There are many tools, websites and people out there that will attempt to tell you how much your home will sell for. The fact is, nobody actually knows that number. The simple answer is “A home is worth the price at which buyer is willing to buy and a seller is willing to sell;” therefore, you and I do not determine what you home sells for- the market decides. Todays market is in fact a sellers market because demand is so high, so how does one capitalize on that market to squeeze the most equity and best terms out of a deal?

The answer is in simple, with proven marketing techniques executed by knowledgeable agents. You may have heard the terms “positioning” and “strike price” back in school and ask how that applies to real estate. The name of the game here is to drive demand- if you remember nothing else from this article remember that the goal is to have the most demand and leverage that demand to bring the best deals. Here I will show you how we use some techniques to drive demand for you home and, in turn, create the most energy with ready, willing and able buyers.

Positioning

This is a graph I keep in my notes (excuse my small handwriting) depicting the traffic that will preview you home in the first 21 days on the market. We will see the heaviest traffic when your home is first introduced to the marketplace and have created a perception of value. As you can see, in the first few days we get our ready, willing and able buyers. They are educated, pre approved for a loan, seen all of the inventory and probably have lost other homes in multiple offer situations. These are the people who are ready to step up to the plate and these are the people we want to bite!

After the first week, if none of the ready, willing and able buyers perceived enough value to make an offer, they have since moved on and the people who are looking at the home now are people simply wanting to buy or “lookie-lous”. Traffic tapers off and we have lost a sense of urgency. No Bueno.

By the third week showings have dropped dramatically, and generally the people coming in are people just entering the market and not ready to make a decision. Also, very no Bueno.

This is the typical life of a home that was priced too aggressively or was lacking in condition and shows how this mistake can cost dearly. All of the ready willing and able buyers have since moved on, most of the “lookie-lous” will eventually move on as well to the new inventory coming on the market. Any knowledgeable agent representing a buyer is probably not going to suggest offering a full-price offer either. So, the only way to attract a new wave of buyers is to A) re position the listing price (loosing money) or B) update the condition (costing money). Both obviously taking away from your net equity.

So, the question is here, how do we set the right price? Priced right and ready to show, your home hits the market as a hot property, and more buyers will be interested. Good news for you! Remember, we want demand to generate multiple offers, which we can then leverage to put you in the drivers seat and see how deep those pockets really are.

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 hopefully produce multiple offers. We call this the strike price.

Many agents, websites and tools will offer free comps for you home- we’ve all heard about them, but what do they really mean? A “comp” is a home with similar characteristics as yours showing the price

they are either listed at, sold for or under contract for. Well first take a look at properties similar to yours in the area currently on the market that are not selling and then homes that have recently sold revealing what buyers have actually paid. Keep in mind, the key here is to be similar in condition and location.

Often times, there is too much emphasis on the “recently solds” for a property. While it is a good starting point, it can be argued that the “under contracts” and “currently on the markets” are more important to the strike price. The market can change from week to week, month to month, and there may be more or less demand now than those comps that sold 3 months ago.

The recently solds allow us to see the price and terms of homes that sold similar to yours with comparable location and condition. If one were to list based on this valuation, they would be looking at a 410k listing price. The under contracts show what list prices generated an offer (keep in mind, these homes may sell for less than list price!) However, these are good indicators of an acceptable strike price. The homes currently on the market show the homes that are listed too high, and we know the list price on these do not work otherwise they would be under contracts.

So you may think you want to list your home at 460k. Well, at this price you are just another home on the market, compared to the homes that are not selling. After seeing the illustration on positioning, you don’t want to be in that crowd do you? The market shows the next property priced near the strike price will probably be the next to sell. Lets 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. Lets be the first below the homes currently on the market- go in at 425k, or maybe push it a little bit and go 429k. That home listed at 430k isn’t in great condition, so when we get on the market. Here we have created value by using the market to our advantage and stand to gain an extra 15k versus listing compared to recently solds. That, my friend, is how strike price works.

Andrew Ford
Luxury Real Estate Properties in the Greater Denver, Colorado Area

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