Pricing
A few thoughts on real estate
pricing
-
There are as many sale prices for
your house as
buyers
-
Seller sets asking price -
Buyer sets final price
-
Buyers will see all price changes &
re-listings
-
Buyers tend to be
better informed of value than
sellers
-
Past sales
are the basis of all pricing - where is the market now?
Pricing Real Estate Is
Different
Pricing of real estate does not follow the same rules as pricing
of high volume commodity products. When thousands or millions of
the same product are sold continually, their prices quickly
become set. It is a homogeneous market. We don't question the
price of Corn FlakesR,
we just pay the cashier. In real estate, and particularly in New
England where houses generally are unique in their features,
the volume of sales of comparable properties are very
low. Some of the towns in Apple Country may have less than 100
sales in a year, and sales of homes of a particular number of
rooms may be fewer than 10 in a year. It is a heterogeneous
market. Effective pricing is dependent on knowledge of recent
sales of similar properties. Not only do we need to study recent
sales, we must make adjustments based on experience for
differences in living area, age, condition, location, market
conditions, neighborhood, lot size and reputation of the local
school system. As Realtors®,
we are continually analyzing the market so that we may have the
basis by which we can interpret comparable sales data.
Don't Test The Market
Marketers of high volume consumer products conduct tests of
product and price acceptance before general product rollout. This
allows them to hit the market with the right product at the right
price. It is not advisable for a seller to "test" their property on
the market. You would think you could. You could always drop the
price if it doesn't sell,
right? The reason you shouldn't has to do with pent up demand. At
any point in time there are buyers who have not found the home they
desire and are waiting for more homes to become available. When a
property is first marketed, these people make a point of looking at
it. After a couple of weeks, all this pent up demand will have seen
it, and all further interest comes from new
buyers entering the market. After the first couple of weeks,
requests for showings can drop by more than half. If your property
is over priced, you will miss this opportunity. Dropping the price
will not get it back.
Setting the right price at
the beginning will get you the best price in the end!
Buyers Know Value
Buyers begin the process of buying, on average, 18 months before they
conclude their purchase. They spend much of this time determining
their desires in a home, and early in the game they want to know
what they can afford. They start reviewing homes, usually on the
internet. Over 78% of home buyers start their search on the
internet. They quickly become aware of the price of homes for sale
in a category within communities of interest. Today, an overwhelming
number of buyers are represented by exclusive buyer agents. In Apple
Country, I would project that over 85% of buyers are represented. A
buyer's agent owes their allegiance to their client, the buyer. They
sign their clients up to an automated search of properties in the
Multiple Listing Service, MLS. Now the buyer has a highly efficient
means by which to keep abreast of the market. Their agent will be
continually advising them of the accuracy of the pricing of the
homes they visit, and for homes for which they wish to make an
offer, their agent will conduct a market assessment of the home just
as your agent will do in advising you on how to price your property.
It is not surprising that buyers have a very good appreciation for
the value of homes after touring 20, 30, maybe even 50 or more
homes. Sellers on the other hand short change themselves. Sellers
usually put their properties on the market only a few weeks after
first considering doing so. This doesn't give them the time to
thoroughly analyze the market.
I Need To Set The Price High
Enough To Have Room To Negotiate
Wrong! Buyers are
reluctant to make an offer on a property that is over priced by as
little as 5%. They believe the gap is just too large. The average
ratio of selling price to asking price is 98%. Not the original asking price, but the asking price at time of
offer. Homes do not need to be over priced in order to
provide negotiating room. Sales data for Apple Country show that
homes over priced by 5% or more will
double their marketing time. Copyright©
2006 - Chris Kellogg
All Rights
Reserved
Last Modified
05/16/2007 |
