invite us in. we’ll bring results. ® factor the market trend into pricing (for real!)

Invite us in. We’ll bring results.®

Factor the Market Trend into Pricing

(for real!)


Your House as seen by…Your House as seen by…

Yourself



Your Buyer



Your Lender



Your Appraiser



And…Your County’s Tax Assessor


AgendaAgenda

• Price to meet the market not chase it• True Market Value• Reading the Trends• Exercise: Price to the Future• The Weichert® approach to pricing• What the buyer’s market taught us• Introduction to the Enhanced PTA Calculator


“There is a gap between what sellers think and the realistic price they can get.

That gap is where your skills must work.”

Jim Weichert, 2008


Price to Meet the Market Not Price to Meet the Market Not Chase ItChase It

Your Listing

Your Listing

Market

MarketMarket


Show of Hands . . .Show of Hands . . .

Who here has had a seller who wanted to list their house for 30% higher than what you know they can get for the house?

Who here has lost a listing to the competition who took it for an unrealistically high price?


What’s in the Sellers’ What’s in the Sellers’ Mind?Mind?

Think carefully . . .

On WHAT did the sellers base their price?


Factor the Market Trend into Factor the Market Trend into PricingPricing

Seeking the True Market Value

Statistics, Trends & Forecasts


True Market ValueTrue Market Value

True market value = the price paid

by a ready, willing and able buyer not forced to buy,

to a ready, willing and able seller not forced to sell,

in an arms length transaction,

after sufficient exposure to the market.


Pricing to Reach the True Pricing to Reach the True Market ValueMarket Value

Time

[DOM]

Buyers

30

Well Priced Listing: Maximum Activity

Multiple Offers

Highly Priced Listing: Weak Activity/ No Offers

Offer within 30 Days

High Price: “Low Ball” Offers

High Activity

Low Activity

Almost No Activity

0

Unrealistically Highly Priced

Well Priced Early

Offer


Elements of the Real Estate Elements of the Real Estate Trend Trend

1. Absorption Rate

2. Variation (Appreciation/Depreciation)

3. Sales Price to Listing Price Ratio

4. “Temperature” of the Market


1. Absorption Rate1. Absorption Rate

TOTAL ACTIVES

UNDER CONTRACTPAST 30 DAYS

=ABSORPTIONRATE

SUPPLY

DEMAND


Absorption RateAbsorption Rate

=ABSORPTION RATE SUPPLY DEMAND


Market AbsorptionMarket Absorption

Monday, Feb 9, 2010 MLS

ACTIVE LISTINGS

LISTED IN LAST 30

DAYS

UC LAST 30

DAYS

ABSORPTION RATE (MONTHS)

Town A 75 17 9 8.3

Town B 88 11 7 12.6

Town C 116 22 11 10.5

Town D 16 3 0

Town E 6 2 1 6.0

Composite 301 55 28 10.8


Market Market Appreciation/DepreciationAppreciation/DepreciationHigh Supply/Low Demand Low Supply/High DemandNormal

Mar

ket

Ab

sorp

tion

in M

onth

s 1

2

3

4

5

6

7

8

9

10

11

12

Normal

Weichert has been studying market conditions for more than 3 decades and has found a direct correlation between market absorption and property values.

As absorption rates increase beyond a normal market level of 5-6 months, property values depreciate annually.

Note: This Market Scale is valid only for absorption rates between 1 and 12 months.


2. The Math Behind the 2. The Math Behind the ChartChart

New Price – Old Price

Old Price=Variation

Variation > 0 APPRECIATION


The Math Behind the ChartThe Math Behind the Chart

$550,000 – $500,000

$500,000=VARIATION = 0.1 = 10% > 0

$50,000

$500,000=

$500,000

$550,000

Price [$]

T0Time

[Month]

Old Price

New Price

APPRECIATION


2. The Math Behind the 2. The Math Behind the ChartChart

New Price – Old Price

Old Price=Variation

Variation > 0 DEPRECIATION


The Math Behind the ChartThe Math Behind the Chart

$450,000 – $500,000

$500,000=VARIATION = - 0.1 = - 10% < 0

- $50,000

$500,000=

$450,000

$500,000

Price [$]

T0Time

[Month]

Old Price

New Price

DEPRECIATION


Correlation between Correlation between Absorption and Absorption and

Appreciation/DepreciationAppreciation/DepreciationHigh Supply/Low Demand Low Supply/High DemandNormal

Ma

rke

t A

bso

rpti

on

in M

on

ths 1

2

3

4

5

6

7

8

9

10

11

12

Normal

Weichert has been studying market conditions for more than 3 decades and has found a direct correlation between market absorption and property values.

