Unfortunately, in real estate we rarely, if ever, give commodity markets any thought. If we understand what real estate really is, and by contrast what it is not, then we will be well on our way to understanding what motivates the market, and how to use it to our advantage as home sellers, regardless of market conditions. Real estate is a commodity. Real estate is a commodity. Real estate is a commodity. However, we consistently treat it like a product, expecting our marketing to be able to sell it. It never has, and never will. Two important attributes of any commodity marketplace are:
•· Consistent Buyer Pool-Every commodity marketplace has a built-in buyer pool that remains relatively constant regardless of market conditions. The preceding statement has been underlined because it is one of the most important principles that would-be home sellers must accept in order to successfully sell their properties, and maximize their profit in this marketplace. Yes, the two can coexist. In other words, we have relatively the same number of prospective buyers in 2008 than there were in 2003-05. In light of stagnant sales and an overabundance or inventory, this is a hard pill to swallow. After all, if properties are not selling, than an apparent lack of buyers is a logical assumption. Right? The truth is quite the contrary. In a commodity environment, prospective buyers will always be stimulated into action if they perceive that what the market is offering them is worth having. The general consensus today is that it is not.
•· No marketing required-This one likely scares the pants off of my industry. After all, we spend an inordinate amount of time and resources telling homeowners that because our marketing is so extensive, effective, and cutting edge, that we can sell their homes quickly and at the highest possible price. The truth is that having the most extensive of marketing resources is absolutely essential, especially in light of the thousands of home sellers competing for buyers. However, it is not for the reason that most of us think. The only thing that marketing can do is to build awareness. It cannot sell real estate. Wheat futures, for example, are a commodity that trade every single business day. However, you will never see a single ad of any kind marketing wheat futures. Marketing sells products; marketing cannot sell real estate, because real estate is a commodity! And in any commodity situation, unlike a product, there is no direct relationship between the marketing and the final results.
Yet real estate is more than just a commodity; it is an emotional commodity. This is the primary reason why properties, in certain situations, are sold at above their asking prices. After all, does it really make any logical sense to pay someone more money for something than what they are asking? However, in the recent past, we often did just that! We became emotionally involved in the process, and logic fell by the wayside as a result. If a home seller can get prospective buyers emotionally involved in the process, they will frequently pay more than they would otherwise pay. I can personally attest that this type of scenario is still playing out today for the few and far between home sellers that choose to accept, and play by the rules of, The "Real" real estate market.