If you ask an economist how prices are determined, he or she will answer that prices are determined based on supply and demand. If there is excess supply and low demand, prices will decrease; and if there is excess demand and a shortage of supply, prices will increase. If you ask a home valuer how house prices are determined, the answer is that home values are based on similar homes recently sold.
How can we sell above market value even when supply is high and demand for housing is low? And how can we sell a home for more when other similar properties are sold at lower prices?
Here I will explain how it is possible to sell above the average market value and what you can do to increase the selling price of your home. This will demonstrate the strategy for making money selling real estate in any market, whether it’s going up, down, or sideways.
Let’s assume the worst market conditions when selling your home. Imagine you are in a buyers’ market. The economy is shrinking, the property market is slow and prices are falling. The Internet is flooded with homes for sale. Every street in your area is full of “For Sale” signs. Buyers are no longer responding to property advertising. There are so many properties for sale that no one cares that your home is for sale. How can you generate interest in your property? And how can you sell it for more when others can’t sell at all?
You need to learn how to use a sophisticated level of property sales strategy and marketing tactics in order to achieve a sale above the average market value. The strategy for selling above market value is the same in any place in the world and under any market conditions. All property offers have something in common, as they all focus on the property features, benefits, and functions of the home for sale.
But if you want to sell for more, you must shift the emphasis from the property to your buyer.
Strategy #1: Selling through identification
When your target is to sell above market value, you aren’t dealing with the problem of selling a home. The art of selling now shifts to another level, and your new problem is bringing your buyer into your home not through his or her needs or desires but through identification.
Unsophisticard sales strategies just focus on the functions, location, and quality characteristics of the property. Common examples of headlines that can be seen everywhere are:
“LUXURY VILLAS FOR SALE”
“HIGH-QUALITY APARTMENTS FOR SALE”
Those kinds of messages have been used to such an extent that they have lost their selling power.
Property sellers, property developers, and estate agents have pushed the messages of property features and conditions beyond the limits of believability. Buyers are no longer attracted by the benefits of owning a home. They already know what a prime home is and what the benefits of living in a good quality home in a convenient location are.
However, your buyer is a human being, full of fears, needs, and desires. Insecure people can’t sleep at night. Unhealthy people want to live healthy lives. Successful people feel the desire to demonstrate their success to society, friends, and family. Busy people seek a way to find free time for themselves and their family. When you promise to alleviate buyers’ fears and satisfy their desires, they will be attracted to you.
How do you use identification to bring the buyer to your home and achieve a sale? There are two steps.
First, turn the home for sale into the instrument that will satisfy your buyer’s desires and alleviate his or her fears. Second, turn the home for sale into an acknowledgment of your buyer’s achievements. We will develop each step in more detail.
What you actually do when selling above market value is that you enlarge your promise. Selling your home isn’t limited to satisfying a demand for housing. Give your buyer additional reasons to buy your property.
Your home for sale must satisfy demand for personal needs and wants such as living in a secure location, living healthily, living in privacy, and having comfort and convenience.
In addition, your home must define your buyer to the outside world as a particular kind of human being. In other words, a home becomes more than a home. The home will be a certificate of your buyer’s achievements,‒ it will define their role in the society, and be an expression of their success.
Let me provide you with some examples of how successful sellers and especially property developers around the world use the above marketing strategies to sell their properties.
What is the supra-functional home value?
There is a difference between functional home value and non-functional home value. The functional value of a home is that it provides you with a shelter to protect you from the local environment. You are protected from sun, rain, hot and cold weather, and also have a safe place to wash, sleep, relax, and live a private life. Your buyer can measure your functional house value based on its location, size in square meters, plot size, specifications, room sizes, and other property characteristics.
The non-functional home value is built into the home’s total value not by engineering or construction but simply through perception. Peoples’ perception of your house’s value is affected by countless factors that may have no direct relation to the material substance of your home. For example, having the architect or someone well-known living in the same neighbourhood or in the same project may give more positive value to your home.
The non-functional value of your home is abstract, and is often called supra-functional value because isn’t measurable. The supra-functional value depends on the role given to your buyer. As well as not being measurable it has no recommended retail value. The property seller can build that extra value on top of the home value, depending on his or her skills and knowledge of the art of creating added value.
The two methods used to add supra-functional home value
In his book about direct marketing, the author Eugene Schwartz suggested two ways of adding a supra-functional value to a product. Although these strategies are best suited to the position of a property developer, an individual seller can study the strategies below and try to identify the supra-functional home value of his or her home when selling. The first method used to add value to a product is character reinforcement and the second is achievement acknowledgment. We will examine below how property developers and home sellers can apply the methods of adding supra-functional value to real estate in practice.
An example of properties with character reinforcement is golf course developments. If you analyse why people buy a home on or near a golf course, the answer is that they want to identify themselves as being golfers. Properties in a golf course aren’t superior in construction quality to others, nor is the location better. Often, the location of a golf course is far from amenities and services, but such properties still sell for more than the average home. Homes in a golf course do not sell for more because the construction is better but because the buyer of such a property automatically positions himself or herself as a golfer. It is the supra-function that sells, not the property itself.
