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Pricing Bands: How to Get the Best Deal on Your Property

Written by Posted On Thursday, 15 December 2016 19:29

When it comes to choosing the right strategy to sell your property, there are no secrets. The real estate market has evolved into a model that analysts call a perfect information game. This means that buyers and sellers can seek to obtain all the information they need in order to make the right moves.

If you are trying to sell your property, one of the strategies you should strongly consider is the planning of pricing bands, which are the lower and upper ranges of the amount you are hoping to obtain.

Getting Preliminary Information

Since the process of buying and selling a home can be analyzed from the point of view of game theory, it is important to base pricing bands on existing information that would be available to prospective buyers.

Price bands are widely used in the real estate business, and thus previous activity can be gleaned from existing information. For example, the Hartford housing market in Connecticut saw more than 750 purchase contracts signed in October 2016. By looking at the pricing activity of the previous two years, it is easy to see that price bands were adjusted in a downward manner from June to September with a slight uptick in October and a sharp reduction until December.

The situation in Hartford suggests that sellers who set November 2016 price bands higher than 2015 stand to attract little attention from prospective buyers, particularly those who are represented by their own realtors.

Setting the Price Band

Armed with the MLS information mentioned above, the next step would be to drill down to the neighborhood level and look for evidence of a soft spot. This indicator emerges when the inventory of available properties is reduced as listings are taken off the market. This results in selling prices getting bunched up. If you get stuck, contact a local realtor company like Keller Williams Realty for advice.

The soft spot is not the lower range of the band; it is actually the empty place in the remaining inventory. Let's say that five listings are priced between $150K and $160K; if the sixth listing is at $180K, buyers would be attracted to the $170K. In this case, the band rests between $160K at the lower range and $170K at the higher end.

Sellers and Buyers Markets

The realistic aspect of price bands can be gleaned when considering market conditions. Listings are typically priced at the higher end so that sellers can get at least the lower end; however, prospective buyers in a seller’s market will actually bid a little higher just to secure the purchase. The opposite will be observed in a buyer’s market. 

In the end, the most important aspect of a pricing band strategy is to remember that buyers will have access to the same information used to set the selling price.

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