Volume 1 Number 1 -- Pricing Strategy
March 2011
In This Issue:
Pricing Strategy
Hi Folks,
As a Realtor® my goal is to provide you information that is helpful to you and protects your interest during the process of purchasing a home. In the process I act as a coach and not as a sales person. I provide the information that enables you to make the best decision for yourself. If this means walking away from a purchase (or sale), I would prefer that you do that rather than later finding yourself dissatisfied with your situation. If you want an aggressive high pressured Real Estate sales agent, there are plenty around so please select one of them.
This first newsletter discusses Real Estate Pricing which is at the key issue in every Real Estate sale. This news letter focuses on market price and pricing strategy.
Hopefully you find this the first of many helpful newsletters to come.
Pete
Phone: 410 615-3655
410 531-5890
E-mail: Pete.Realtor.Nerd@gmail.com
"Your Friend on a Technically Challenged Planet ©"
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Pricing Strategy
While there may seem to be conflicting approaches to pricing strategy for Real Estate buyers and sellers, there is not. Both wish to sell or purchase a home at a fair price. Generally, this is "Market Price" as determined by recent sales of similar homes, current homes actively seeking buyers, the time of year, and other mitigating circumstances. Either the buyer or seller may find themselves in a situation where it is to their advantage to accept a lower price than market price. But this is NOT half price. Let's see how this works.
A property on my street recently sold. I talked to the owners at one time about listing it and suggested if they wanted to sell the home and move forward, they should clean it up and list it for under $600,000 -- say $590,000. They thought that they could fix it up and finish the basement to get the price that they wanted. Their desired sales price was $645,000.
They selected another Real Estate agent whom they knew, fixed up their home and listed it at $644,945. It took about 9 months after we had talked to do what they thought was needed to increase the saleability of their home and get the $645,000 desired sale price. Their home sat on the market for 90 days with no sale in sight. The listing expired. They then changed to another agent. This agent got them to lower their price to $625,000. The house got some visits but no buyers. Then the price was reduced to $589,900. After another 84 days the home sold for $575,000.
If they had just cleaned up the home, not finished the basement, and originally listed it for $590,000, they would have sold their home for at least the $575,000 months earlier than when it finally sold. Also they would have saved the money they spent on finishing the basement. The Sellers in this case fell prey to the disease where they thought they needed to get a specific amount from the home. Further, they priced it high to get the most money for their home. In a word, this disease is greed. They lost money and delayed moving on with their lives for 9 months.
In another case a buyer had cash to purchase a home. Because he thought that "Cash was King", he could offer any ridiculous price and sellers would agree to it. He also wanted to see every home for sale to not miss an opportunity to get the best price. He lost out on two estate sales because he insisted on a lower price and finally purchased a foreclosure. The cash purchase of the foreclosure did save him perhaps 10%. Again the disease was greed.
Market price is market price. Market price is determined by recent sales and active listings of similar homes within a half a mile of the subject home. Buyers and sellers do not change market price no matter how hard they wish. Agents develop a Comparative Market Analysis (CMA) or a Broker Price Opinion (BPO) to determine the current market price of a home. These pricing opinions are developed using Multiple Listing Service (MLS) data on three sold and three active listings. The MLS data is input by Realtors® for every home they sell. They must enter the sale date, the original list price, the sale price and any Seller price concessions to the buyer. These sales statistics are accurate sales data. The selling price of a home may vary from these statistical prices by around 5% depending upon condition and other desirability factors. This means there could be a 10% difference in price for homes in the same neighborhood - one 5% higher than market and one 5% lower than market.
A home for sale cannot be underpriced. Homes offered at market price stand out in the MLS because of their price. This is similar to fishing with very good bait. When you first cast out your bait, the splash attracts all the fish. They rush to look it over. If the bait is highly attractive (market price) the fish bite. If not they move on.
A home offered at market price attracts buyers eager to get a deal on a home. Competition results and the home sells for market price or slightly higher. In coaching my Buyers in competition situations, my recommendation is to offer slightly higher ($1,000 to $5,000) than the current asking price if they really desire the home.
As a Buyers Agent or a Listing Agent, my role is to determine the market price of the home for sale and provide that to my clients so that they can make accurate offer or listing decisions. However, the final pricing decision is the client's decision. There is little I can do if they choose not to follow the coaching provided.
Have a home on which you want to know the market price? Ring me up at 410 615-3655 for a free Comparative Market Analysis.
© 2003 - 2011 by P. D. Moulton