Pricing your home effectively is one ofthe most important things you do when preparing to sell your home.
There is no magic formula.
But you don'thave a system you might as well pick a number out ofthe sky and consult a Magic 8-Ball.
This is the first in a three-part series where we're gonna talk about price.
The other two coming up are Competitionand Condition.
Stay tuned to our channel, subscribe below, and makesure you get onto those as soon as we publish them.
This video though willfocus on that five hundred-pound gorilla [animal scream] inthe room and that's Price.
Everybody wants to talk aboutprice.
Everybody has an opinion on price.
We're also gonna talk about thedifference between an AVM or Automated Value Model and a CMA orComparative Market Analysis.
We're gonna discuss the fundamentals ofprice and value and who determines which.
And we're going totalk about your choices as a seller.
There's a lot of talk today, from the bigNational Association of Realtors all the way down to the local level, totalk about accuracy matter.
Accurate data matters.
That's important, but trusting that one exclusive source that whether it'san AVM or a CMA, I don't care where it came from, trusting one source above all others isa mistake.
Take all the information, all the datathat you can pull in, and then make a human decision.
Take that [data] and do what we call is agut-check check.
Does it make sense? Is it accurate? Is itrelevant? Is it realistic? We'll get into all that in a minute butfirst I want to make sure that we touch on one important thing.
And that's establishing the basicfundamentals of an open marketplace.
Not real estate, specifically, but an open marketplaceanywhere.
[Question] Who sets the price? [Answer] That's the person with the product or providing theservice.
That's the person who has the thing that people want to buy.
[Question] Who sets the value? [Answer] The market sets thevalue.
The buyer sets the value.
The personwilling to pay you or pay someone for that product or service is the onewho sets the value.
Do yourself a favor and get someone in the door that understands how the market works, not how a computer program works, how price is established and value is establishedand the relationship between the two.
When it comes to setting price for a home two terms generally come out and that'sit an AVM and a CMA The AVM is an AutomatedValuation Model.
You don't hear this quite as much, it's alittle bit more of an "inside baseball" thing.
But most people will have heard of a CMA, a comparative market analysis.
Now whatthat is and what the AVM is, they're basicallythe same thing.
They take data from listings that haveeither sold or withdrawn or on the market currently.
They pull them in and they do someaveraging they do some medium pricing and then they spit out a number.
They giveyou a bunch of nice fancy charts and all kinds of other different things.
But they're all basically the same thing.
Everybody uses an AVM or a CMA whether or not they realize it or not.
There are those that you pay for.
There arethose that come with your MLS.
Even some agencies and brokerages havetheir own model.
There are some famous AutomatedValuation Models out there like the one from Zillow called a Zestimate.
And just like the Zestimate, everyAutomated Valuation Model that is used by agent or anybody elsehas its limitations.
It has its pluses and it hasits minuses.
So what you have is a couple situations:one is you have an agent who just uses their system exclusively.
Whether it's through their MLS or through theircompany or they pay for it, whatever.
They just use whatever number comes outof the machine.
And they go with that.
Because that's what's on the printedpage and that's what they're gonna present to you.
When they sit down for their half hourlong listing presentation about how wonderful they are.
[clapping] The second type a situation that you'relikely to find is the agent who does all that samestuff that the first one does but now they just make arbitrary changesto the numbers just because they don't want to seem like they're following acomputer model.
There's no real fact or analysis or anyother type thing behind it.
They just don't want to have the exactsame number.
So they'll go up or down, sometimes only a matter of a couple hundreddollars.
But just so that seems like they're incharge of this thing and "well that computer is exactly what it'scracked up to be.
But I'm the one you need hire because I'm alittle bit smarter than the computer.
Now the really bad situation that youwant to avoid are the agents that cook the books.
They're the ones that inflate the price of the house in order to entice you as a seller to go withthem.
They just want to get the listing thenthey're gonna beat the crap outta you for the next couple months about trying to lower the price.
But it's notthe agent and it's not you who determines thatvalue.
The buyer does.
The market does.
So the first step in theprocess is to Gather Data.
Include your local MLS becausethere is information in there that just quite frankly isn't available anywhereelse.
[For instance] you can get information about sellerconcessions.
So just because the sales price was X amount of dollars thesellers kicked in 10 grand on seller subsidies to help the buyerswith closing costs.
Now what that does is that, in effect,means that they got a lesser price for their home.
It doesn't show up onthe sales price because that's not how it's financed not how it works out in the end.
But thenet back to the seller is less.
You as a seller need to understand that it'syour net that's most important not the price.
There are a lotof things that happen after that initial agreement on price that can pull money away from you.
Thenext is competition.
You have to know the competition.
Nowcompetition isn't just the ones [homes] that are on themarket right now or under contract right now.
It's the listings that sold, that's competitionfolks because everybody's looking at that.
