How true differentiation Impacts your profit and strategy when selling your home.

Article By: Neil O’Donnell

I realize, at first glance, the image to the right may look a little Howard Hughes-ish. Bear with me, there is a method to my madness. If you are thinking of selling your home, this sketch may have a profound impact on your bottom-line profit.

When I set out to study the investment philosophies of Warren Buffett, to find out what made him the world’s greatest investor, and ultimately, how his methods could be applied to our clients’ home sales—I stumbled upon a book called Differentiate or Die. This book changed my entire perspective on real estate. Jack Trout was the author. In the book he laid out the fundamental reasons why a business must differentiate from competitors, not just to be successful, but as the key ingredient to thrive in our current era of Killer Competition.

Now, admittedly, from a business perspective, this is common sense. Every entrepreneur knows he must differentiate his business. As a mentor once told me, “Nobody needs two left shoes.” In business, if two businesses are the same, then one is dispensable.

But, this got me thinking.

Business and the fight for new customers, really is no different than real estate and the fight for homebuyers.

Your home is a home, yes, but analogously speaking, it is also product no different than Tide laundry detergent. You are the owner of that product, no different than Proctor & Gamble is the owner of Tide. And see, when you look at your home through this lens—the profit from your home sale; its ability to compete in the marketplace—comes down to your ability to differentiate.

We have to ask . . . Is your home the same as many other homes on the market? Is it just a commodity or is it different? Could it be judged superior by the voting public – the actual end buyer?

We have to ask . . . Is your home the same as many other homes on the market? Is it just a commodity or is it different? Could it be judged superior by the voting public – the actual end buyer?

In the sketch above, you’ll notice there are three scenarios. Each scenario describes the starting position of your product (your home), in relation to other competing homes on the market. Each of these scenarios can also be thought of as a set up to a race.

The better you differentiate your product, the faster you move forward toward higher profit. And of course, the less differentiation, the faster you move backwards toward lower profit. All the while the other homes on the market, in your neighborhood, your price range, with similar size, amenities, etc., are all competing in the same race.

Let’s explore each of the three scenarios, outlined above:

In scenario #1 – you, your home, you start even with your competitors. You are neither ahead nor behind. There is no discernible difference between your home and others. No apparent advantages and no apparent disadvantages.

In scenario #2 – you, your home, you start out ahead of the competition. This could be for a number reasons. But through some means of differentiation, you have the advantage of a 5-second head start. As long as you run the race appropriately, don’t trip over your feet or make a fundamental mistake, you have increased odds of winning.

In scenario #3 – you, your home, you start out at a notable disadvantage to the competition. You are now the underdog, not the frontrunner. And to win, and bank the most profit possible from your home sale, you will have to run the race of your life.

There is, by the way, nothing wrong with starting from behind. The fabled underdog story exists for this reason, to upset the odds-makers. David versus Goliath: an apparent mismatch, but in this fight Goliath’s size is no match for a small well-placed stone, shot from a distance, out of reach of Goliath, from David’s high-tension slingshot. Bing! One stone upside the head, and Goliath is down for the count.

But in order to have a chance to win, the underdog must acknowledge he is the underdog and formulate a strategy to offset his perceived handicap.

If you are running the 800-meter dash, for example, someone running on the inside lanes—from a strategic standpoint—must run a very different race than the runner who runs in the outside lanes.

Part of my job then, prior to creating the actual “race strategy,” is to accurately determine the starting position of each a client’s home.

Now you would think that every home, given the three scenarios we’ve discussed above, either a) starts out even, b) ahead or c) behind the competition, right?

Wrong. There is actually a 4^th possible scenario.

In scenario #4 – you, your home, you start out ahead of the competition but . . . only “in your mind.” For obvious reasons, this is dangerous territory.

When a homeowner is blinded to their true starting position in relation to other competing homes on the market; due to pride of ownership, ego, arrogance, lack of understanding of how true differentiation works, how value is created, etc., almost always, in my experience, they sabotage their chance for maximum profit.

Undoubtedly, in strong market cycles, we find more than a handful of homeowners firmly rooted in the mindset of scenario four. And the last scenario in the world that you ever want to participate in, is scenario #4.

The truth is, it’s not as easy to achieve maximum profit, as you might think. But it is possible, with strict adherence to a tested and proven approach, as we outline in our book, The Value-Driven Approach to Sell Real Estate: How to protect yourself from Real Estate Greed and bank extra profit by Thinking like The Great Warren Buffett.

In the book, we discuss the importance of getting an accurate and comprehensive diagnosis—for this very reason—to identify your homes’ true starting point.

Your Ability to Control the Race

One interesting tidbit too, about how true differentiation works, when done correctly and effective, you not only control whether your home moves forward or backward “in the race” toward higher or lower profit, you also control whether other competing homes (with yours) move forward or backward too.

I suppose its kind of like cheating, tying a rope around your competitor, and anchoring him to a tree before the start of the race. But hey – that other homeowner should have hired someone who understands true differentiation. Then they wouldn’t have been in that position, chained to a lower potential profit.

The biggest secret though, for maximum profit: you must know your “product’s” starting point in relation to its competitors. Without this key acknowledgement, nothing else really matters. The details become fictional, hypothetical, and unrealistic.

But when we deal with reality, we can actually go to work on a true differentiation strategy. If it turns out that we’re the underdog, so be it, we’ll run the race of the underdog and accord to the facts, to strive for the upset.