Price It to Sell With the PTA $ $ $ $ $ $ $ $ $ $ $ $

Who Determines Market Value?

Your House as seen by… Yourself

Your House as seen by… Your Buyer

Your House as seen by… Your Lender

Your House as seen by… Your Appraiser

And…Your County’s Tax Assessor Your House as seen by… And…Your County’s Tax Assessor

Agenda Price to meet the market not chase it True Market Value Reading the Trends Exercise: Price to the Future The Weichert® approach to pricing 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 Notes: Pricing is the highest skill of a real estate professional. As brokers we are put in charge with people’s real estate assets. As agents we are bound by fiduciary duties to correctly asses the value of the asset, to monitor it’s performance, and to keep our principals informed of both value and performance. Pricing is also the basis of any real estate business building: both prospecting and presenting are based on discussing value of the real estate assets, market dynamics, and marketing plans customized for specific conditions. At the end of this economic crisis, real estate will be a completely different business, run by highly skilled professionals. Those who are to survive the crisis and the probably slow recovery, will be the few who will learn the lessons and sharpen their skills, develop tools, and apply technology, statistics and mathematical models to stay ahead.

Factor the Market Trend into Pricing (for real!)

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? Elicit responses for each question.

What’s in the Sellers’ Mind? Think carefully . . . On WHAT did the sellers base their price? Elicit responses from Associates.

Price to Meet the Market Not Chase It Your Listing Your Listing Market Note: Can be found in Market Update tool on Weichert University Market Market 13

Factor the Market Trend into Pricing Seeking the True Market Value Statistics, Trends & Forecasts

True 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 Market Value Buyers Multiple Offers Offer within 30 Days High Activity Well Priced Listing: Maximum Activity Well Priced Early Offer High Price: “Low Ball” Offers Low Activity Notes: You may want to illustrate the Less is More Concept from Jeffrey Otteau Notes: I.E.-House A=$530,000 and B=499,000 both are listed on same day but House B sells for $490,000 in 40 days but House A sells for $475,000 in 120 days. WHY? (Disclaimer-this is not the actual example from Otteau’s report) Highly Priced Listing: Weak Activity/ No Offers Almost No Activity Unrealistically Highly Priced Time [DOM] 30

Elements of the Real Estate Trend Absorption Rate Variation (Appreciation/Depreciation) Sales Price to Listing Price Ratio “Temperature” of the Market Notes: Applying trends and strategies

1. Absorption Rate SUPPLY DEMAND TOTAL ACTIVES ABSORPTION RATE = UNDER CONTRACT PAST 30 DAYS Note: Determining Supply and Demand as it is expressed as an Absorption Rate DEMAND 18

Absorption Rate SUPPLY DEMAND ABSORPTION RATE = Appreciation/depreciation (variation) is the basis of the PTA. 19

Market Absorption in Months 2. Variation Market Absorption in Months 1 2 3 4 5 6 7 8 9 10 11 12 Normal Absorption Rate = 9 month Annual Depreciation = = - 15% to – 20% Monthly Depreciation = = - 1.25% to - 1.67% Averaged Monthly Depreciation = = - 1.5%

Market Appreciation/Depreciation High Supply/Low Demand Low Supply/High Demand Normal Market Absorption in Months 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. Note: Correlation between absorption rate and price variation (appreciation/depreciation) – not reflected in the existing PTA Calculator. The enhance PTA Calculator has a built in formula that takes in account what the absorption rates are and it is reflected in the suggested price range. Give as HANDOUT. 21

The Caveat Note: Because absorption rates vary throughout the year, look at average absorption rates or trends over the last six months. 22

3. Sold Price/List Price Ratio Sale Price/List Price = SP%LP Ratio Appears in most MLS Listings Used to determine estimated Sale Price of UC Listings

4. “Temperature” of the Market 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?

“Show” Objective Information Go beyond showing MLS sheets and “comps” (what everybody else does) Present a visual summary of the data using the Leave Behind booklet or Market Update presentation with the PTA or Enhanced PTA Help sellers see the trends in their local market Demonstrate your expertise in real estate, pricing and local market area

Present the Big Picture to Detail From the Buyer’s Perspective… Who is your competition? Local Market Statistics Absorption Rate Days on Market Competitive Comparables What Else?

Selecting Comparables Fast Track Facilitator Notes Session 8: Practice Makes Perfect Selecting Comparables Facts to consider when determining comparable properties: Location Size Number of beds Number of baths Number of garages Amenities Style

Selecting Comps, continued Fast Track Facilitator Notes Session 8: Practice Makes Perfect Selecting Comps, continued Other considerations: Age and Condition Improvements Desirability Property Size Taxes What can you do if there aren’t enough properties to choose from in each of the categories?

Factor the Market Trend into Pricing Enhanced PTA Calculator & How It Works

PTA vs. Enhanced PTA 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

Note: You don’t NEED 5 comps but it is recommended that you should have at least 3 comps. (1 comp at minimum). The challenging part is not entering the number but Knowing Your Market Area Inventory in order to choose the best comps. You can and should still bring the active comps as you are bringing the expired and withdrawn listings in order to prove the point, but not making them part of the price determination in the PTA calculator.

How the Enhanced Calculator Works Notes: Print out all tabs of PTA and hand out to the group. In this section you will review how the enhanced PTA works.

Enhanced PTA Calculator: Calculation 1

Enhanced PTA Calculator: Calculation 2

Enhanced PTA Calculator: Calculation 2 Page 2: The New PTA Calculator extends to 5 the entries for comps in the 3 categories, for a more flexible operation: comps could be added, removed and put back, etc. Also for further appointments on price improvements the pendings that close could be easily moved to the sold category, etc. Warning! Please remove any zeroes from fields that do not refer to actual listings in order to obtain the accurate average.

Enhanced PTA Calculator: Calculation 2 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.) Note: Hand out local adjustment guide from appraiser.

Enhanced PTA Calculator: Price Guide Study this page so you can discuss how the pricing trends are affected by: Absorption Rate Days on Market Variation

Enhanced PTA Calculator: Price 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: Price Guide Page 3: Price Guide I left one decimal in the display of the Absorption Rate. Though the depreciation is selected based on the rounded number and 8.5 to 9.4 are still being rounded to 9, leaving the decimal in will be a better guidance for the listing agent on how to select the listing price.

Enhanced PTA Calculator: Price Guide Page 3: Price Guide

Enhanced PTA Calculator: Print Page

Enhanced PTA Calculator: Print 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.

Discussion: Q & A starts here!

Pricing Dialogue Lets Practice how to present your PTA Introduction Stay in Control Guide them thru the Comps, focusing on Averages Ask for the Price? Handling Objections Notes: Ask the group what they think they should bring. Write their answers on a flipchart. Some examples should include: PTA Price Guide MLS Agent full report of all comps used in the PTA Appraisal Adjustment Guides One-Line Reports from your MLS Market Update

Price to the Future Waiting 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! Price to the Future

If you want more practice or tips, go to: Thank you for Coming! If you want more practice or tips, go to: www.WeichertOne/Weichert University/ Price Trend Analysis