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How did you come up with that price...anyway?

When preparing a Comparative Market Analysis, CMA, recently I was trying to determine a good listing price. It's not an easy job!

I had to put more weight on the "on markets" than the "sold" comps.

Traditionally real estate agents are taught to put more weight on the "solds" when trying to establish a property value.

After all, the "solds" tell us an important story. They tell us what a property actually sold for!

Not the pie in sky hopes that the listed price usually indicates but what a buyer actually paid. Very important data for sure. And in the old days that piece of data was the most important piece.

Not anymore...

When agents prepares a CMA they usually select homes that are comparable to the subject and they rate the homes they selected.

A typical rating system is much like this;

1. Equal (=)

2. Inferior (-)

3. Superior (+)

If there are comparable homes on the market that are priced at 399,900 (-), 389,900 (+) and 384,900 (+) and they have been on the market 129, 95 and 80 days respectively.

Would it make sense to price your home higher or the same as ones that have not sold especially if they are superior or equal to your home? If you were a buyer and looked at nearly identical homes in a similar neighborhood and setting...which would you buy?

Now understand that the average sold prices indicate a value of 409,000 to 419,000...but nothing has sold in the last 4-6 months. The sold data is very old in terms of market movement.

It is very important to make sure your agent has analyzed the whole market. The Days on Market are very important.

If the average days on market "DOM" is 118 days...should a seller be panicking 60 days out without an offer? Depends on the seller and their needs.

Some questions to consider...How quick do you need to move? What is more important money or time?

Do you really need to sell? If not perhaps it would be better to wait the market out and list your home at another time.

Here in lies the dilemma.

Do you test the waters, list on the high end, play catch up and run the risk of stigmatizing your property?

Do you list below your best competition and hope your home sells first?

Do you list at a fair market price and do everything possible to make your home shine?

Only you can answer those questions. Make sure the agent you are working with understands the market and is realistic...you don't need an unrealistic overly optimistic agent. You need sound market advice and an honest experienced REALTOR.

Pricing to sell is a must in New Hampshire.

Read everything you can, there are a lot of good New Hampshire real estate blogs full of excellent information available. Education and a good agent is the key to market success.

Jay and Monika McGillicuddy, Southern NH and the Seacoast area real estate specialists.

Jay and Monika McGillicuddy, covering southern NH and the Seacoast area. If you’re thinking of selling or buying a southern NH or Seacoast area home give us a call…we’d love to help make your home ownership dreams come true.

E-mail Jay and Monika or call or text at 603-548-7728

Jay and Monika McGillicuddy, NH REALTORS

Prudential Verani Realty

603-944-9172 direct line

603-926-3648 office

Posted by Monika McGillicuddy Southern NH & the Seacoast Area on 08/02/2007 11:45 AM

Comments (51)

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51 Comments on How did you come up with that price...anyway?

AUG

2007

Listing a property in a down market can be a little tricky. Very important to look at what's on the market and how long they have been listed as this will help set the tone for where you should be priced.

Thanks for the good thoughts about pricing. Here in our Bradenton - Sarasota, Florida market it is not uncommon to see the Active Listings priced below the most recent Solds. I also know that many of those Active Listings are not going to sell. In fact, only about 3-4% of the Actives are selling in any given month.

As a friend of mine put it, "Pricing your home today is like throwing a dart at a dart board rolling down the street." Very tricky.

Hi Dan,

I think pricing is so difficult in this market. It seems like a never ending cycle...everything new comes on a little lower.

Jay,

You are 100% correct...agents need to look at the whole picture.

I guess it all comes down to your sellers. It sounds like you have a good handle on where the price needs to be to sell. The question you seem to have is what will the sellers think...

For me, when there isn't any good recent sold activity, and I have to use the currently active stuff, I look hard at how they compare. Then, I like to price in the lower 1/3 of those properties. If there are 10 properties on the market in the immediate area, I want to be in the bottom 3 on asking price. The others haven't sold for a reason, so there is no point in pricing where those are since those are still the dreaming prices.

Monika:

Interesting thoughts. Regarding listing prices, definitely put more emphasis on what properties sold for. The only thing listing prices are good for is to see where the market might be moving.

