Report Definitions
#1 - The Price Distribution Chart & Data (grid)
The Price Distribution chart provides a global perspective of price and transaction activity levels
across the entire spectrum of market prices; the Target Price Range is highlighted in dark green
so that it’s easy to see where you believe the subject property “fits” into this mix. This
information is displayed using a frequency histogram, which is simply a bar chart that slices the
market into a series of equally sized price segments (think of our loaf of bread analogy again)
with the height of each bar indicating the activity level (frequency) within that segment. In
Pricing Analysis the width of each bar is always the Target Price Range increment as chosen by
you the user in your search criteria. In addition, Currently For Sale and Currently Under
Contract properties can be overlaid on the chart to give an instantaneous “snapshot” of supply
& demand conditions within any given price segment. That is, where are the buyers currently
“buying”; and what does the competitive landscape look like from an “inventory” perspective.
The Price Distribution grid (with just sold properties invoked) displays property information
relative to basic functionality (BD, BA) and size (improvement SQFT and lot size SQFT/Acres)
attributes to facilitate meaningful comparisons between the subject property and those within
the Target Price Range. The summary line tallies the most frequent occurrence of each
attribute across the whole market to help determine how the Target Price Range (and hence
the subject) conform to this “standard”.
#2 - The Market Size Chart & Data (grid)
The Market Size chart provides a comparison of (sold) transaction activity levels between
contiguous time periods. Thus, the user can easily “see” if activity has increased or decreased
over time. The size difference between the two time period histograms gives a visual sense of
how activity has changed. The table below the chart displays the exact values and calculates
the unit difference and what percentage increase or decrease is involved.
The Market Size grid provides a lookup table for changes in activity between the two time
periods for each price range increment. It facilitates a comparison of what comprised the main
property profile during each period, i.e. bedroom and bathroom count, SQFT, and Lot Size. The
question to ask is always, “Has the property profile changed over time in this segment, i.e. will I
get more or less for my money? How do SQFT, Lot Size and $/SQFT compare over the two time
periods. This is very important information to inform you of the dynamic within the price
segment.
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#3 - Market Pricing Chart & Data (grid)
The Market Pricing chart overlays (vertical) median price lines against the Market Size
backdrop so that it’s easy to see which direction market forces have been pushing prices. Each
median line is color coordinated to “match” the histogram that it is associated with. The
default time frame for this measurement is the Last 365 days vs. the Previous 365 days. Thus,
there is no seasonality involved in the measurement. Shorter time frames are available for
“moving” markets. When using these shorter time frames make sure you appreciate which
months are included in each and if any “seasonality” might be involved, etc.
The Market Pricing grid is the same one used for Market Size. It provides a lookup table for
changes in activity between the two time periods for each price range increment. It facilitates a
comparison of what comprised the main property profile during each period, i.e. bedroom and
bathroom count, SQFT, and Lot Size. The question to ask is always, “Has the property profile
changed over time in this segment, i.e. will I get more or less for my money? How do SQFT, Lot
Size and $/SQFT compare over the two time periods. This is very important information to
inform you of the dynamic within the price segment.
#4 - Target Price Range (View #1)
The Target Price Range chart provides a zoomed-in micro view of how properties in the Target
Price Range are distributed relative to price, property attributes and time on market. This view
was designed to facilitate individual property comparisons so the best market comparables
could be chosen for closer examination. A simple scatter chart is used to display the individual
properties within the Target Price Range in a manner analogous to pushpins on a “graphical”
map. The scatter chart functions as a Price vs. DOM coordinate system so that a property’s
“symbol” location on the map reflects meaningful market information, i.e. its horizontal
position indicates its current price point, its vertical height signifies time on market, and its
symbol color reflects price history information. The table immediately below the chart contains
important summary information relative to the properties displayed on the chart. This
information includes: # properties, # with price changes, SP/OP, $/SQFT and the most
frequently occurring property attributes within the property set.
