My take:
Looking at past home sales can be a good starting point when pricing. But using past sales in an escalating market will result in leaving money on the table. Conversely in a stagnating market using past sales can result in overpricing the property. Pricing in anticipation of the market is key to success. I read somewhere that the typical agent has an average of 4 years experience. If this is the case a huge percentage of the "newbie's" have never experienced a tough real estate market. It will be interesting as I think we have overshot price equilibrium and projecting forward I am advising my sellers to price aggressively out of the starting gate.
( click on to make larger )
This graph might help illustrate my point. As home prices continue to go up everyone assumes that the glorious blue line will never stop continuing up. However, things do not go up continuously in a straight line. There are pullbacks, markets ebb and flow. So if you knew the market fundamentals were starting to weaken, you obviously would not want to price high, (such as where the red arrow is situated.) You would price slightly lower (see green arrow) than the market to catch the top of a weakening market, thus maximizing your sales price. "Don't follow the herd"...Lemmings perish. And never forget, the herd also consists of a large percentage of the real estate agents! Choose your seasoned agent wisely!
2 comments:
Pricing is critical and requires experience and attention. Supply and demand trends along with pricing of the competition must be professionaly analyzed. Why pay tens of thousands of dollars to an agent who doesn't have a clue? An experienced agent in changing markets can save a seller the entire commission in increased sales price. I wouldn't pay someone $25,000 for guesswork.
more than ever, buyer's are more astute & informed. our current market cycle started to change in the 3rd quarter of 2006 - the real estate santa had finally emptied his bag which had been full of 'funny' money. finally we're back to a market with normal, single digit, appreciation. price it right and the market will recognize. sharpen it up & you may attract multiple offers & end up with more!
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