Thursday, July 16, 2009

Proper Pricing

“My price may be on the high side, but bring me an offer!”

Calgary has an average 98% list to sell ratio. Last month over 8000 homes did not sell; The homes that sold were priced favourably to the buyer. The Crowsnest Pass has similar stats. Buyers don’t need to look at overpriced properties.

Serious buyers look in the price range that has been predetermined by their down payment and monthly payment ability. Unless your property is priced correctly, the down payment and monthly payment requirements will not be competitive.

A buyer, who is genuinely looking, soon becomes very knowledgeable in his range. An unreasonable asking price only discourages him from looking and considering your property.

Buyers purchase by comparison, and a property priced above the competition does not "compare" favourably. Inviting a buyer to make an offer usually indicates that a fair price has not been established.

It is very difficult to obtain a reasonable offer on an overpriced property. The buyer feels he should be just as unreasonable in his offer as the seller in his asking price.

It is a mistake to believe that you will get more for a property by asking more. You usually get less, because fewer buyers will consider it when it is placed on the market. The right buyers will not see it, and it usually stays on the market so long that it tends to become "shop worn."

Modern Pricing Technologies Used by Appraisers
and Consultants to Price Properties in Alberta

1. Realtors have no control over the market, only the marketing plan.

2. Pricing in rising and falling markets:
- Overpricing in a rising market may be okay;
- Overpricing in a falling market is disastrous.
Market trend is as important as pricing. Know your market trends

3. Four kinds of numbers are used to represent your property:
A. Cost: what was paid plus capital improvements
B. Price: what the seller wants
C. Value: what a buyer is willing to pay
D. Market Value: what a willing buyer and seller will agree upon

4. Regression and progression:
A. Regression - the phenomenon of an expensive house being decreased in value because of the lesser desirable homes around it.
B. Progression - the phenomenon of a home selling for more than its worth because of having more expensive property or a more desirable area around it.

5. Substitution:
The value of an amenity is based upon what it will produce not what it will cost.

6. Reasons for overpricing:
A. Over-improvement: a seller cannot select an over-improvement, enjoy it and expect the buyer to pay the original cost of it.
B. Need: the need for money does not increase the value!
C. Buying in a higher priced area does not increase the value of your property.
D. Paying too high on the original purchase does not increase the value.
E. Lacking factual comps does not increase the value.
F. Providing bargaining room does not increase the value.
G. The high cost of a move does not increase value.
H. My tax assessment came in at $__________. All homes usually sell for way more than the tax assessment in the Crowsnest Pass.

7. The largest impression and most impact a property makes on the market upon buyers and upon agents is in the first few weeks of the listing. Therefore, it should show the best and be priced the best during those weeks.

8. Benefits to Proper Pricing:
A. Faster sale, which will save carrying costs and surety of close, has value.
B. Fewer inconveniences
C. Exposure to more prospects, and therefore more offers
D. Increased cooperative salesperson response and promotion
E. Better response from advertising the features and benefits of the properties
F. Attracts higher offers, which….
G. Means more money to sellers

These pricing strategies were prepared for you because they sometimes are a roadblock between you and your goals. My job is to identify these potential pitfalls and help eliminate them.

John Prince, Alberta licensed real estate agent, CENTURY 21 'THE PROFESSIONALS LTD.' (Crowsnest Pass Real Estate). Serving the Crowsnest Pass and area. Call me directly at 403-564-4518 or by email at:

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