How To Price Property In Any Market

One of the most important duties of a real estate agent is to properly price a property for sale. You must understand that there is no exact science to pricing property. Pricing a property is nothing more then an opinion of value based on the evaluation of market data.

Sellers rely on us to get this correct. Of course, all sellers want the highest price and surely you can help them achieve that. The art is to balance the highest price that they desire and the time frame that they hope to move. You may sometimes see a property sell for a very high price and come to find out that it took a full year to get that price. If you have a seller who wants that price yet only has 3 months to get a home sold, you have a dilemma. What do you tell them? Answer: Price and Time go Together. There is always more then one price for a property. The faster the seller wants to sell means the lower price they are likely to receive. If the seller has plenty of time then it is likely they will get a little more money. Once again, Price and Time go Together.

When presenting price, Sellers like to have options. Options allow the seller to participate in the pricing decision and feel that they have a say-so. It is nearly impossible to determine the exact price so it is to everyone’s advantage to come up with reasonable price range for the property. Once you read the CMA, you will be able to determine three price scenarios; low price/quick sale, average price/average time, above average price/above average time to sell. We label these prices as follows;

Price #1 The price it will take to sell in 2 months or less
Price #2 The price it will take to sell in 4 months or less
Price #3 The price it will take to sell in 6 months or less

In order to successfully price a property, the agent must understand the motivation of the seller. In order to understand the motivation of the seller, You Must Ask Questions!

Questions that Determine Motivation

• Why are you selling?

• What time frame are you hoping to have it sold?

• What price are you hoping to get?

• How did you arrive at that price?

• How much do you want to net in your pocket when selling the property?

• What condition is the property?

• How much do you owe on the property?

HINT: If the prospect answers all of your questions without hesitation, then that is a sign of motivation. If a prospect hesitates when you ask these questions, lookout, they may not be as motivated as you thought.

Once you ask the above questions, you should have a clear picture as to what the seller is hoping to accomplish. Do Not make the assumption that every seller wants the highest price. You will find in many cases that the seller is more concerned about how long the sale is going to take versus how much they the property will sell for. Again, Price and Time go Together.

Sample CMA

Property     Price        Bedrooms/Bath    Days on market    Date sold

102 River St.    $250,000    4/3*            126            2/12/07
563 Front St.    $235,000    4/3*            54            3/23/07
221 Small Dr.    $262,000    4/3*            201            2/21/07
123 Tea Dr.    $239,000    4/3*            41            3/13/07
974 Red St.    $251,000    4/3*            130            4/12/07
342 Blue St.    $263,000    4/3*            230            3/26/07

On the above example, it should be obvious that there are sales that fit in one of three categories,
1) Sold in 60 days or less.
2) Sold in 120 days or less.
3) Sold in 120 days or more.

*All examples used are assuming that the square feet of all properties are comparable.

Now that you have collected the data, it is time to get organized and build your presentation. Take the data and place into categories as such;

2 months or less        4 months or less        4 months or more
$235,000            $250,000            $262,000
$239,000            $251,000            $263,000

Next, calculate the average price for a home that has similar features, (bedrooms, baths, garage, square foot, etc…)

2 months or less        4 months or less        4 months or more
$237,000            $250,500            $262,500

Once this calculation is complete, the price range for the subject property is clear. In this example, if a seller wants to sell within 2 months then according to the latest market data, it would sell around $237,000. If the seller is okay with the property taking 4 months to sell then they would likely get around $250,500. And of course, if the seller is comfortable with taking 4 or more months to sell then they could likely realize around $262,500.

When presenting price scenarios, it is important that you help the prospect understand how you are arriving at these numbers. There are two ways to present price. One way is to tell them the price and hope they believe you and another way is to show them the data and the price will be obvious to them. Remember, prospects can argue with you yet they cannot argue with the facts.

It is important to understand that most sellers are concerned about what they will net in their pocket versus what they can sell for. It is critical to give them this information during the pricing presentation. By the way, go back and read the questions that you must ask to determine motivation and you will see that, ‘How much do you want to net in your pocket when selling the property?’ is one of the questions. It is helpful to understand what the prospect is hoping to accomplish prior to the presentation. Knowing what your prospect is looking to accomplish should not change the price you present yet may change the way you present it. In other words, if a seller wants to sell for $250,000 and have it sold in 30 days then you may want to take your time and explain that both are possible yet not likely together. Price and time go together and they will have to choose which is most important to them. On the other hand, if the seller says they want to sell in 2 months and $237,000 is what they want to sell for then go ahead and present it quickly and let them know how exciting it is that you are going to be able to help them reach their goals. Pricing is one of the most important parts of selling real estate.

The following is a sample worksheet that may be followed in order to determine sellers net proceeds.

Sellers Estimated Net Proceeds from Sale

This worksheet will only provide an estimate of the proceeds you will receive from the sale brought about by this contract. Only the closing agent (escrow agent or attorney) can provide the final estimate.

2 months or less     4 months or less      4 months or more
Purchase Price        $237,000        $250,500        $262,500
Deed Stamps        - $877            - $927            - $972
Deed Preparation    - $300            - $300            - $300
Termite Inspection    - $100            - $100            - $100
Broker Commission    - $14,220        - $15,030        - $15,750
Mortgage Pay off    - $0            - $0            - $0
Prorated Taxes    - $800            - $800            - $800
HOA            - $155            - $155            - $155
Misc. Fees        - $55            - $55            - $55

Estimated Net         $220,493        $233,133        $244,368

Now you have determined the estimated net proceeds that the seller would realize at different time frames.

2 months or less     4 months or less      4 months or more
$220,493        $233,133        $244,368

After you have thoroughly presented the price, timeframe and net proceeds data, it is time to ask the MOST IMPORTANT PRICING QUESTION EVER;

Mr. / Mrs. Seller, now that you have all of the information and you are clear on the price you will get and the time it will take, tell me, which one will work for you, 2 months, 4 months or more then 4 months?

The key to asking this question is to remain silent until they answer. After a little silence, they will choose the one that works for them and you then affirm that that is a great decision and move to the signing of the documents.

It is proven that in all selling situations you will be more successful if the prospect is given three options and the power to choose one. Once they choose one, based on the estimated net proceeds, they have also accepted the commission that you charge. Using this systematic approach to pricing property will immediately take you to the top as a successful real estate sales person.