A ‘three-pronged’ approach to determining a price range

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Realtor.Rock is a bi-monthly column where local Realtors share their expertise on real estate matters.

This week’s interview is with Josh Ryan, a residential Realtor with Dickerson Nieman Realtors.

Josh can be reached at (815) 381-1200, by e-mail to joshr@dickersonneiman.com or through his Web site at WinnebagoCountyMLS.net.

What do you think is the biggest mistake smart people make when selling real estate?

Pricing! Despite the age-old real estate mantra “location-location-location,” I find price to be the most important controllable factor; after all, location can’t be changed. In my experience, there are essentially four factors that determine a sale: location, condition, show-ability and price. That’s not to say that lowest price is best—far from it. Pricing too low can leave too much cash on the table, but pricing too high will stagnate a potentially good sale.

Read any book designed to educate Realtors about pricing property, and you will find at least one common thread: most of them will only use “comparable sold and closed sales data” to determine a viable price range.

Isn’t the “sold and closed data” the most important information?

Yes, without a doubt, but there are more factors to consider. I use a three-pronged approach to determine a price range. Of course, I still use sold and closed sales data, and I give a necessary amount of weight to it. I also take into consideration the prices of homes that are for sale now and what the average appreciation has been in that geographic area.

Using the “active and available” list and incorporating the appreciation data can be tricky. An agent has to be careful in how they compute this data. Market conditions change constantly. Just because a seller is asking $100,000 doesn’t mean the home is worth $100,000.

How do you factor in overpriced listings or a change in the market?

Sometimes I don’t factor it in. I can’t. When a comparable home is for sale, but obviously overpriced, I can’t use it. I have to exclude it; and there are always overpriced homes on the market! When a potential buyer goes home shopping, they certainly don’t look at just one house. They look at every house that makes sense. They look at all of the homes that are comparable in location, style and price. So how can the competition not matter?

Factoring in the appreciation can be really tough, especially in today’s market. As an agent, I have to know the market conditions cold. Our Multiple Listing Service computes the area appreciation based on the prior year’s sales data. It’s a nice feature, and not every MLS system offers it in such a nice, easy format. But because of the way things have been changing in the market, seemingly every day, you have to use more than just the broad strokes of year-to-year data. Every time I research a property for pricing, I have to scour any information that I can find to determine a reasonable estimate of appreciation. Most often, the MLS is accurate; sometimes dead on—but I need to be sure.

How has this pricing strategy worked for you?

I think it’s worked well. I haven’t always used this system. Previously, I used only comparable sold and closed data, like most of the industry. Once I started using the three-pronged approach, things have changed. I tend to price homes a bit higher than before, and usually get the price, but that may have to do with the only other factor involved that we can control—show-ability, or how the home is presented.

As one of the factors that the seller can control, what is presentation?

When I first started as a Realtor, in 1999, I would give very little consideration to the show-ability of a home. If it didn’t look good, I would just encourage a lower price. In my opinion, the days of selling a home “as-is” are gone. It just leaves too much cash on the table, and not in the seller’s pocket. Home sellers need to make the shift from thinking they are selling their home to an attitude of marketing a product. And that product must be properly prepared and presented.

In today’s market, any home has increased competition because of the accessibility of listings on the Internet. According to the National Association of Realtors, 80 percent of today’s home buyers use the Internet in their property search. This means that with a few clicks of the mouse, any potential buyer can, almost instantly, see all the properties that match their search criteria. So it is critical that the photos on the MLS look great. Properly preparing a home makes it a more enticing and desirable property. That translates into more traffic, more showings, and, usually, a faster and more profitable sale.

James Frazier is the owner of A Defined Design-Professional Home Staging Service. He can be reached at 815-997-3212 or through his Web site at www.adefineddesign.com.

from the April 18-24, 2007, issue

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