An Exercise in Competitive Market Analysis

by MAR Staff | Jun 26, 2012

By Paula K Savard, ABR, CRB, CRS, GRI, EPRO, DSA       

In order to obtain listings, REALTORS® assist property owners in pricing the property for offering to the marketplace.

The process requires the practitioner to focus on the local real estate market for the last six months in order to compare sold properties as they relate in style, square footage of living area, and age of the subject property i.e.  Ranches with ranches,(single level) Capes with Capes,(1 ½ story with 1 ½ story) Colonials with Colonials, (2 ½ story with 2 ½ story).

 This focus is BEFORE meeting with the homeowner and again after the first walkthrough.  New agents will invariably tell their broker, manager or coach , “There are no comps. The answer isn’t immediately jumping off the computer screen.  What is the number I should use for a list price?”

Setting the Price
The seller sets the price. The practitioner is an advisor and counselor who helps the client understand and authorize the price.  Preparation for an appointment with a seller for a listing consultation is necessary for several reasons.  The price range is the primary information the property owner seeks in allowing you to meet with them.  Build you consultation around the price range, stressing a range, not a number.

Because real estate licensees are NOT appraisers, a formula for Market Analysis that requires the least adjustment or personal opinion is most affective for establishing a price range. The range should be exact to which, if marketed consistently and effectively for the average time indicated by the market for that style, price and age, the property will sell.

Property owners misunderstand the service we provide in setting the price range and will invariable get on the phone or email, once the licensee has left, and tell family or friend the REALTOR® did an “appraisal “ and said the property was worth-----X.  This number is invariably the highest number they saw in the range and the number imbedded in their mind. It is the unrealistic bar the marketing manager is expected to realize in an acceptable offer.

Educating the Seller on Market Conditions
In the last several years, time on the market has increased dramatically because of the declining market prices.  Yet the property owner always wants to start at the top of the range.  The old adage “I can always come down” is lethal in a declining market and only adds market time and diminishes the final price realized.  

In a declining market, the seller who starts high is following the decline, and they believe the practitioner is talking to the wrong prospects during the process because the inquiries are coming from people who hope to buy more for less having searched a range in all the internet sites that offer properties for sale.

The buyer who searches a price range and gets many, many offerings, has no need to go into the realm of “more than they really want to pay” in order to find properties to view.  Therefore, the property owner whose home is priced to follow the decline in the market, rather than being ahead of it, never gets to talk to the right buyers.

And so, you have focused on the market, established a range, within which, if marketed consistently and effectively, the property will sell. You are now prepared to counsel and consult with the property owner regarding the price they should authorize for the listing agreement.