I am using active listings at this time and weighing them with more importance. With the market changing constantly, CMA's have to be updated every 60 days. So I think you are on the right track in determing value based on the competition.

I'm using solds, actives and pendings to tell the whole story! Great post.

You are so right. I have listings that are at or below the lowest point for the comp sold listings under 6 months and I'm getting feedback that they are still too high. I look at the market daily and see the price changes rolling out as more and more agents are seeing the trend and are dropping their list prices. This is something we need to be aware of when pricing the house for entry into the market as well as after they've been on the market for 30, 60 and 90 days.

Absolutely, you have to consider all data you can get. You have to compete with other homes on the market, so of course you have to consider the actuall asking prices too.

Great information! There is a lot of information out there that Realtor's have access to, and so important to compile all of the data and show seller's the true picture in their particular area. With so many listings, DOM's are becoming crucially vital when trying to determine a listing price. So many variables that make up the whole process, including,seller's time frame, and what the competition is doing.

I absolutly agree. You can't use the sold comps if nothing has sold. All to often people want to use the 'well my neighbors house sold lastyear for $$$"...ahh but that was lastyear...inventory wasn't as high. Do your Due Diligence as an agent, youll look better and more knowledgable when you do.

Hi Monika - I'm also putting more weight on the currents in this market than I have in the past. History & solds, as you said, are old, and they don't portray the market right now. I like how you spelled out the options - the answers to those questions will determine whether a property really should be on the market or not, in my opinion.

If sellers are not willing to be realistic regarding today's market, not last year's or even 2 months ago, but today, then I don't think they should have their house on the market. Those unrealistic expectations on price translate into unrealistic expectations on me as well - and that's not what I'm in this business for.

Good post!
Ann

A bad option

B definitely in todays market

C does not apply see answer B

Good post Monika! Some CMA's are very difficult and most cannot be done in the same way. That's why it's an art and not a science, right?

Thanks for the great read!! -Joe

Excellent post!! I have been sitting here for the past 1 1/2 hours trying to do a CMA for a particular home that the seller owes approx. $213. Comps are running around $200-$275 (no showings at the $275 home and the first words out of that agents mouth were "I know we're overpriced, but...

Anyways, I believe that my seller is going to hold off until he is able to get equity out of his home because an overpriced listing in this market is not the smartest thing in the world!!

Thanks for the post!

The market is very difficult and coming up with comps is difficult because of that as you point out. I try to stay in touch with a couple of appraiser to get their take on what is happening with prices. I think looking at the competitiion for a particular property is very helpful. It is important for the seller to actually "see" some of the competition. We will have to see how things progress in the next few months.

You are absolutely right! This is exactly what I am dealing with right now. A seller's property was on the market for 6 months, had over 70 showings but only one second showing and only one offer that fell through. Now they are interviewing new REALTORS. When I showed them all of the properties that sold during the past 6 months in their exact price range they think their property is better and should still be priced at the high end even though their property didn't sell! The average days on market is about 90...their's was on for 180. I told them to list about $20,000 below their last price. Even after years in the business it is so hard to understand a seller who is selling a vacant house that is costing them several thousand dollars a month yet they won't reduce the price. AHHHHHHH! Thanks for letting me vent:)

Excellent, excellent.

Pricing properties is one of the hardest skills in Realtordom. Some of us "get it" and some just never do. I rely on square feet and location for most estimates I make and it's usually right on with the appraiser.

But, it takes practice, practice, practice.

This is a must read for newer agents.

Monika,

You are soo right, have to look at the big picture in this market! Excellent post! :)

Monika,

Now more than ever the current listings are important because of the existing market conditions. I also agree that the days on market is a piece of information that should be considered. The problem is you do a good job putting all this data together but some sellers still don't get it.

Good info Monika. In my market right now a sold comp older than 30 days is almost worthless. I did an analysis earlier this week and could only find 2 solds for the year BUT I had 97 actives and only 1 pending!! Needless to say I had to take ALL of this into consideration and ended up pricing 15% below the most recent sale that was 3 months ago. I just hope I'm low enough!!!

