C A S C A D E

Of all the “tricks” I know that can sell a property quickly, I’d say the most powerful tactic is to simply price your property right in the first place.

It may sound like an obvious answer, but there is a lot more to this process than just picking a number. Even when you have a solid, data-driven valuation of your property, you’ve only just begun to determine what your actual asking price should be.

To start with, we need to establish what the word “value” actually means to your buyer.

What Is “Value?”

If you expect to sell any piece of real estate, your buyer needs to genuinely believe that the property is worth MORE than the price they’re paying for it.

Let me reiterate that. In the mind of your buyer, the value shouldn’t just match your asking price; the value needs to EXCEED it.

market perceived value

Think about it. ANYBODY can do a “like-kind exchange” and buy a property for exactly what it’s worth. There are thousands of properties like this on the market right now that aren’t selling. Take your pick!

And there lies the problem. Nobody will rush out and buy a property that is priced for its exact value because a buyer needs to see the extra value before they make a buying decision.

The margin between your asking price and the buyer’s “perceived value” is the whole reason real estate transactions happen. If you can’t show your buyers that they’re actually getting a great deal, it’s going to be very difficult (if not impossible) to sell your property.

Luckily, you can do a lot of things to help your buyer see the excessive value in the properties you’re selling. But make no mistake about it—if you’re not able to show them this margin of excess value, your property isn’t going to sell.

Understanding Your Buyers

The beauty of pricing your property correctly is that it will sell itselfYou won’t have to “convince” anybody that your property is a great deal because when people look at the information you’ve presented, the value will be obvious.

However, the only way to price your property correctly is to understand what your buyer wants. What decision-making criteria do they need in order to say “Yes!”?

Here are some questions to think about:

  • What does your ideal buyer care most about?
  • Why would they click on your listing in the first place?
  • What will they be using the property for?
  • How can you give them what they want?

Unfortunately, most buyers aren’t going to come right out and tell you these answers. You’ll have to do some digging and anticipate their needs based on what you learn from them.

Every buyer has a different set of needs, which means different people will assign different values to the same piece of real estate. In other words, your property will be worth more to some people than it is to others.

Just look at how auctions work. These are the PERFECT illustration of how different investors will value the same property at completely different prices.

real estate auction

Every auction ends with only one winner—because everyone has a unique set of needs. At different points, they’ll say “that’s enough” and walk away from a deal.

With this concept in mind, let’s talk about a few pricing strategies that will help you price each property right and extract the most value from each property you sell.

Buyer Profiling

If some buyers are willing to pay more than others, how can you find those who will pay the most?

You can do it by profiling your buyers and then pricing your property in a way that makes it accessible to as many different types of “profiles” as possible.

When you do this effectively, you can:

  • Sell your property faster.
  • Sell your property for more money.
  • Find buyers who are giddy with joy because you’re giving them exactly what they’re looking for!

I’ll let you in on a little secret: people LOVE to buy things.

People buy real estate because they believe it will solve a problem or meet a crucial need in their lives (e.g., housing for themselves, a great investment opportunity, cash flow to finance their lifestyle, etc). When a buyer truly believes that they’re receiving value in excess of what they are paying, they’ll be throwing their money at you! And think about it—if they believe they’re going to be significantly better off due to their purchase, why wouldn’t they?

The trick is to:

  1. Know what your property is worth to your market.
  2. Understand the needs of the “buyer profiles” in your market.
  3. Communicate the obvious value and benefits that apply to each of these buyer profiles.

A few types of “buyer profiles” exist in almost every situation and in every market. Here are three major ones:

1. The Cash Rich Buyer

This person is highly liquid, with a lot of cash sitting in their bank account and tons of buying power. They could easily pay your full asking price, right now, with the cash in their pocket. However, like every other buyer, they’re looking for a good deal. And since cash-rich buyers can buy almost anything they want, they’re hunting for value in the form of a discount.

cash rich buyer

For example, if you have a $100,000 property and want it to appeal to a cash-rich buyer, let them know that they can get the discount they’re looking for. Just include a section in your description (or even your headline) that says something like this:

ATTENTION CASH BUYERS: Want an instant discount on this property? Close on this purchase by [insert deadline], and you’ll receive a guaranteed 15% off the list price, with an automatic price reduction to $85,000—no questions asked!

