'Overprice' Premiums for More Profit

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Whether you’re charging a million-dollar premium for a custom home on the ocean or $10,000 for a cul-de-sac production home, that premium could be too low.

April 01, 2004

Whether you’re charging a million-dollar premium for a custom home on the ocean or $10,000 for a cul-de-sac production home, that premium could be too low, says Jeff Meyers, CEO of real estate research and consulting firm Meyers Group, based in Costa Mesa, Calif.


For builders across the board, he recommends “overpricing” lots (and homes) with premium size, views or mixed-lot conditions, which absorb faster.


“Those lots and houses will always sell, so if you overprice them, it’ll help you pull the values of the inferior lots,” Meyers says.


Higher premiums, in turn, increase absorption and provide more uniqueness for consumers, provided a unique value story lies behind each premium.


Meyers emphasizes the need to chase revenue as aggressively as you cut costs and sees too many industry GIANTS as shortsighted cost-cutters.


“They’re quick to tell you they just saved $100 a house,” Meyers says. “That’s great, but your marketing director just left $10,000 on the table at the last house he sold.


“And while they’re focused on every penny that goes out the door, dollars are flying out the window because it’s a lot easier to find revenue than it is to cut cost.”

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