Market Value and Salability

by TedV

For Sale

We are in the process of preparing to sell our house. We’ve lived in the same place for over 18 years and there is a lot that needs updating, repairing and replacing. We are making decisions on what home improvements to make based on two factors: Market Value and Salability. Those two factors also impact decisions on how you market and even create your products and services, as we will see after I explain these basic ideas in regards to houses.

In all types of marketing, house sales and all others, any feature or improvement only adds value or increases buyer desire based on how the prospect relates to the particular feature or improvement.

Market Value – How much a house is worth in its present condition, location, and market. Much has been written about the housing market and the reduced current housing values across the country in this economy. At any one point a house has a certain value assuming someone will buy at at all.

In regards to a house, any improvement may or may not increase the market value. Remodeling a kitchen, assuming it is both tastefully and correctly done, will definitely increase the market value of a home. The problem is that $20,000 spent on remodeling a kitchen will probably only result in a $10,000 increase it its price – market value. Now, if that $20k was a quotation from a home improvement company and you have the skills to do the work yourself for $5k total money out of pocket, then you will have a return on your investment.

Salability – Attractiveness of a house in its given market to potential home buyers. A completely remodeled house will have great appeal to many types of potential buyers if done tastefully. In this market a coworker of my wife’s sold their home in less than 3 weeks and for just about their asking price.

Their home’s Salability Factors were: 1) good neighborhood, 2) good school districts, 3) a part of town that had lost less value than others and should recover value quicker, 4) a beautiful, tasteful and up-to-date interior with an excellent room layout, 5) a well maintained yard, and 6) an attractive but not overstated price point.

A house in ill repair may sell quickly to a professional or amateur home remodeler, if it is priced right.

A fixer-upper needs the following Salability Factors: 1) Agressive pricing (read–low priced), 2) that price point needs to be well below the price houses in the area are selling for AFTER future repairs are all paid, 3) a fairly decent neighborhood, 4) fairly good schools, and 5) no major structural damage unless the house is priced for a fire sale.

Let’s look at how these factors “play together” when selling a home.

• A house needs a new roof. That $10,000 let’s say, will not add a penny to the price of the home, but in this buyer’s market with way too many homes priced to sell, buyers can be picky and who wants to consider a house they’ll immediately need to re-shingle?

• The house may benefit from a remodeled kitchen, but $20k is a lot of money, and hoping to get the $10k I mentioned above still adds $10k to your asking price. Perhaps new paint, a new appliance or two, and a new designer ceiling fan will make an older kitchen decor a non-issue.

• All the houses in a major portion of the city have experienced flooding over the years. You might spend $10k having everything repaired, or you might spend $15k on the same repairs with a national company offering a life-of-the-house guarantee that the in-house-flooding won’t happen again – ever – or they will make any repairs free of charge. This additional expense creates no market value but substantially increases salability of the house in this flood plain area.

Market Value and Salability in “Regular” Marketing

Market Value – I have always preferred selling the higher priced products with the better feature set. In my first sales job I sold a replacement parts product that cost 3 to 10 times more than what the prospects were using. Customers would usually see remarkable improvements in performance and cost savings from avoiding future repairs. My $200 item replacing a $30 item could easily see $500 to $700 a year in savings and last two years or more.

The market value of this product was suspect, because this was all new and ROI was not a very well understood term at the time in this market niche. My claims seemed too good to be true. However, also at this time cost of labor and cost of replacement parts damaged by the cheaper solution came under close scrutiny. Higher ups in most of my customers realized that reduced cost of labor alone would justify my products.

My customers would try one or two of my products in their worst situations. Rather than a year or more, these bad situations would prove the cost savings in a few months, sometimes even in weeks. Soon they were buying 3-5 of my products a month. Not long after that it was a dozen or more per month and the purchase orders quite often came in without me having to do a thing.

The proven market value overcame all price objections. My competitors would say, “But ours cost less!” My customers would look at them and grin before saying, “I know but it’s way too expensive to use.”

Salability – The last physical product I dealt with – I am more into helping sell services now – was for a consulting client who I helped develop their sales model. It was a physical wellness product, and the wellness arena has few products, mostly programs to help people. Major corporations were the big prospects because in the boom days of 2002 to 2007 these companies made a lot of good press and cachet with their employees instituting wellness programs.

The physical product my client invented could be scientifically proven to reduce stress. There was a good bit of data out in the medical community stating that reducing stress would reduce specific health related costs for businesses. My clients $500 per office worker device had a rock solid ROI. Every major prospect agreed with us on that.

However, we were approaching these corporations in late 2007 and throughout 2008. The economy was accelerating down a slippery slope and all of these corporate prospects were rightly scared of the future. Also, the real innovators in wellness in big businesses were on average spending $30 to $50 bucks per employee in wellness per year – not the $500 per for this device. At this time all the executive suites were cutting costs and wellness spending was one of the first programs on the chopping blocks. At best wellness budgets were frozen in place.

The market value of this product was obvious. All circumstances around it made its salability impossible. Everyone could relate to the ROI message. No one could pay for it.

Market Value and Salability Relevance

All of the words and pictures of a sales or marketing message are just product fact gibberish unless you can help your prospects relate what you say to what’s important to them. Powerful ROIs and great capabilities are crucial only if somebody cares.

Wonderful features and benefits are absolutely essential for a viable product or service, but can your prospects say, “Wow! This sales/marketing message is talking about me and my situation!”

Related articles:

Relevance In Marketing – It Easily Eludes Us All

Deny Thy Father and Sell With Relevance

Photo credit goes to Ian Muttoo.

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