What if your market is trending quickly down or quickly up? Can this affect your pricing strategy? Of course! In both cases you might miss an opportunity to sell your listings for top dollar by not keeping a careful eye on the market trends. In a rapidly rising market for instance it might be wise to closely evaluate not just the sold properties but to look very closely at the pending sale prices and the active listings. Based on this a savvy seller might want to consider pricing their home more aggressively knowing that if they are slightly above the market in a very short time the market will "catch up."

But what about the reverse, a declining market? You might think of a declining real estate market like a stock market sell off. In a bear stock market what tends to happen is that sellers chase the market down. In other words they keep agreeing to lower, and lower prices just to lock in what little profit they may have left. Believe it or not the same is often true in a bear real estate market. Sellers chase the market. First rushing to put their home on the market, thus causing a build-up of an inventory, and then slashing their price just to get their home sold.

This is a dangerous position for any seller. For instance in a declining market even if they price their home competitively within a few days or weeks, their price maybe significantly over what more motivated sellers are asking for their homes.

Take a look at how easy this can happen with Suzy Homeowner.

Suzy would really like to sell her home in the next 60 days but of course she wants to net as much money as possible from the sale. Studying her competition and relying on the advice of her real estate professional she lists her home for $345,000.

Based on this price let's take a look at Suzy's competitive position today:

• Competitor Home A: $368,000

• Competitor Home B: $349,000

• Suzy's Home Today: $345,000

• Competitor Home C: $345,000

• Competitor Home D: $333,000

• Competitor Home E: $329,000

She appears to be very competitively priced relative to the market. But let's see what happens 30 days later:

• Competitor Home A: Expired

• Suzy's Home Today: $345,000

• Competitor Home B: $339,000 (Reduced Price)

• Competitor Home C: $335,000 (Reduced Price)

• Competitor Home D: Sold

• Competitor Home E: Pending

• Competitor Home F: $326,000 (New Listing)

• Competitor Home G: $325,000 (New Listing)

• Competitor Home H: $319,000 (New Listing)

Wow! What a market transition! Suzy went from being very competitively priced to becoming the highest priced property within her price range. As a buyer which home would you look at last? This is a terrible position to be in and the scary part of this scenario is that in most cases a seller like Suzy would never know it. Why? Most sellers only request a market analysis at the beginning of a relationship with a real estate agent. Savvy agents on the other hand make sure to provide updated list of comparable listings every thirty days!

Published: September 26, 2007

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