Your buyers across the other end of thetable are looking at the solds as well in order to tabulate calculatethe offer that they're going to make.
So youneed to look at that too.
That's your competition.
The next placeto look are those big/nasty/mean portals that everybody likes to talk about.
That's your Zillow and your Trulia andyour Realtor.
Com in any other one that you can think of.
You've probablyalready been there and run Zestimate or some other typeup Automated Valuation Model to see what your home is worth in orderto prepare yourselves for selling.
Guess what? Buyers are doing the samething! Now they [AVMs] may be way off the mark butthat doesn't mean they're not important.
You need to pull them in.
You're in gather dataphase not analysis phase.
You're better off having it.
Not needingit, than needing it and not having it.
Next up is seeking input.
No one knows everythingabout every neighborhood in every step town or every area.
You can't! It's impossible.
Thatmeans talking to appraisers.
That means talking to inspectors.
That means talkingto other people in the area.
Neighbors, agents who have sold otherhomes in that area, agents who have rented other homes inthat area, is there a special assessment that affects this property versus some of the others.
Two almost identical houses in two different neighborhoods:one has a special assessment and one does not.
It means it costs more live at one then theother.
The last portion is a gut-check.
This is the mostimportant piece of all of this.
Does it pass the sniff test? Did we missanything? Take a look at all the things that youpulled in to try and figure out, does this even seem right? Am I.
Does this just seem way low? Does it seem way high? Does this seem right? Do wehave all the information we need in order to make a decision? When I wasin Baghdad in 2008, I had an intelligence officer cometo me recommending that we take this certain bridge with our convoy to get across the TigrisRiver.
He saw that is the best option.
I saw itis a pretty terrible option because our United States Air Forceeliminated that bridge from existence in 2003.
Explosion!!!] You need to have that got check andyou need to go ask somebody before you go making recommendations that are way off the mark.
The next stepafter gathering all the data is analyzing the data.
Now is when youstart to see some patterns emerge.
You start to see some price ranges.
Youstart to see some commonalities, some features you start to see thatcertain home start to be priced a certain way.
And when they're priced a certain way theysell in a certain time frame.
Now is when you start to develop yourCourses Of Action, your COAs.
Condition and Competition are criticaland again we're gonna talk about those in future videos.
But if the comparable properties, from acertain time frame at a certain price were of far worse condition or farbetter condition then the home that you're trying to sell,that's going to have an impact on the price that you establish and the value that the market is willingto pay.
You are analyzing the data for relevance.
Are you using the comp rules that youshould be? Is there a neighborhood or a home or a set of homesthat you just missed? A very relevant situation here inLoudon County are is the new home construction versus the very recent construction, so you couldhave a neighborhood it's only 4 or 5 years oldcompared to a new home right down the road.
The market couldperceive more value by getting custom features built to suit than a home that is already built and hasthe features that you like and not necessarily the ones that they want.
Afteryou gather the data and analyze the data, it's time for us tomake a recommendation.
Our goal is to give you the information,education, and advice you need in order to make the best decisions.
We're gonna give you a Course Of Action that we think is the main one that youshould focus on based on what we know.
But we're alsogonna give you some options that show you what might happen if.
Ifthis happens, than that.
If this happens, then you needto do that.
If you'd like this you need to do that.
We're gonna give me some options.
So make sure that you understand thatthere are pluses and minuses for pricing high and pricing low.
The choice is ultimatelyyours but I would caution you not to pick the agent that just comes in with the highestprice.
Every decision has Strengths Weaknesses Opportunities and Threats.
[SWOT Analysis] Understand the full big picture and hiresomebody that can help you understand that andmaybe point out some things you haven't thought of.
You are paying for maximum effort andexceptional results.
Why settle for average? Why settle forthe agents who are gonna sit back, rely on one system, generate a number, pump that out to you, cross your fingers,set it, forget it, post and pray, sit back andsee what happens? There is no secret sauce.
There is nosecret family recipe.
It's all about understanding thefundamentals.
Understanding the relationship between Price and Value.
Gathering the best data.
Analyzing thatdata making sure that it's accurate andrelevant.
And then making recommendations based on what is best for you.
Giving youthe information, education, and advice to enable you to make great decisions.
That's our purpose here.
and thank you for watching this video,the first of three.
[sad music playing and high squeaky altered voice] so.
Several things that interrupted our shooting tonight and have taken.
[normal voice] It's after one o'clock in the morning and we're still here shooting because well.
I don't quit.
That's just not in ournature.
so have any other agents are willing todo that?!?.
[blooper reel] has an opinion on what a home to should.
Dang it! Ahhh! [not really on the phone but doing my best Harpo Marx impression] [frustrated] ok.
[walk like an Egyptian?] That after all is what you want.
You want to be able tomake.
I don't wanna tell you what you want! [I want you to tell me what you want!] Please like & share! Don't keep us a secret.
Thank you! Good night.