Monika, this was an Excellent post. We must all continue to develop and refine the skill of pricing particularly as market conditions shift.

Monika - wonderful post. Great information. I am bookmarking and rating it a 5.

Nice post. I'm glad to hear someone say they have a difficult time coming up with the right price. In this constantly changing market its foolish to overprice and then chase a declining market. The best way to convince sellers is to show them everything that is priced near where they want to price and let them see how they compare.

Monika - great information! I once did the whole gamut to price a listing: active, pending and sold, and was told by my team leader that all I needed was 6 months of solds in the neighborhood. I like seeing the whole picture. I have never been told to check the DOM. This is an awesome tidbit! Thanks!

This is definitely a 5 post and a bookmark!

I think it is also important to look at the last year of solds and see what percentage prices have been coming down monthly. If your market is still in a downturn, it is extremely important to price a listing "ahead" of the market. If you price it this way, the home will have a higher chance of selling and quicker too. While you home is priced right, everyone else is reducing their prices and just trying to play catch-up. The last thing I want to do is see a neighbor reduced their home $20,000 and now my seller has to do the same to remain a competitor.

Hi Monika,

My theory is that in our market in Florida...the compa are irrelevant..homeowners still are still insisting to sell higher than actual value. It can get fustrating. I just listed a small condo last night and I refused to list it high..theywanted to list it higher than originally listed..but I soon talked them out of it and we priced it pretty well.

Monika this market has given even the experienced agents fits. What was good yesterday is not the right price today. Your outline offers insight into the process. Nice post.

Monica,

Great post - I think pricing right is important everywhere right now. I also have always used days on market, it's VERY important. I tell people to thank the overpriced sellers for "testing the market" for you, so you don't have to. You already know what it won't sell for and how long it will take to prove what it won't sell for. Solds are the reality and pendings and actives are an unknown FAIRYLAND.

Thanks for the rating =, +, -, tidbit! - I never thought of using that great idea.

I'm finding that pricing is so fluid here in the Hilton Head Real Estate market. We really are depending on current prices and as you know, that changes daily sometimes hourly.

Pricing is always a challenge. In this market it can be even more so.

AUG

2007

Pricing to sell is a must not only in New Hampshire, but everywhere else as well. Current market conditions must be taken into consideration as well as comparable sales. In a downturn, comparables may be too high.

Oh wow...34 comments! We're off for the day but I will get back to you all later on! Thank you so much for your comments.

Monika,

That is a great breakdown and explanation of a CMA and things for the sellers to consider.

Excellent post. I also use the expireds and withdrawn listings to see what has not sold. Pricing is difficult especially in a slower market. Like several comments have already said - it sometimes comes down to te seller's motivation.

I still do my CMA's from my appraiser experience background. Guess old habits are hard to break. :) Pricing can be difficult in this market, especially with sales a bit stagnent. Pricing high and then adjusting chasing the market down is never a good idea.

Doing a Market Analysis is a bit tricky. You have to be sure to way all of the variables. I hear to many people talking about this being a down market. This is a normal market. The last few years were an unusally active market brought on by investors moving their money from the Stock market to the real estate market for profit. The message that we have to deliver to our prospective sellers is that people are still buying good homes at a fair market value. The evidence in the Market Analysis will point out what is fair market value. We have no control over that one.

David Wakeman

I price my homes using the same techniques as Jennifer Kirby above. This will solve a lot of pricing problems and keep you ahead of the competition.

All the real estate Gurus? are suggesting pricing at least 10% below the sold comps......too bad the sellers don't read those. Sellers still know all the answers don't they?

Dick Beals

Monika,

I believe you have to know your farm area better than just looking at the statistics. Is the area changing from a transient community to a permanent residence community? How many investors own in the area? Is this a new community where everyone owes about the same? or Are there some owners who would have a lot more equity and be able to price their homes much lower than your listing? I agree with everyone in regards to sellers motivation being the deciding factor. One thing is for certain, it is getting difficult to decide when a home is listed at the right price, I guess you will only know once it sells.

Very nice piece. We still have appreciation, so it's a little different. But your teaching points here are great. I'm requiring a couple in office newbies to read.

