YOUR EBOOK TITLE THE NEW CMA: COMPETITIVE NOT COMPARATIVE
For the example using that base rule, we do +/- 5% and get +/- $37,500. Rounding then to a $10,000s integer, we have a pricing range of $710,000 - $790,000 .
We most likely are going to price the home somewhere in that range, which is backed by our sold data. The active data will tell us where in the top, bottom or middle of that range we need to price based on the competition. Next we must ask ourselves, who is our competition?
The Competitive Range
When we speak of competition we don’t just mean the homes that are for sale in your neighborhood. It’s the homes that a buyer who would put an offer in on your house, will also look at when searching. The competition for you then are other listings that have the most overlap of potential buyers, who are deciding between your home or another. These buyers are more price sensitive than anything and often have a wider search area than one neighborhood. This is the time where you as a real estate agent really can leverage your understanding of the local market and truly home in on what we call the buyer zone , or basically how wide and far a buyer would look before your home no longer fits there needs. There are buyers who only look at a specific neighborhood and if your area in particular is very unique or offers something like a specific lake access, etc… then you may only be comparing to your neighborhood. Buyers are usually looking in a little wider area. You’re not competing against every buyer or every house out there on the market. Just to give you a quick example, if your house is priced in the $100,000s range you’re not really competing for the same buyer that a house priced in the $500,000s is competing for. You are looking for two different areas or subsets of the market. So when we say that there is a thing called Competitive Range , what this means is this is a range of prices that buyers are looking in. Basically if you have a buyer that’s looking for a house from $200,000 to $250,000, and you have a buyer looking for a house from $250,000 to $300,000, then those two buyers are both going to be competing, potentially, for a house at $250,000. This overlap establishes what we call Competitive Range. This Competitive Range is really your competition beyond just your own neighborhood and your own area that you’re going to have to really focus on positioning against. That way you know if there’s a house that’s priced exactly the same as your house and maybe happens to be a different neighborhood a mile or two away, but it’s a similar year build, guess what? You’re probably competing for a similar buyer, or your buyer will probably look at both houses. For the most part most buyers will look at a certain price range which they can afford. They look at all homes that fall in the same “area.” This area again is subjective with each buyer, but as an agent you can anticipate that zone by knowing the different areas your city has. This can be newer areas, historic districts, school zones, proximity to highways, etc...
Using this idea, we can find the Competitive Range from our Scattergram and, home in on the market competition to see where we will stand in the eyes of buyers.
Remember our pricing range is $710,000 - $790,000. The Competitive Range must be larger than this and include that entire range. So thinking like a buyer who is searching for a home, we would expand outside this pricing range slightly and look for the dollar amounts that are most likely going to show up on MLS searching sites.
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