Most agents continue to use the same pricing approaches that the industry did 50 years ago
- People searching for homes priced at $500,000 to $550,000 will never see your $499,999 listing.
The rules of pricing properties are changing, yet most agents continue to use the same pricing approaches that the industry did 50 years ago. Are you making this costly mistake on your listings? A constant topic of conversation on my company’s group coaching calls is how to price properties correctly. A few days ago, I spent some time working with an agent who had landed a prime listing in one of the nation’s hottest downtown historical areas. The listing was priced at $849,900, was beautifully staged and had only been on the market for seven days, which is the average market time for this area. The other experienced agents had convinced the listing agent that she should ask the sellers for a price reduction because the property next door had just come on the market for $799,000. The agent was also concerned that the area might be peaking and that additional interest rate increases could result in declining values. After reviewing the comparable sales as well as the new predictive analytics tools for pricing listings, I recommended that she increase the list price rather than lower it. Here’s why.
A justified price bumpThe row houses in this area are predominantly two bedrooms, with one full bath upstairs and a half-bath downstairs. This was the case for the $799,000 listing next door to the subject property. In contrast, this agent’s listing was a three-bedroom, two-and-a-half bath with parking, a rarity in this area where most residents fight for a space on the street. Clearly, the $50,000 price differential was more than justified. When I checked the price on Weiss Analytics (an artificial intelligence solution that uses hundreds of factors to price properties, not just MLS and public records) plus the Zillow comps, they were all greater than the current list price. Furthermore, Redfin’s algorithm put the probability of the property selling in the next four days at 70 percent at the current price. The Weiss Analytics tool also predicted that this property would increase by 3 percent this year. Furthermore, because of the re-gentrification going on in this area, the property was predicted to outperform the overall market area by 5 to 8 percent over the next five years. While all the facts above do matter, there was one even more important reason for increasing the price. It’s a major pricing error that thousands of agents make daily.
A small but costly mistakeTo understand the exact nature of this mistake, I searched Austin homes for sale on realtor.com with no price parameters. The following prices came up for the top ten new listings:
A new pricing strategyThe agent I spoke with had made a $100 pricing error by pricing her listing at $849,900. The reason becomes obvious if you go to realtor.com on your mobile device and look at the pricing parameters it gives you for a search. Here’s what I pulled up: