Helpful Real Estate Blog

I completely agree with those economists-analysts who find out it quite difficult to quote a home-price in conditions of volatile market. If some years ago it was enough just to have a look at your neighbor’s house-price and to add or cut a certain sum, nowadays as the housing market is slowing this strategy practically doesn’t work. So homeowners are at a loss about what price to establish on their houses.
 

In order to attract new buyers real-estate agents have to offer rebates on closing costs or outright discounts to their clients. While single home-sellers have to resort to different unusual strategies for charging prices because traditional pricing sources (such as Web sites that list comparable home sales and appraisal from real-estate agents) are not more acceptable in the circumstances of fickle market.
 

Among the most often used strategies of marking a price I’d like to mention the following:
 

1) Setting a Range. This strategy means that instead of establishing fixed price homeowners set price bounds within which they want to sell their houses. And then they consider offers from buyers and choose the most preferable one. Many brokers often use price ranges. Homebuyers usually offer a price near of below the low end of the range, and home-sellers accept the highest price from proposed. I compare this approach with a tender or auction, when you settle on an asking range and buyers begin bidding war.
 

This strategy is also known as “value range pricing”. It appeared initially in Australia in the early 1990s and was adopted by some California brokers afterward. Range pricing strategy is used by some real-estate agents throughout the USA, but it’s not widely practiced.
 

This approach is used, for instance, by Carlton Lund, a broker in Carlsbad, Calif., who proposes a spread of between 10% and 12% and says that the greater part of the homes he works with are sold at the higher end of the range. Thus he regards this strategy as quite convenient and advantageous.
 

But a professor at Florida Atlantic University and co-author of a related study published last August in the Journal of Real Estate Finance and Economics, Marcus Allen, has another point of view on this strategy. He calls it “a novelty pricing strategy” and point out that using a range increases the duration of selling a home by 5% and don’t affect final price.
 

2) Slashing Early. When choosing this strategy homeowners name a price and cut it in few weeks. Cutting the price is a common practice used by many real-estate agents. Sellers usually make a reduction in 30 or 45 days after the first charging of a price. According to Rob Cohen, a real-estate broker in Boston, this approach is quite acceptable and especially in the circumstances of slowing market, when price is often a moving target. He usually marks a price at or below market and hold for a while.
As for me I consider this strategy as rather acceptable for those who want to sell their homes at the highest prices. Thus, they should determine a price at such a high level at which they would like to sell their property and then just observe the respond of buyers. If buyers don’t accept such a high price they always can cut it, but while setting as high price as they like sellers have a chance to get the best possible deal.
 

3) Slashing Often. This strategy differs from the foregoing by the number of making reductions. While that approach stipulate cutting the price granted on one occasion only, “slashing often” strategy implies as many reductions as you like until you reach the lowest price you can afford to sell.
I think that in the volatile market this strategy is especially good.
 

4) Playing With Blocks. This approach envisages setting a price in accordance with the blocks in which buyers are distinguished.
The National Association of Realtors carried out investigations last year that revealed that eight out of 10 buyers begin their home search online and look for homes only within price bounds that they enter into search engines.
 

Melinda Noel, Houston real-estate broker, classified buyers into following blocks:
·        those who tend to look in $20,000 to $25,000 increments for homes under $500,000;
·        those who look in $50,000 increments for homes between $500,000 and $1                          million;
·        those who look in $250,000 increments for houses over $1 million.
Thus she suggests sellers to quote a price at the top of a break point and then if the buyers don’t respond to cut a whole notch – for example from $749,000 to $699,000.
 

I think that the main advantage of such naming a price is taking into account tendencies in buyer’s behavior.
 

Thus according to the existing approaches while setting a price on your property you can start with high price and cut the figure every few weeks, drop the price to a different bracket or give a range of numbers rather than one fix figure. So you can choose any strategy at your discretion.

This entry was posted on Wednesday, July 12th, 2006 at 12:54 pm and is filed under Real estate market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.