As absorption rates increase beyond a normal market level of 5-6 months, property values depreciate annually.

Note: This Market Scale is valid only for absorption rates between 1 and 12 months.


The CaveatThe Caveat

Note: Because absorption rates vary

throughout the year, look at average

absorption rates or trends over the last

six months.


Monday, February 9, 2010

CLOSED LAST 30 DAYS

AVERAGE LIST PRICE

AVG. DOM TO UC

AVERAGE SOLD PRICE

SOLD VS. LISTED

Town A 2 $294,500 163 $272,500 93%

Town B 1 $345,000 183 $327,000 95%

Town C 3 $325,966 21 $306,333 94%

Town D 1 $399,900 304 $352,000 88%

Town E 2 $339,450 30 $309,000 91%

Composite 9 $332,300 140 $306,778 92%

3. Sold Price/List Price 3. Sold Price/List Price RatioRatio


4. “Temperature” of the 4. “Temperature” of the MarketMarket

What would give you more of an indication of the “temperature” of the market . . . . ?

When a listing Closed?

OR

When a listing went Under Contract?


Market Overview Market Overview TemperatureTemperature

Monday, February 9,

2010

ML

SA

CT

IVE

LIS

TIN

GS

AV

ER

AG

E A

CT

IVE

PR

ICE

LIS

TE

D IN

LA

ST

30 DA

YS

PR

ICE

IMP

R. L

AS

T 30 D

AY

S

IMP

RO

V. R

AT

E

UC

LA

ST

30 DA

YS

AV

ER

AG

E U

C P

RIC

E

PE

ND

ING

S V

S. A

CT

IVE

S

AB

SO

RP

TIO

N R

AT

E

(MO

NT

HS

)

CL

OS

ED

LA

ST

30 DA

YS

AV

ER

AG

E L

IST

ED

PR

ICE

AV

ER

AG

E S

OL

D P

RIC

E

SO

LD

VS

. LIS

TE

D

SO

LD

VS

. AC

TIV

ES

Town A 75 $387,658 17 912.0%

9 $396,322 102% 8.3 2 $294,500 $272,500 93% 70%

Town B 88 $270,776 11 5 5.7% 7 $179,557 66% 12.6 1 $345,000 $327,000 95% 121%

Town C 116 $384,498 22 11 9.5% 11 $314,054 82% 10.5 3 $325,966 $306,333 94% 80%

Town D 16 $417,299 3 0 0.0% 0 1 $399,900 $352,000 88% 84%

Town E 6 $489,149 2 0 0.0% 1 $420,000 86% 6.0 2 $339,450 $309,000 91% 63%

Composite 301 $355,867 55 25 8.3% 28 $310,657 87% 10.8 9 $332,300 $306,778 92% 86%


Exercise: Price to the Exercise: Price to the FutureFuture

• Most Recent Under Contract Comparable:

$519,000• Under Contract Date: 15 Days Ago• Days-on-Market to Contract = 120 days• Sale Price to List Price Ratio = 93%• Absorption Rate = 9 month

WHAT SHOULD THE LIST PRICE BE ?


• Sales Price to List Price Ratio = 93%

• List Price for Under Contract Comp =

$519,000

Expected Sales Price:

$519,000 x 0.93 = $482,670

1. Determine the Expected 1. Determine the Expected Sales Price for the Under Sales Price for the Under

Contract CompContract Comp


Absorption Rate = 9 month

Annual Depreciation == - 15% to – 20%

Monthly Depreciation == - 1.25% to - 1.67%

Averaged Monthly Depreciation =

= - 1.5%

2. Determine the Effect of 2. Determine the Effect of Absorption on Market ValueAbsorption on Market Value

Ma

rke

t A

bso

rpti

on

in M

on

ths

1

2

3

4

5

6

7

8

9

10

11

12

Normal


• 120 Days On Market = 4 Month

• - 1.5% Monthly Depreciation x 4 Month = - 6% Depreciation

• Factor: 100% - 6% = 94%

DOM Depreciated Price:

