the Positioning strategy also implies that if you are asking a higher price than your comparable competitors, you will inevitably sell your listing near the lowest price, but at a 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 as the same number of bedrooms, similar living spaces, 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 in this case: condo #1 for 280,000$, which becomes the new comparable.

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

Now there are two comparable. One sold for 280,000$ and the other for 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 for potential buyers!

So now you are third in line to sell, but the new average fair market seems to be 281,000$ (which is the 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, a potential buyer and his realtor will do a comparable search and quickly see that there were two units sold with similar conditions at a much lower price. There is no way that a realtor can justify your price to his or her buyer.

Let’s say a buyer offers you 285,000$ and you decide to decline the offer. Chances are, buyer #3 will most likely try to negotiate with condo #4 then #5 since they have similar options. The owners of Condo #4 don’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 is no more important shift in the fair market value, the new price for this type of property would now be 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.

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You must understand that even if you don’t want to lower your price, the market will force you to accept a lower price offer by comparison. Buyers, on average, are not stupid. They won’t throw their money away and neither should you.

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

To sum up, you want to sell now for 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 sales 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 for it!