How Competitive-Based Pricing Helps You Close A Deal Faster

As we begin to price property, it's important to understand the difference between comp-based pricing and competitive-based pricing.

Comp-based pricing is what REALTORS typically do when they do a CMA, they do a comp based pricing analysis. What they do is they look at properties that have sold three to six months ago, very similar to what an appraiser does. And normally in a typical market, that's very effective. But we're not in a typical market.

When you're doing that today, you could have an inherent flaw in your data. And here's what it is:

Back in April and May, all indications point to the fact that we probably hit our apex point of the market. Meaning that home sales were indicating at 23-26% appreciation rate compared to the year before. So that was the peak acceleration of our markets.

Since then, we've been moderating. And what that means is that people aren't getting 23-26% compared to a year ago. Now it's down to about 16.9%, still high, no doubt, but that number is going to float down. NAR predicts that number to be 10.5-11% by the time we get to the end of the year. Still strong appreciation, but we've gotta be careful when we're pricing.

So here's what we should be doing:

We should use competitive-based pricing. Meaning, we're looking at both pending transactions and active transactions. Now we know we don't have sold prices, but we do have pending prices.

And here's why pended prices are really, really strong right now compared to other times in our market. They're strong because on average people across the country are getting a little over 100%, probably that's going to moderate to about exactly 100% very soon.

So when we look at a pending price, we can pretty much guarantee that the home is sold in most cases or close to 100%. We don't need to wait for the sold to know what the sold data is probably going to indicate very strongly.

And that's where we can see where people may have come on the market under those other prices and pended. Or they may have done price reductions and pended. And it will show a more moderate market than we saw in the April, May, June market, where we had multiple offers, bidding up properties.

The level of multiple offers is coming down. The number of offers per transaction is coming down. So we need to be really watching active listings and pending listings. And also looking at the history of each listing.

If an active listing has been in the market for 20 or 30 days, that's an indication that they're overpriced and we should put a big question mark next to it.

When we look at a property that is pending in three days, we should say that it was priced right. When we look at a house that went pending after 45 days, we want to look at the history and say what happened? Ah, they had a price reduction 10 days before they got their offer, where they had a price reduction two days prior to getting that offer.

Those are the things that will really open up the conversation with sellers and help them price competitively and not just comparatively. Hope that helps you today.

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