Pricing is always tricky when it comes to real estate.  It gets especially tricky, however, when the market is shifting.  The market velocity (how fast properties move) and slope of its appreciation (how quickly prices are increasing) are definitely on the move, and that means how sellers price their property is critical. Here a few insights you should know about.

Let’s get a few basic concepts out of the way first:

  1. Closed transactions are always a lagging indicator. In other words, properties that closed just yesterday represent an accepted offer that likely occurred 3 months ago or more. They also represent an initial pricing that’s 4-6 months old, which was derived from a full comps analysis of the market at that time … which, itself, was based on lagging closed transactions.
  2. In an up market, closed transactions will always underestimate the value of your property. Because of this lagging effect, transactions from the past will be priced lower as the market keeps appreciating.
  3. In a down market, closed transactions will always overestimate the value of your property. As a great example, in 2009, looking at 2008 comps was pointless, as the market had already shifted downward significantly. So seller’s brokers and appraisers, alike, had to revise those comps down to account for this shift.

What this ultimately means is that during a market that’s at an inflection point, as ours is right now, there’s a lot more analysis and strategy involved in the pricing equation.   This also means that insights reflective of today’s dynamics won’t show up in the data until months from now.

So what’s a seller to do?

  • Don’t just look at comps to price your apartment. Savvy brokers know to also consider active and in-contract listings as they look to set the right price in today’s environment.
  • Know which segment you’re in.   We often talk of “the market” as if it’s one, big, homogenous blob. But it’s not – it’s made up of sub-markets of price-points, each with their own dynamics – sometimes interrelated, sometimes completely independent of one another.  Knowing your sub-market’s dynamics is critical to being able to sell in it.  If you don’t know which segment you lie within, call us.  We would be happy to help you navigate the market  to help you facilitate the best possible return on your most important asset – your home.

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