In my opinion, Sellers need to focus on 3 pricing considerations in order to market their property effectively in today’s real estate environment. Following is a brief summary on each of these pricing components.
1. Valuation. The first pricing component is the traditional methodology of establishing, to the best of our ability, the fair market value of a property based on a comparison of like properties that have recently sold, adjusted for size, quality of finish, age, location and any other special amenities. Reviewing and comparing “sold” properties is the best indicator of what the market is telling us, i.e. what have willing buyers and willing sellers actually agreed upon with respect to value for properties similar to your property?
2. Key Active Competition. Particularly in a buyer’s market, like the market we have now, pricing needs to be set not just according to similar properties that have sold, but also those active on the market today. It is critical to identify key competitors in the marketplace that would most likely be shown to an interested buyer who would also be looking at your property. It is important to “think like a buyer” and make sure your value is better than the competitors. Some Sellers think that this is not an important issue because they know that they may be willing to negotiate deeper than the competition off the pricing. But, the reality is, what we see in this market is that assuming similar property characteristics and location, Buyers are going to make their first offer on the home that is best valued.
3. Price Point Management. Key price points and how buyers search for the properties they want to see is a critical consideration in pricing. This is a separate issue from valuation and is important because buyers give their Realtors price parameters that they need to stay within. As an example, a buyer might say “I only want to look at homes between $300,000 and $400,000.” If your property is priced at $410,000 it is entirely probable that the buyer will never know of the existence of your home. As another example, our MLS databank this week shows that in the last twelve months, in the category of residential property sold in La Plata County, 34 homes sold in the range of $600,000 to $700,000. In contrast, only 12 homes sold in the range of $700,001 to $800,000, i.e. there were 34 potential buyers in the lower price point, while only 12 in the higher price point, a significant difference when trying to attract as much attention as possible to a property. The point of price point management is to make adjustments to valuation in order to come within the closest, most attractive and likely price points that a buyer will search in order to look at your property.
If you have any questions, please do not hesitate to call me. You can reach me, Don Ricedorff, at The Wells Group 970-375-7014, don@frontier.net, or at my website at durangorealproperty.com.
Don Ricedorff is a licensed real estate broker in the State of Colorado, with 18+ years of experience, and he resides in Durango Colorado.He has numerous real estate designations, which have provided him with an unparalleled education to assist his clients. The designations include:
CRS, Certified Residential Specialist
CRB, Certified Residential Broker
CCIM, Certified Commercial Investment Member
CDPE, Certified Distressed Property Expert
ABR, Accredited Buyer Representation
GRI, Graduate of Realtor Institute
RSPS, Resort and Second Home Property Specialist
CIPS, Certified International Property Specialist
SRES, Senior Real Estate Specialist
He is also an active volunteer in the community and his church. His highest aspiration is spending time with his wife, Janet, and his three children Kelly, Katie, and Kyle. His other interests include playing tennis, fly fishing, hiking, boating, and water skiing.
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