$482,670 x 94% = $453,710

3. Effect of DOM on Price3. Effect of DOM on Price


• Under Contract Date = 15 Days Ago = 0.5 Month• - 1.5% Monthly Depreciation x 0.5 Month = -

0.75% Depreciation• Factor 100% - 0.75% = 99.25%

UCD Depreciated Price:

$453,710 x 99.25% = $450,307

4. Effect of UCD on Price4. Effect of UCD on Price


34

Price to the FutureWaiting doesn’t work in seller’s favor.Overpricing doesn’t work in seller’s favor.

Price today for the price of tomorrow.Be the more attractive price on the market.

Induce competing offers.Good properties, attractively priced still sell

over the asking price.Sell within 30 days for more than you could expect

in 120 days.Save 3 to 4 month of mortgage payments.

Protect yourself from the incertitude of listing in a depreciating market.

PRICE TO MEET THE MARKET INSTEAD OF CHASING THE MARKET!


Factor the Market Trend into Factor the Market Trend into PricingPricing

Enhanced PTA Calculator&

How It Works


3636


Current PTA vs. Enhanced Current PTA vs. Enhanced PTAPTA

Current PTA

• The trend is determined by analyzing comps:

– Sold 12 months ago;

– Sold 6 month ago;

– Pending sales in the past 30 days;

– Active listings

• The Absorption Rate is calculated but not incorporated in the trend

• DOM are calculated, but not incorporated in the trend

• “Temperature” of the Market is important, but not essential

Enhanced PTA

• Uses absorption rate to determine market appreciation/depreciation (long term trend)

• Uses comparable sold listings to establish the sales price to listing price ratio.

• Applies the variation to the most recently under contract pending listings.

• Eliminates the current active comps

• Temperature of the market is essential


Math Behind the Enhanced Math Behind the Enhanced PTA CalculatorPTA Calculator

Time

[Months]

Price [$]

0 12116

PTA2

PTA1

30 Days Pending

List Price

6 Month Sold

Price

12 Month

Sold Price

Pending Expected

Sales Price

13 14


Price to Meet the Market Not Price to Meet the Market Not to Chase Itto Chase It

Your Listing

Your Listing

Market

MarketMarket


How the Enhanced Calculator How the Enhanced Calculator WorksWorks


Enhanced PTA Calculator: Enhanced PTA Calculator: Calculation 1Calculation 1



Note: - Mark with an asterisk any address of a

listing on which an adjustment was applied (i.e. extra rooms, extra bathrooms, extra square footage, etc.)


Enhanced PTA Calculator: Enhanced PTA Calculator: Price GuidePrice Guide



Note:

THIS PRICE GUIDE IS NOT TO BE SHOWN TO THE SELLER. YOU HAVE TO LEARN, UNDERSTAND AND BE ABLE TO EXPLAIN THE RATIONALE BEHIND THE "NEW PTA CALCULATOR" TO THE SELLER.


Enhanced PTA Calculator: Enhanced PTA Calculator: Print PagePrint Page


Enhanced PTA Calculator: Enhanced PTA Calculator: Print PagePrint Page

Note:

- This is compatible with MS Excel 2003 to 2007.

- If you need help using Excel, go to Weichert University and take the Excel online courses in the technology courses section.

- This may not be compatible with MAC and MS Vista.


Pricing ToolkitPricing Toolkit

What to bring:


Assignment for (insert Assignment for (insert date) date)

1. Hands on practice session using REAL information for a listing or price improvement. No listing? Get one!

2. Download the Enhanced PTA Calculator3. (insert date), please bring:

– Laptop, if you have one (with Calculator on it)– Sold Comps (12 months, 6 months)– Under Contract in Past 30 Days– One-Line report of actives

Get Stamped!


“The only thing you can do to sell real estate right now is price it to sell.”

Jim WeichertNovember 14, 2008

invite us in. we’ll bring results. ® factor the market trend into pricing (for real!)

Documents

listing market slide

buyer slide

market trend

lender slide

appraiser slide

buyers market

market conditions

true market value statistics