Selling a home in today’s economy is different.
It was easier when there were more buyers than sellers. To sell a home today owners and their agents must compete for fewer buyers who are dealing with tougher mortgage qualifications. To be more competitive, marketing that is more sophisticated than the industry norm must be brought to bear. Here is an introduction on how that will work.
Home Owner as CEO
Home owners are firemen, policewomen, accountants, teachers, social workers, morticians, carpenters, stock brokers, writers, scientists, engineers, doctors and nurses. Most are not CEOs of their own company. But when they sell their homes that’s what they need to become.
As the CEO of a small company set up to sell one product, a unique home, the smart CEO surrounds herself with people who make her successful. One function of your company will be marketing. If you think that means you need to hire a salesperson you will be making a mistake many CEO’s have made over the years. Sales is only one aspect of marketing. The smart CEO hires a marketing director.
The Four P’s of Marketing
When you hire a competent marketing director you will get assistance in four areas. In any basic marketing course the first thing you learn about is the four P’s of marketing, Product, Price, Place and Promotion.
A good marketing plan integrates elements of each into a consistent marketing strategy. How well this is done will determine how quickly and profitably your home will sell. Many homes sit on the market for a long time and eventually sell only at a deep discount because the owners got poor advice….or no advice…about how to position their home vis-a-vis the four P’s.
The First P – Product.
By far the most important of the four P’s in the sale of residential real estate is “product.” There are homes that are so nice and so well located that no marketing is necessary except to stick a “for sale” sign in the front yard.
Paradoxically, the product area is where most listing agents fail their clients. In their defense, many home owners do not have the hard-nosed objectivity of a good CEO. They have an emotional attachment to their homes which prevents them from seeing it the same way the rest of the world will when it is put on the market.
Many agents will not make the strong recommendations necessary to maximize the potential of the home because they do not want to risk the relationship with the owner. They are like corporate “yes men” telling the boss what he wants to hear.
The biggest mistake is to think of the real estate product strictly in terms of the house. People don’t buy a house just to put a roof over their heads. The style, the location, the condition, and even the price they will pay are a reflection of their values and the way they want the world to see them.
The Second P – Price
Of course, product influences pricing. A new Cadillac sells for more than a Chevrolet. However, it is not the only factor. Getting the price that maximizes the net (profit) to the seller takes some analysis, skill and knowledge of the market. Here are a few of things that make pricing a home unique.
1. Housing is one of the few product categories where negotiating is expected.
In the current market few homes for sale get full price offers. The final price for a home is often determined by two different negotiations, the first on the contract price and the second on requested repairs or changes. Thousands are left on the table in the first stage and deals fall apart for piddling sums in the second.
2. People shop for homes.
Buying a home is seldom an impulse purchase. The internet has made it possible to screen dozens of homes in very little time for price and other features. There is also ready access to the prices of homes that have recently sold. One that is not an obvious fit is usually not seriously considered. At one time you could put a home on the market at an inflated price and hope to get lucky. Because there is so much information available, this doesn’t happen much anymore.
3. Every home is unique but some are more unique than others.
It is relatively easy to predict the sales price of a home in a subdivision with lots of sales and very similar homes. Luxury homes, historic homes, or homes with unusual features (like an ocean view or a mother-in-law suite) are much more difficult to price and take analysis and experience to price realistically.
The Third P – Place or The Distribution System for Homes
In marketing terms, “place” originally meant just that, where something was sold. As technology evolved the more precise definition became the distribution method or “channel.”
In this country the primary distribution system for home sales has been the network of REALTOR associations and over 900 Multiple Listing Services.
In the Research Triangle area there are several associations including the Durham Regional Association of REALTORS, the Chapel Hill Association of REALTORS and the Raleigh Association of REALTORS. The Triangle Multiple Listing Service includes these three associations and covers 14 counties and has almost 10,000 licensed agents participating. At any one time there will be around 15 to 20 thousand homes listed by the TMLS for sale in the region.
There are two important functions of the MLS systems that facilitate the sale of homes.
The first is the data base of all the information about these listings as well as thousands and thousands of sold properties. For many years this information was closely guarded by the associations and access to it was one of the primary reasons for hiring a REALTOR to represent you in a real estate transaction. This is much less the case today as the internet has “set free” a lot of the data, if not the information that can be derived from it. This change is still underway and the subject of much debate in the industry.
The other important function of the MLS system that isn’t discussed as much is a set of rules, regulations and customs that facilitate the real estate transaction. The most important of these is the sharing of compensation between the listing broker and the selling broker. Many of the traditional practices are now being challenged by clients, new business models in the industry and the U.S. Department of Justice.
All real estate agents are licensed in the same way but the job of a listing agent is very different from a buyer agent.
A listing agent is more of a marketing director than a salesperson and may never even meet the buyer until she passes the keys to the new owner at the closing table. The buyer agent is more like an independent manufacturers rep who maintains the relationship with the buyer and guides them through the process.
It is important to understand the changes that consumerism and the internet are having on the real estate distribution system and the different roles of the listing and the buyer agents involved as you prepare your home for the market.
The Fourth P – Promotion
For homes, product and price are the most important elements in the marketing mix with the distribution system coming in a strong third. Promotion does have its role, but probably not what you think. Most real estate advertising represents wasted time and wasted money. The most effective promotional activities for homes fall into the category of “guerrilla marketing.”
Nobody buys a home sight unseen.
Even in the relatively narrow market for million dollar homes there are hundreds of homes to choose from in the Triangle area. No potential buyer is going to look at all the choices they have. This means that the goal of promotional activity is to get showings. As the seller you must cooperate with your listing agent to make this as easy as possible.
The marketing plan your listing agent presents you should drive showings with an excellent presence in the MLS, handsome and comprehensive information both print and electronic, great presentation at showings, great open house events, and especially, buyer agent awareness.
Pulling it all together – Your Marketing Plan.
If this has been thought provoking at all, you are asking yourself questions about how it would apply to the marketing of your home. Because no two homes are exactly alike, it would take more than a few paragraphs to cover all possible situations.
The smart CEO delegates the responsibility for the development and execution of the marketing plan to an expert marketing director. So should you as the seller of a home.
My marketing philosophy for homes centers on the product itself. The product drives the price and the promotional approach. For many homes the analysis is straightforward; for others it takes a more creative approach. For an analysis of your requirements, contact me at 919 819-6666 or use the contact page on the site to send me an email.
Jay Zenner – Broker/Owner