Whether you’re a property agent looking for ways to up your real estate game or you’re someone looking for practical hacks to get the best price for your future home, this article is for you.
Back to Basics: 4 Common Pricing Strategies
There currently exists four pricing strategies common many property management firms. For these pricing strategies to work, Analysts have taken into account six factors, namely: ability to pay, account segments, competitor actions, input costs, market conditions, and trade margins.
While there are a variety of pricing options depending on market types, they can be summed up into four basic pricing strategies below:
Economy Pricing. No-gimmick pricing with extremely thin margins. Marketing and advertising costs are relatively low. Two of its most primary targets include the high market share and the mass market. Basic house commodities like detergents and bottled water are common examples.
Penetration Pricing. To quickly gain high market share, pricing is set artificially low. This is especially common to newly-launched products like mobile phones and housing loans. Once its market share objectives are achieved and the promotion period is over, pricing are now set to standard.
Premium Pricing. This is particularly for outperforming companies that are relatively considered to have “authority” in their respective industries. Their high pricing is used as a defining criterion. Examples include Gillette in blades and Porsche in cars.
Skimming Pricing. To recover maximum profit before more competitors enter the market, products under the skimming pricing tend to have high prices until competition arises. Examples include the earliest versions of mobile phones, VCRs, and other electronic gadgets until their Asian counterparts took over and attracted more customers.
Property Pricing Strategies You Should Know
Although it’s easy to find your property’s monetary value thanks to online estimates and real estate agents, did you know that you can have your own property pricing analysis yourself? Below are five strategies to find the perfect price range for a well-deserved property:
Consider online pricing benchmarks when pricing your property, and make sure to adjust based on those.
For instance, if your property is sold at $52,000, a buyer searching within the $25,000-$50,000 benchmark won’t easily find your property, especially if you’re set on having your property listed online. Adjusting your prices from time to time can increase its visibility among the most popular real estate search websites.
Considering that 44% of property buyers start their property search online, usually using their mobile phones, setting your price under a reasonable price filter threshold can boost your property’s possibility to be sold in no time.
If you need to cut your losses, make sure to set your maximum and minimum thresholds.
While setting a fixed price range may sound like something which can be purely done out of common sense, this can be easily overlooked when putting your property on sale. This is especially true if your market tends to bargain until your property reaches its last price, having a fixed price range will save you the risk of losing your profit in the hopes of finding a quick buyer.
Apart from that, it can also help you plan on how long you can put your property up on listings without letting it sit there longer than it should. While the average time of property purchases can vary per local market, basic indicators include property inventory levels, trends, and interest rates. However, if you never had interested buyers within 10 days, there might be something wrong with your price range.
For beginners, it is ideal to use a free online home value estimate as reference. However, don’t stop there.
To get good start with your real estate investment plan, an ideal launching point would be automated value models – also known as AVMs.
AVMs take your property’s real estate data like its total lot and building area, number of rooms, beds, baths, location, and other selling indicators typically looked for in a property. After running all of these information into an algorithm, they will then give you a ballpark figure of how much your property is worth.
However, it is essential not to depend your pricing decisions purely based on its online value. Especially for meticulous real estate agents, there are hundreds of minor details to consider which aren’t necessarily covered by AVMs. These include the property’s proximity to a big power line, noise threshold, terrain, or the buyer’s overall “feel” of the area. While AVMs are good starting points, it is vital to witness your property’s full potential beyond what a computer program can see.
To effectively set a reasonable price for your property, don’t let your emotions take over. Instead, make sure to analyze its comparable sales.
While it’s understandable how your property encapsulates a lot of precious memories with no absolute monetary value, holding on to its sentimental value can hinder you from selling your property within a reasonable price range. This is why a comparative market analysis is important.
For starters, a comparative market analysis also known as CMA puts your property side-by-side against recently sold properties with similar indicators as yours. The “hack” here is to define a marketable price range, which you can increase or decrease based on your property’s unique features and upgrades.
To start a bidding war, remember to set your property’s price way below its competitors.
While setting your property’s price range beyond its intended value might sound condescending, it’s actually a pretty smart strategy when used within the right timing.
Aside from making your property stand out against its competitors, it can also create a sense of urgency to your potential buyers. As buyers tend to go after the cheapest offer available, the fear of another buyer getting your property drives potential buyers to lay out some bucks as soon as possible. Hence, your property’s listing days is bound to significantly reduce.
No matter how eye-catching or marketable your property is, it wouldn’t sell if the price is not right. This is why getting the right pricing strategy that works the best with your property is a vital process to easily take off your listing without undervaluing its assets.