Why Hire a Listing Agent When You Can Hire a Marketing Agent? Pt 2/2: Strike Price

Put yourself in the buyers shoes- which homes do you think all buyers want to see first?  Of course they want to see the best priced homes, they all do!  We want to make sure your initial list price will excite buyers strongly enough so we can generate multiple showings and multiple offers.  So how do we determine that “magic” number to see how deep those pockets really are?  One method is to look at Strike Price.  In short, Strike Price is the listing price that is currentlygenerating acceptable offers.

Read Part 1: Positioning and Overpricing

Many agents, websites and tools will offer free COMPS for your home- we’ve all heard about them, but what do they really mean?  A COMP is a comparable home with similar characteristics showing the price they are listed, sold or under contract for.  This report is easy to pull up using modern technology and data.  It will show properties in the area currently On the Market.  I prefer to call these “Homes that Are NOT Selling”.  It will also show homes that have recently sold, revealing what buyers actually paid.   While these COMP Reports show good data, they are simply just numbers- there still needs to be a way to interpret them.  What do these numbers tell you and how do you execute a strategy based on them-that’s the whole reason were looking at them, right?

Side note that’s worth mentioning- the key here is to be similar in build, condition and location.  Comparing a walk-out-ranch to a 1970’s split-level home is not ideal, nor a Victorian home to a California Contemporary.   What was the condition of the home when it sold, were there concessions made?  Is one home backing to green space or on a busy road?  What the difference in a 1 car garage vs a 2 car?  Many times there aren’t homes exactly like yours, so we make adjustments to prices- too much information to get into here, but that is an important step.  To make it easy lets pretend were looking at a community of townhomes or new builds that are extremely similar.

Often times I think there is too much emphasis on the Recently Solds for a property, especially in this appreciating market.  While it is a good starting point, I can argue that the Under Contracts and Homes That Are NOT Selling are more impactful to the Strike Pricebetter reflecting the market TODAY.   It can change from week to week, month to month, and there may be more or less demand now than those than 3 months ago.

COMPS for 100 Neighbor St

comps table

Above is a sample Comparable rundown for a home at 100 Neighbor St. The Recently Solds show 5 comparable homes that sold close to you over the last 4-6 months.  If you were to only look at these, it would seem the average home price is $410k.  The under contracts show similar homes and what list prices generated an offer (keep in mind, these homes may sell for less than list price or above!)  While we don’t know what these homes are under contract for, we DO know they represent an acceptable Strike Price– the market obviously valued them at these numbers, so it’s safe to say a home in similar condition and will go under contract in this range.  The homes currently on the market show the homes that are listed too high (“Homes That Are NOT Selling”).  We know the list price on these do not work otherwise they would be under contract and contribute to the strike price.  They will eventually either accept a low-ball offer, or reduce their listing price to get interest back.

So you’re looking at that $440k Recently Sold, decide you want to push the market and list your home at 450k.  It seems like a warrantable number, plus your right in the middle of the other homes on the market.  Well, at this price you are “just another home on the market” compared to the homes that are not selling.  That sounds like a ticket to land in the Currently On the Market column and be a “Homes That Are NOT Selling”.  After reading the article on positioning/overpricing, you don’t want to be in that crowd do you?

The market shows the next property priced near the Strike Price of 415k-420k will probably be the next to sell.  Let’s use those overpriced homes to our advantage and create value with our pricing.  Wouldn’t you like to be the next to sell?

Under this scenario, I would strongly suggest a list price closer to the Strike Price.  In doing so we will effectively under-cut the competition in a price range we know is generating offers and (if warranted) over asking.  This is best way to ensure we are getting the market to bear what it thinks your home is worth.  Again, as stated in my other article, you and I do not set the price your home sells at- the market does!  Let’s go in at 425k.  That home listed at 430k isn’t in great condition, whereas we have made all of the strategic updates and in excellent condition.   If executed correctly getting $440k like the other Recently Sold isn’t out of the question.  Our strategy to achieve these results is sound.

Here we have created value by using the market to our advantage and stand to gain substantially more money versus listing compared to “Recently Solds”.  In turn, we can feel comfortable that we executed a strategy for the market to bear the most it can.  That, my friend, is how strike price works.

-Andrew Ford

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