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Division of NAR
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This is a SAMPLE article
for
submission to real estate editors of
newspapers and magazines, condensed
from the latest book by Kerry D.
Bodily, Published by Gabriel
Publications - Untold Secrets – How
the Real Estate Market Really Works
– Price/Value
Competitive pricing – the solution
to a volatile subject!
Imagine living in a home on a busy
street with a major train line just
beyond the back yard fence. People
really do live in these locations,
and even worse ones, by choice, but
why? We’ve all heard the real estate
adage, “location, location,
location,” but there are two things
much more important than location,
and they are price and value.
You see, in real estate especially,
buyers can only buy what they can
afford. But regardless of the
location, style, or attributes,
buyers should still receive maximum
value for the price they pay, and
we’ve all heard that value is in the
eye of the beholder. Sellers, on the
other hand, are focused on price,
i.e., their bottom line. Each,
however, typically determines price
and value from a totally different
and almost opposite perspective. In
a market as important as real
estate, people expect to implement a
standardized method, which could be
used by anyone, to determine the
price and value of a parcel of
property, regardless of their
perspective. Nothing is further from
reality. This problem needs to be
exposed and fixed.
For example, let us say that you’re
wearing your buyer’s hat. You’ve
hopped in your car, driven all over
town, and you’ve personally walked
through every viable property in
today’s market that meets your
particular needs and requirements.
After choosing the single piece of
property that best meets your needs,
you would want to determine its true
value. Then you would know whether
the asking price was too high
(forget it), too low (a steal), or
just right (perfect), before
deciding to enter the negotiating
stage. So how do you, the buyer,
determine its value? If the value is
in the eye of the beholder, you, the
buyer, would determine its intrinsic
value to you. After all, it is your
decision alone and you are the
person who would be living there.
Maybe you could consult with an
appraiser, a real estate agent, a
relative, or even your best friend,
but any answer would come from their
perspective, not yours.
If you have just viewed a dozen
properties, and you have evaluated
each, then those are today’s
competition. It’s not what sold
yesterday, or what recently sold up
the street, or what just sold three
blocks over, but it’s what’s on the
market today. “Today’s competition
determines today’s value.”
Now, let’s put on a seller’s hat and
take a walk through the immediate
neighborhood. Though buyers most
often drive, the seller can walk.
Why? If you’ve ever sold a home, or
talked to a real estate agent or
appraiser about how to value a
parcel to sell, the typical
explanation takes a wild and crazy
turn away from the buyer’s
perspective. The common answer,
passed down through the decades,
would sound like this: Find three
properties that have sold recently,
in your neighborhood, preferably
mirror images of yours, and even on
the same street, if possible.
Now those comparables, when
presented by a real estate agent to
a seller, along with a myriad of
statistics, market trends, charts,
graphs, and other non-conclusive
data, will ultimately suggest a
price range for the seller to choose
from. The typical seller will
usually choose the higher values
from the range. But does that sound
similar to how buyers value
properties? No. In fact, it’s
exactly the opposite! Sellers are
looking at properties from a market
that no longer exists, and buyers
are looking in today’s market at the
only choices they have.
Why should there be any difference
in how value is determined,
regardless of who is asking the
question or for what reason? All
logic says there is no difference,
but each half of the market (buyers
and sellers) determines price and
value from opposite sides of the
fence. Is there a problem here, and,
if so, is there a solution?
Signs that advertise Price Reduced
often create unintended difficulties
for the seller. The implication is
that the seller has finally realized
the property is overpriced, i.e.,
not priced competitively, and they
now want to adjust the price. These
reductions in price are often too
little and too late. When a new
property is added to the market,
most of the activity takes place in
the first few weeks. In real estate
circles, this is often referred to
as the window of opportunity. Buyers
and agents who are actively looking
in that area and price range will
often try to be first in the door.
If their first impression is “nice
house, but overpriced,” then they
move on and rarely look back.
However, agents will often appease
sellers and say, “Buyers can always
make an offer,” but most buyers
don’t want to negotiate with a
seller who has visions of grandeur.
The property would not have been
overpriced to begin with if the
seller had determined the value the
same way a typical buyer would,
i.e., from a competitive approach.
The real solution for the seller is
almost as simple as driving around
town or looking on the Internet and
identifying your viable competition.
Adjusting for differences and
determining your competitive market
value requires some simple tools,
which are slightly beyond the scope
of this article, but the first
challenge here is overcoming the
natural human trait of resistance to
change. As a seller, put on the
buyer’s hat and try looking at the
market through the buyer’s eyes,
even though this approach would be
foreign to most real estate agents
or appraisers. Competitive pricing
is the answer.
Kerry D. Bodily, author of “Untold
Secrets - How the Real Estate Market
Really Works - From a
Twenty-Five-Year Veteran,” real
estate instructor with several
professional designations,
award-winning software designer,
real estate board officer, Multiple
Listing Service advisor.
To reach the author directly, you
can email him at
kerry@kerrybodily.com.
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