Hi folks. Last week I was invited by Jennifer Allen to participate on a teleconference on “How To Price Your Listings Right……With a Persuasive CMA”. The teleconference was awesome and I believe we had close to 1,000 people listen in. Since then I have had numerous emails asking me questions about my CMA.
Instead of typing the same email response over and over again I thought I’d just post that particular part of my presentation here. So here you go. I hope it helps.
“I’M NOT HERE TO TELL YOU HOW MUCH YOUR HOME IS WORTH….I’M HERE TO TELL YOU WHAT IT WILL TAKE TO GET YOUR HOUSE SOLD.”
Preparing a Persuasive CMA
First, I prepare a standard CMA using the format provided by my MLS. I’m sure you guys know what I’m talking about. You pick the comparable properties and your MLS CMA program will generate a suggested price. I like the presentation that my MLS gives but I rarely agree with their price suggestion. Fortunately I can go in and change it. The biggest draw back of my MLSs CMA is that it only lets me use 19 properties. That’s not enough but it is start.
I enter my subject property. Then I pick 19 properties that are similar. If my subject is a 1200 sq ft house built in 2004 with no pool then I usually pick comparables that have between 1150 sq ft to 1250 sq ft built from say….. 2002 to 2006 with no pool. I use active, pending and sold listings.
If I can’t find at least 4 sold properties I will expand my search parameters a little. Ideally I want 5-6 good sold comparables….A few pendings and then the rest are actives starting with the lowest priced.
The price this MLS CMA generates will be based ONLY on the historical data or sold listings.
In my market……that is declining so rapidly….. I only go back about 60 days on the Solds. Any sales older than that have no baring on my analysis. My standard MLS CMA will give me some very important information….
Price per sq footage sold.
Price per sq footage for the pendings.
The median and average sold prices.
This is data that I need to help me arrive at the right price……but it‘s not enough.
Why is it not enough?
Well, mainly because Buyers use price as one of their major search parameters. They probably will not walk into a Century 21 office and say we are looking for a home between 1150 and 1250 sq ft built between 2002 and 2006.
What they will say is we need at least a 3 bedroom home with a minimum or 1100 sq ft and we are qualified for $100,000. The REALTOR® will put these search parameters in the MLS and get a list of suitable properties. THIS is the list that my property needs to be on and it needs to be in the top 5 best priced properties.
Preferably the best priced.
Now if you did a search like this you may have homes show up that are quite a bit larger than the subject. If the Buyer can buy a 4 bedroom home with 1600 sq ft for the same price as my 1200 sq ft home which one do you think they will buy? Usually the larger one.
My listing has to be better priced.
So, in addition to the standard MLS CMA I have to do a print out of ALL active pending and sold listings in the same price range as the subject property.
The price range I use is the price the MLS CMA report generated. This print out will also give me the average and median price per sq footage.
Now I’m getting close to being able to arrive at a price.
Next, I have to pull up the entire community, zip code or whatever area your subject is in. Hopefully, you have been limiting your search areas for the 2 earlier reports as well. Anyway, whatever area you are using, go ahead and pull up ALL of the properties. Again you are using actives, solds, pendings and are looking for the sq footage….median and average.
Set the 3 reports side by side and study the sq footage prices.
Do you see a trend?
Are the figures similar?
Is the sq footage price on the pendings lower than on the solds? (If so…..that means you are in a declining market and need to place more weight on what’s UNDER contract (pending) and on what’s active instead of what has already sold).
If you take the average price per sq footage of the pending sales and multiply it by the sq footage of your subject does it line up with what has sold?
Where does it fall on the list of active listings?
Is it in the top 5 best priced?
How much lower would it need to be to be the best priced property?
Do you understand what I’m doing?
I’m taking the ENTIRE market, as a whole, and deciding where my potential listing needs to be priced in order to SALE!!!
I’m NOT looking for value I’m looking for price.
Because…..my purpose for preparing a CMA is NOT to find out what a property is worth but to arrive at what it will take to get it sold.
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