I want to talk about how to price a listing in a competitive market. And it’s particularly salient now, you know, in this pandemic, this unprecedented market we’re seeing in the US housing market and then micro markets around the country.
We just had actually a property going under contract for almost 40% more than we listed it for in less than three days in a market where that never happens with multiple offers. So a couple of quick points here and tactics on how to do this because valuing and listing a property at the right price is probably one of, if not the most important skills and things we do as real estate agents and brokers.
And it’s hard to convince sellers to come to market which we ultimately recommend. Right now, though, a couple of schools of thought on this. One is price it 10 to 15% above what you would normally price the property at after doing a full comparative market analysis, the second school of thought is price it at market or slightly under and create a feeding frenzy if you will.
Don’t create an administrative nightmare when choosing price
Problem with the ladder in my opinion is you’re creating an administrative nightmare, and you’re also creating a little bit of price disequilibrium in the market. Demand is outpacing supply. More people with liquidity and resources are putting offers in on fewer homes as the supply is constricted. Thus less inventory pushes pricing up. And what it does is we can start to get ahead of that. And we do that by looking at data.
So quantitatively, analyze what’s been happening in that neighborhood, in that micro market, within the past three to six months. What is going on with the average days on market? Understand that metric, then what is going on with the pricing? What are we seeing prices move year over year, month over month, quarter over quarter in that area.
Understand the goals of your selling client
Once we have all this information, we then get to understand in the context of what are the goals of our selling client, what is our ideal timeline, what do they need to get out of this? What are some of the things that will drive our decision making? Then we’re going to come up with a range of recommended list prices.
It should be trending toward depending on your welcome market and all the data and the research you just did. Remember real estate is highly localized. You need to be doing the research in the market you’re in. I would recommend pricing it a above market and letting the demand catch up to letting other offers and liquidity come to you. At the end of the day we want to: maximize the amount of proceeds upon the sale of the property. And two: we’re trying to do in a timeline that meets their goals.
Let the market demand catch up to us. Or create a auction feeding frenzy by placing a property at market or slightly below in a highly competitive market. Hopefully this was a value to you. Again, just quick tips on pricing a property in a highly competitive market. Make sure you do your homework and research. Make sure that you understand the trends, make sure that you’re future pacing your strategy, make sure that you’re doing it to the requirements and the goals and motivations of your seller.
Remember that real estate is a hyper localized business
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