Webster defines Science as “a branch of knowledge requiring systematic study and method.”

Five years ago, pricing for a home was determined by a different method. Those days, it was more throw a price out there and wait to see how many offers it attracted. Sellers wanted to list above what their neighbors sold for, buyers were afraid they wouldn’t get the house they wanted so they were writing escalator clauses. Many houses sold for more than the list price. Those days are gone and we probably won’t see them again anytime soon.

Today, list price strategy and offer price strategy are more systematic and back to the old tried and true methods. Comparable sales, location, size, layout and condition are the key elements that we work with. As agents, David and I try to counsel clients on pricing, but the clients make the final decision. The internet is a great resource for everyone to read about real estate market trends, inventory levels, pricing strategies, offer strategies and more. Sellers read the articles about the market coming back and inventories going down, so they want more for their home. Buyers read the articles about how the market has further to fall and so they want to offer 10% or more below list. These opposite perspectives make for lively negotiations.

To make the real estate world more interesting, the third perspective is the real estate appraiser. The appraiser doesn’t care about the buyer’s or seller’s perspective. All the appraisers care about is what has sold recently that can help them come up with a value for the home. Not too long ago, we sold a house and the appraiser said that nothing had sold that was comparable within 3 miles in the previous 3 months, so they valued the home almost 10% below the agreed upon selling price. When that happens, the buyer can walk away, the buyer can accept the value and put more money down for their down payment or the seller can lower the asking price. This is why list prices and sale prices are researched and discussed fully with our clients. With facts in hand, we can defend the prices we recommend with our clients and appraisers.

These are more positive times for real estate than the last few years. Business is up almost 30% over last year, rates are still historically low and Washington still has people moving in for jobs. We have a good real estate market here in Washington and we look forward to it continuing. If you’d like more information about how we determine pricing, please let us know. We love to talk about this subject and it might make great conversation at your next party!