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Pricing Flaws
Let's talk about uncomfortable truths, and as I am typing this I know I am doing the right thing for any potential client - Manuel
Real estate agencies often rely on sales tactics and pressure maneuvers that as of today people can sniff from miles away. Many firms and agencies lack meaningful value and leave sellers wondering why they signed with such office.
I welcome you to please grab a coffee and enjoy the article that I am sharing out of personal experience.
Through my years as an investor, I share what I wish someone would have told me.
If I can ever serve you, let me know.
-I wish you dear reader joy and wealth, Manuel.
Conflicts of Interest
The only reason why we are touching on subjects that others do not want sellers to know is because we want the best for our clients, and we want to give our efforts to people who value us. I care about my clients and that includes having honest and difficult conversations.
There are three things you need for a successful sale, the right price, the correct exposure and agency.
Real estate agents are not able to come to terms in disclosing transparent information out of fear of losing a potential listing. Pricing is the root of all problems.
Agents out of fear of losing a client, or losing the chance to have their pretty face on a sign will resort to flawed strategies that enlarge the ego of their client and agrees with them. There are negative consequences to this.
Imagine that somehow your agents knows that your house has a market value (not price), of $290,000 and that it will take with 90% confidence 45 days to sell. This is good information to know because you have to account that property taxes accumulate so the longer it takes to sell the longer you'll pay. Or, if you have to move you can have the peace of mind of knowing how to plan the moving.
But instead, you show up and tell your agent that all this years your area has been growing and that you could sell your house without their help and that you will never take (net) less than $330,000.
At this point, after hearing you, the agent instead of presenting hard evidence, decides to say the most common lie: "We'll let the market decide".
You feel confident because you showed that agent how it gets done without even reviewing your competition, your turnover rate, expected days on market, expired listings and canceled listings (if you were investing without that information there is a high probability that you would either lose money or get it trapped in a house with no offers).
Overpricing Downspiral
Why we are different
At Baron Real Estate we are against these practices because we know the financial and emotional consequences that they have.
We have spent months refining pricing models and competition assessments that we have used to provide superior new construction homes with optimized prices and beat other builders with more financial resources than us.
Now we are extending these refined approaches to sellers to provide a more accurate pricing strategy.
Effects of mispricing
When a house enters the Multiple Listing Service as soon as a seller signs the documents. The house is actually fed automatically to all the brokerages. This is why For Sale By Owner's never succeed. Their property is not in the front of people that can afford, have the means to borrow and the will to close (that conversation is for another time).
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Agents with buyers that are registered at specific price ranges, will automatically receive a notification that your house is available, then they present the property to their clients.
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The question is, how can overpricing the house harm me?
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Usually, real estate agents and brokerages hold a private clientele of buyers. If your agent knows that your house should be priced at $290,000 but because of a lack of transparency and candor proceeds to list it at $330,000.
You are in for a rude awakening.
Product market misfit
By going through an agency you are exposing your house to the right audience. People who are ready, willing and able.
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The issue now is that your house at $330,000 is being shown to buyers with budgets between $320,000 and $340,000. They are priced at that for a reason, either because of the size of the house, size of the lot and subdivision average.
So when serious buyers between $320,000 and $340,000 are browsing those homes all of a sudden your house is on that price bracket but it cannot compete on that range!. Is either smaller, or is located in a different subdivision.
Then, after 5 months you reduce the price to $300,000 and close at $285,000. $5000 below what the agent knew.
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The question is: Why would the house close below the agent's expected value?
Fingerprints: House Activity Is Recorded
Days On Market
The fact that the house has been sitting for a long time in the market, can be indication of issues for buyers.
A property is at its hottest point of interest in the first 2 months. This is why we do not recomment overpricing a house because after 3 or 4 months it becomes a lemon. People are accustomed to see the house and it creates the following thought process for buyers.
Why is the house still on the market?
There's probably something wrong with it if its still available.
In reality, the house price history will always stay in the MLS. This is why we have these conversations with clients, we are not here to list a property and cause harm.
And this is also why an agency that is avoiding transparency will harm your property.
What Does That Look Like In Real Life?
A
B
Baron Real Estate
Other Agency
Listing A, is our listing and we advised the client that in order for the house to be a success at $285,000 condition would play a role. The house A, was slightly renovated, received 7 showings in the first week and one cash offer at $265,000 closing in 15 days.
The sellers decided to refuse the offer but the results showed right away, since the Months of Inventory is at 5 months, getting an offer in the first 30 days is a success.
Notice how Listing A has 721 views in less than a month while listing B has only 351 in 202 days. Observe how listing B made the mistake of overpricing by doing multiple reductions. That is something you do not want to do.
If you take a look at our listing, we did do a probabilistic study of the subdivision. Both homes are located in the same subdivision, but our client A, followed the strategy we layed out.
A problem that we saw in the subdivision was that too many homes were sold below the market average, so it brings values down, hence why there is a peak at $130 per square feet.
This is information that you cannot access since it is only available for licensed agencies.
Looking at the gaussian distribution, you can see why we have a peak at $130 per square feet. When the zip-code average is around $160.
$150 per square feet is located at precisely 1 sigma from the mean, which means that it is a premium, sellers decided to make the house stand out by doing light renovations.
Something, listing B did not do, and even began way up their listing making frequent price reductions and damaging the record of the property.
You see how these things make a big difference.
Now you are able to understand how when you work with individuals that do not have the means to bring out the correct data, and strategic knowledge, you end up wasting time, losing money and not doing the best for your property.
Thank you for reading. If you need a consultation please call us!
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I still have much more to share, but I have work to do, enjoy my other articles.
I care about your assets, and your home is your greatest investment. I look forward to help you reach your goals, Manuel Ramos Santos
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