This past fall in Dallas saw the market slow markedly and inventory rise as homes sat through entire listings without selling. Though I do not believe the slow down is permanent, rather more like it was catching its breath before a big spring, I did notice that a lot of agents neglected a key element when pricing their listings.
Any agent can do a quick CMA on a property to determine a range of values in an area or subdivision with comparable homes. Unfortunately, however, it appears that too many agents stop at the CMA and do not price according to the CMA and the competition currently on the market.
In a strong market, pricing according to the competition is less important as the best homes simply get snatched up quicker, but there are plenty of buyers for the ones that are a little over-priced or are not as nice in terms of location, maintenance and appeal. But when the market is more soft and becomes a buyer's market, it is essential to price according to what you are competing against and I am at a loss to explain the amount of listings I have seen recently that seem to ignore this concept.
The best way I know to both properly price a new listing and to show your client(s) your expertise is to schedule a preview of comparable homes in their area and take your clients with you. This forces them to more objectively view the sale of their home and gives them an understanding of the market in their area and what price their property is likely to command. It also shows them the potential impact of an immaculately maintained property during a listing versus a property that is not clean or properly staged. After this previewing session, you should then sit down with your client(s) and determine where their home fits in the competition. If it is far and away the nicest one available then you can price a bit above the competition as long as it stays within the reasonable range of your CMA. If it is somewhere in the middle of the competition, then you need to encourage them to price it below the competition to encourage a buyer to purchase rather than continue looking. If, however, it is one of the worst properties on the market, you either need to counsel them to update the home before listing or explain that a list price substantially below the competition to attract a buyer who will be willing to invest the time and money to renovate the home to a level similar to other homes in the market.
Either way, if you are a managing broker, please make sure to explain the pricing process with your new agents as it appears that many are not fully understanding that numbers pulled from the local MLS do not always explain the full story of where a property should be priced. If you are a veteran agent, try to always make time for viewing the competition (even if you can't do it with the client(s)) instead of taking the shortcut and hoping that the average price per square foot in the area will work for this particular listing.
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