Imagine the person who is your buyer. What aspects of his or her character would you like to reinforce? Are there enough people who would like to present themselves in the role you will reinforce for them? Often, buyer roles aren’t directly expressed or written but are transferred through images and symbols. For example, you may find that in an advertisement for a golf resort, the picture shows a famous golfer instead of the property. The whole purpose is to create a link between the buyer and the personality of the famous golf player.
Another example is the sale of properties in marina developments. Advertising showing yachts with helipads, ladies stepping off out of, and celebrities who bought homes in the same project will reinforce the character of the successful person who knows how to enjoy life. Usually, those ads promote the image of the wealthy and successful person who knows that life is short and enjoys his or her wealth through expensive lifestyle experiences. You never directly describe or depict the character you are reinforcing, but it is implied owning a property in the marina project would be typical of that character. Your buyer may own other properties but does any of them truly project the role he or she wants to have in society? The suggested solution is that, as soon as the buyer owns a property in the marina, his or her role as a wealthy person who knows how to enjoy life will be permanently ingrained.
The role is not what people think about the owner of a property. It is all in the mind of the buyer what character role other people think he or she has. If you are selling a property, you should see what character role your property can reinforce for the buyer. Reinforcement should not necessarily be about wealth. Your property could reinforce any role, for example, the role of a nature lover if you have a house for sale in a nice location suitable for nature walks and a clean environment. They key is to find a role that many buyers will desire so that it will create a big enough market for your property. What role reinforcement can you sell to the buyer and add value to your home?
The second strategy for adding supra-functional value to your property is achievement acknowledgment. We all wish to express our character and to receive recognition for our accomplishments. However, we can’t go around saying how smart or how rich we are. Instead, we express our character and achievements in symbolic ways. We express ourselves through the products we buy. People buy a home partly to express themselves, and the most powerful way they can express their achievements is by showing off that home.
At every stage of his or her life, your buyer goes through several milestones of achievement. Think about your own achievements. Remember when you got your first job and moved to your own apartment or house? In your twenties, did you have the urge to invite your friends and show them your new forty square meter apartment? At that stage, the fact that you had a job was also an accomplishment, but it was expressed through your new home.
Your strategy when developing your home’s supra-functional value is to intensify its primary image. First, by showing people the role you are trying to reinforce. Second, identify what achievement acknowledgment your buyer will receive by owning your home. If you behave, act, and think like your ideal buyer, then your message will be easily and unconsciously transferred to your buyer.
Strategy #2: The squeezed buyer
Squeezing a buyer is another way of selling above market value. Selling your home above market value to a squeezed buyer isn’t a situation you can or should create, but it is a situation that you can identify and exploit. This is the case when you are in a favourable position with a buyer who desperately needs your property and that buyer will pay more than the market value purely so that no one else buys it.
One type of squeezed buyer is a neighbour who is willing to pay more for your home or plot so that no one else will buy it. A common scenario is that homeowners may pay more than the market value to buy a plot in front of their home so that no one else will build there and block their views. Or your home may have a unique advantage for the buyer such as transferable building density, which the buyer desperately needs to complete a project. In such a case you can sell above market value because your home has a special value for a specific buyer who is willing to pay more for your home.
Strategy #3: The property as a vehicle
Using the property as a vehicle is a powerful strategy for increasing value and property sales. This is the case when the property is the vehicle for something else. For example, many countries like the UK and Cyprus offer citizenship through investment programs. A person buys a property and then is granted the right to apply for residency and citizenship based on each country’s investment criteria.
The buyer knowingly pays more than the market value to purchase a property because the property ownership will bring other benefits not related to the property itself. In the example of the citizenship by investment programme, a buyer is willing to pay more for a property that will grant him or her the right to apply for residency or citizenship. There are cases in which buyers may buy property solely for the immigration benefits and not because they need a property. The added value in the home sale price is then derived from the fact that the property is being used as a vehicle to achieve something else.
Strategy #4: Targeting buyers with a low level of market awareness
Selling to a buyer who has a low level of awareness is the most common but least effective way of selling your home for more than market value. Sellers who adopt this strategy believe that they can sell their homes above market value purely because the buyer isn’t aware of the market values. This strategy mostly targets overseas buyers, who sellers believe aren’t aware of comparable sales in their local area.
In my opinion, this strategy merely demonstrates the seller’s lack of awareness. Sellers who adopt this strategy have a very shallow way of thinking in that they believe that buyers aren’t aware of market prices. But the reality is that the seller isn’t aware of or doesn’t accept the reality of the market values of similar properties in the area.
Trying to sell high to a buyer who isn’t aware of market values very rarely works. Sometimes overpriced properties are sold by accident, but your probability of selling an overpriced property is limited. There are other reasons why this strategy should be avoided. When you try to rip off the buyer, you risk permanently damaging your reputation. We’ve extensively analysed the reasons why overpricing will backfire, and this is merely a different version of the same issue.
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