AUG

2007

Yes, in my market some of the properties that have sold are extremely difficult to use for a CMA....creative financing, net sales, one listed for 65,000 but there were 2 lots sold together so the sold price looks like they paid 25,000 over the listed price.

Honest Agents that don't tell the sellers just what they want to hear, but the reality of the market, is very important. Thanks for the info.

Lane...It is all up to the sellers. I just hope I can give them solid information that will enable them to make the right decision.

Donna...I agree with your statement "I want to be in the bottom 3 on asking price. The others haven't sold for a reason, so there is no point in pricing where those are since those are still the dreaming prices."

Dreaming prices get us nowhere.

Bill...Sold prices are important but in my area they are old prices so we now need to put more emphasis on what properties are listed for.

Ann...I'm updating my CMA's every 2 weeks now...just to keep my finger on where the prices are at.

Kelly...Thank you so much. Telling the whole story is critical.

Andrew...In my area not only are we seeing price changes daily but incentives and bonuses being offered.

Axel...Thank you so much I agree with you 100%

Bruce...Oh yes the DOM's are crucial and telling the sellers the whole story even if that means they won't list is vital.

Liz...Due Diligence says it all!

Thanks so much Ann everyone needs to be realistic regarding today's market!

Randy...Thank you..there really aren't many options are there?

Hey Joe...I like your line "That's why it's an art and not a science" Right on!!

Karen...I think your giving your sellers the information they need to make the decision thats right for them. Like Joe said that is why it's an art and not a science.

Thank you Joan...we will see how it all shakes out ...hopefully the sellers and agents will keep their eyes open. This is an ever changing market for sure.

Diane...Wow 6 months and over 70 showings! You go ahead and vent as that has to be frustrating for everyone.

Thank you so much Lenn! Practice, practice, practice is right on!

Suzanne...The whole picture is the key. Thanks so much!

Jennifer..It is very frustrating when that happens. I guess you can't make people believe...but I'm at the point where I know I don't have to take the listing. It isn't easy thats for sure.

Bryant... Pretty sad when a 30 day old sold is worthless, that makes it so hard to price and do justice for our clients. Thanks Bryant.

AUG

2007

Lola...Absolutely we need to continue to develop and refine our skills! Thanks Lola.

Rosemary...Thank you so much!!!

George...Thanks so much. I spend so much time talking price with my sellers, giving them all the market data I have and tell them to drive by the competition...all to try and help them see the market through clear eyes and not their clouded ones. Short of taking them into the competition...I don't know what else to do!

Linda...Thank you so much! I'm glad my post was helpful to you.

Jennifer K ...Great way to put it "price a listing "ahead" of the market"...how very true.

Neal...Thanks so much I sure hope that Condo sells fast!

Gary...LOL I know many agents who are having Market Fits! This market adjustment is a pleasant experience for many.

Debie...I use the same line...the other sellers are "testing the market" for you...just look at the history...price reduction after price reduction.

Brenda and David...Fair Market and in many cases below fair market. But really ...who defines fair market? What a buyer is willing to pay and a seller is willing to sell for. Not us that is for sure.

Diane B....Hilton Head Real Estate market is much like the New Hampshire market.

Bob and Caroline...Challenging is right on!

Brian...Absolutely correct! Thank you!

Ray..Thanks so much. Sometimes it's hard to try and explain it all.

Michelle B...Sounds like you have it down!

Dick and Sandy...That is what makes our job so tough...making our clients understand.

Carmen...Sometimes it's just not the right time to sell...unless you really have to that is.

Thank you Chris!

Kathy..Honesty is the best policy...even when it hurts. I had a seller break into tears...they were losing 150,000!

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Monika McGillicuddy Southern NH & the Seacoast Area

Hampstead, NH

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Prudential Verani Realty/Hampstead

Address: 314 Lafayette Rd, Hampton, NH, 03842

Office Phone: (603) 327-0247

Cell Phone: (603) 944-9172

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This blog is all about real world real estate from market conditions to community information. It offers a personal perspective and an insider look at real estate, real estate agents and the services they offer. I not only list and sell for a living but I also train other agents on all aspects of real estate sales.

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