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Real Estate Tips & Tools

The Power of Real Estate Competition


To say that competition defines the value of homes is a bit short-sighted, though it does impact the price you will see for your home. The only thing that can define the value of any piece of real estate is a buyer willing to pay for it, but the market and the competition seen within the market can give a prospective buyer a framework to derive a value from.

That is a powerful trait of market competition, underscoring the need to understand the market and diagnose what kind of competition your home might see. Every home for sale in your local area has the potential to be a direct competitor to your own home. Of course, houses vary in size and amenities, so only those that most closely resemble your own property truly present meaningful competition for a buyer's attention.

Pricing a home is often the most crucial step of the real estate process and can ultimately determine what kind of transaction you will have. If you price your home properly, you will see a short time on the market and a sale price to your liking. If you price the home wrong, you could sit in limbo for months and have to accept less than what you'd like.

The difference between those two outcomes can hinge on the level of competition in the area for your property. The first step to combating that competition is understanding the current market trends to determine if it is a buyer's or seller's market. If homes are tending to stay on the market for a long time, that is a good indication that supply is out distancing demand, creating a buyer's market. That can affect your pricing strategy.

A buyer's market also means that a home may have to be priced more aggressively and more directly positioned against competition to sell quickly. One way to sell a home is set the price a bit higher than market value in order to drop the price gradually until it nets a buyer. However, that can mean a long stay on the market and a weak position in relation to competition in the area.

Another way is to do a careful comparative analysis of all homes in the area to not only help price the home, but determine the amount of competition amongst similar properties the market holds. If there are many homes like yours, it may be wise to price the home more aggressively to draw interest in a crowded market segment.

Conversely, if your comparative analysis turns up relatively few properties on the market that are similar to yours, you can probably afford to price the home a bit higher as less competition gives you a better chance at garnering interest without dropping price to get it. Obviously, these are two very different situations and without understanding the level of competition in your area, you cannot make the distinction between which route to take.

Remember, a prospective buyer is someone just like you. That buyer wants to get a great home for a great price and will often go through quite a few homes and showings in order to reach that goal. Make it easy on them and understand the competition so that you can price the home to motivate a seller into seeing that your home is not only full of the amenities they want, but it is priced more reasonably than competing homes as well.

Many real estate agents will do a comparative market analysis for you in order to price the home. Get involved in the process and tell your real estate agent that you want to help determine the pricing strategy of the property. The function of a real estate agent is to help you sell your home, so be sure to shape the way it is sold. Taking control of the situation and understanding the competition for your home can help you ensure a smoother real estate transaction for both you and your agent.


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