Real estate pricing is a vast subject with a girth wider than I could ever hope to cover in a single real estate blog post. A good Realtor typically does hours of research and testing before making a recommendation for placement within the current market.
The basics of real estate pricing are to place your home listing in a category where it will attract the largest number of buyers. More buyers, more exposure, more opportunities for sale.
Let’s look at trends and pricing gaps. A trend would be a group of listings that are clustered tightly around a price point. For example, there may be a cluster of homes at the $900,000 mark, or several priced at $899,900.
Real estate search engines tend to default to “lowest to highest” price, or will reorganize to “highest to lowest”. To appear first in line you need to either be at the top or the bottom of the cluster relative to how prices are displayed.
If your targeted cluster is $900,000, to price at the bottom of the cluster you could go to the lowest priced listing in the $900,000 range and price slightly below that listing. This is advantageous especially for condo buildings where there are many listings showing under the same address. You would also cross reference the strategic price within the address search functions.
For example, we might see the bulk of prices in the $900,000 range at $899,900, and perhaps a few at $898,900. To appear at the top of the list in ascending order you would place your property slightly below the lowest price at $898,800.
To find pricing gaps we look at the market as a whole in your geographical area. Identifying a neighbourhood pricing trend of $900,000 could be followed by further qualifying gaps. Perhaps there is a large bulk of listings at $899,900 but absolutely no other listings up until another cluster at $914,900. In this case there’s a huge opportunity to set yourself apart as the single house listed for $905,000 or $910,000. Typically we would try and formulate a price that puts you directly in the middle of a gap. For the example, the ideal pricing gap placement would be $907,000 for homes listed between $899,900 and $914,900.
Most real estate search engines use whole numbers to search, and move in increments of $10,000 or $20,000. Some will allow to the dollar pricing, but in general people will use a whole number. Some engines will include the whole number in the maximum range but some will not.
For another example, let’s look at a scenario where using a pricing gap doesn’t make sense. Say your condo is valued at $550,000. Strategically staying a bit below the $550,000 mark will open your home up to more buyers, so if someone is searching up to $550,000 on a search engine that does not include the whole number. You would still come up, and might even look like the best in class, if they are searching from $400,000 to $500,000.
In the above example, if you moved into the next bracket of $550,000 to $600,000 and listed at $560,000 or $570,000, your home would show as being in the bottom or mid selection. You might end up in a group of listings that wouldn’t necessarily make your home look as good, compared to the ones under $550,000.
Real estate prices are based comparatively. The strategic aspects are dynamic and must constantly be evaluated for relevance and effectiveness. It’s not just a matter of posting your home listing to the system and hoping for the best. Many hours of research and constant monitoring are required to strategically place your home on the market for sale.