This is just an example; you can use different wording, and your discount can be higher or lower. But for a buyer who needs to see a discount to feel good about buying, this is precisely the kind of “hot button” that could push them to pick up the phone and call you.

2. The Cash-Strapped Buyer

Most markets are FULL of cash-strapped buyers. This person has low liquidity, limited cash in their bank account, and not much buying power.

cash strapped buyer

They’re well aware of the fact that banks won’t give them money, and their options are limited. Like most people, they realize that beggars can’t be choosers, and since cash-strapped buyers are looking for a property they can buy with their limited cash on hand, they’re looking for value in the form of easy financing and affordability. You can give them this value with the option of seller financing.

For example, if you have a $100,000 property and you want it to appeal to a cash-strapped buyer, make sure they understand that they can get this property without talking to a bank. You could include a section in your description (or even your headline) that explains your financing terms:

SELLER FINANCING AVAILABLE! Buy this property with a low down payment and affordable monthly payments! Call for details!

The real kicker is, most cash-strapped buyers don’t care what kind of interest rate or monthly fees you charge (the example above is with a ridiculously high 9.85% interest rate and a $15 monthly servicing fee). Most cash-strapped buyers will gladly pay it because they only care about one thing: can they afford the monthly payment? 

It’s the same reason they’re cash-strapped in the first place—because they don’t care about getting a good price, they only care about the monthly expense. Oftentimes, these people are the type who live paycheck-to-paycheck and they have a limited budget to work with. If you can make it fit their budget, they’ll gladly pay your full asking price—maybe even more!

3. The Hybrid Buyer

The vast majority of the buyers in your market are going to fall somewhere between our definitions of “cash-rich” and “cash-strapped.” Some will have:

  • Some cash, but not enough to buy your property outright.
  • Tons of cash, but they just don’t want to spend it.
  • Little cash, but they also care about getting a slightly lower price.

For the buyer who falls in any of these three’s territory, we’re going to have to raise the perceived value of the property in their mind. We can do this in several ways:

A. Offer Virtual Tours

B. Give Them a Money-Back Guarantee

snapshot (20)

C. Make your listing stand out with some professional pictures like this:

x6VeZAhRpqd8LczPAOGC_2014-08-27 02.46.52 1

D. Believe in the Power of Bundles

You can also bundle your property with a handful of other small benefits that will help your buyer to see more value.

For example, if someone wants to buy your property, they’ll also get the following:

  • 10% discount off any other properties they buy from you in the future.
  • A professional survey of the property (a small fee, which you will pay for).
  • A limited number of (minimal) improvements to the property to fix any known issues.
  • A professional property report (which you can simply pull from a real estate data service like DataTree).
  • Title insurance and a limited home warranty (depending on the type of property).

The Goal

The whole goal of your pricing strategy should be to make your property appeal to every kind of buyer in your market and to make the most money from the buyers who are willing to pay a higher price.

When you’re offering the right benefits that appeal to every possible kind of buyer, you’ll be opening the doors to MANY more offers that wouldn’t otherwise come in (because their needs aren’t being met).

C L O U D

After taking the time value of money into account, you should feel comfortable selling to any of these buyers. One way or another, you’re going to get the same amount of value that YOU need out of your property. Whether you accept slightly less cash now OR significantly more money over time, both situations will give you a similar value in the end.

When you hit all the hot buttons that different customers want, you’re going to sell your property MUCH faster than if you only offer them one narrow path (i.e., full asking price, all-cash, non-negotiable).

About the author

Seth Williams is the Founder of REtipster.com - an online community that offers real-world guidance for real estate investors.

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