There are three different symbols (pushpins) used to represent the competitive data on the
scatter chart; each has a distinctive shape and color. A green circle represents Sold properties, a
blue triangle signifies currently Under Contract properties, and a red square indicates currently
For Sale properties. Symbols with no fill color represent properties that have had No Price
Changes; while symbols with fill color represent properties that have had 1+ Price Changes
(one or more).
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The Target Price Range grid provides useful “lookup-table” capabilities that facilitate individual
property comparisons relative to: Original Price, Sold Price, Sold Date, # Price Changes, DOM,
SP/OP, BD, BA, SQFT, $/SQFT, Lot Size, and Year Built. In addition, the user has the ability to
check or uncheck any property for inclusion in their analysis; if unchecked the row font will
change to the italicized mode, and its color will change from black to gray. If the default All
Properties view is invoked then the unchecked properties will be visible on the chart (grayed
out) and on the grid, albeit, in the italicized mode. If the Checked Properties view is invoked
then the unchecked properties will not be displayed on either the chart or the grid. Whatever
mode is invoked will be reflected on the printed report.
#5 - Target Price Range - SP/OP Comparison (View #2)
The Target Price Range – SP/OP Comparison chart expands on the basic Target Price Range
concept to facilitate comparing the two pricing “pathways” that occur in the real estate sales
process, i.e. properties either need price reductions to sell or they didn’t, there is no in
between. We call these two pathways: No Price Changes; and 1+ Price Changes to give them a
convenient label.
A comparison of the average outcomes of these two pathways shows that in most instances
properties that had to enter the price reduction process did not fare as well as those that
didn’t. In most cases they “undersold” the market, i.e. their average sold prices were generally
no better than those that didn’t have to price reduce; and their properties (improvement SQFT)
were often bigger! The table below the chart lines up the two pathways for easy comparison.
And who said, “There is no risk to overpricing because I can always come down”.
The Target Price Range – SP/OP Comparison grid provides the same useful “lookup-table”
capabilities found in the previous TPR grid, i.e. it facilitates individual property comparisons
relative to: Original Price, Sold Price, Sold Date, # Price Changes, DOM, SP/OP, BD, BA, SQFT,
$/SQFT, Lot Size, and Year Built. In addition, the user has the ability to check or uncheck any
property for inclusion in their analysis; if unchecked the row font will change to the italicized
mode, and its color will change from black to gray. If the default All Properties view is invoked
then the unchecked properties will be visible on the chart (grayed out) and on the grid, albeit,
in the italicized mode. If the Checked Properties view is invoked then the unchecked properties
will not be displayed on either the chart or the grid. Whatever mode is invoked will be
reflected on the printed report.
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The Pricing Analysis Philosophy
 Click the Bookmarks icon in the left margin for links to specific points of interest in this document.
Pricing Analysis was designed to provide the real estate professional with a tool that can
process large amounts of MLS data quickly and then turn it into useful sales information. The
informational output is presented in a highly visual manner, using illustrative charts and graphs,
so that the underlying market relationships are easier to see and, thus, comprehend, i.e. “a
picture is worth a thousand words”.
Using Pricing Analysis the real estate professional has the ability to transfer market information
in a manner akin to, “Walking a mile in my shoes”. They can quickly and efficiently bring their
clients up to “market-speed” by readily conveying the relationships between price, activity
level, and sales rates for any market segment they define. The real estate professional can then
help their clients interpret this information so they can make intelligent, well informed
decisions about how market conditions are likely to affect their property. This information is
based on factual, quantitative market information derived directly from your MLS data.
Experienced real estate professionals know that supplying their clients with factual, real time
market information is one of the keys to generating successful sales outcomes. “And while
everyone is entitled to their opinion there is only one set of facts!”
A simple search, using just the basic criteria, is all it takes to get the information needed for a
property analysis. Once the desired MLS is chosen the first two criteria are very straight
forward; you simply choose the Property Type and Area Type that match the subject property
and define the market. The third criterion is called the Target Price Range which allows you to
choose the price range where you believe a fair-market sale is most likely to Happen.
Caution: While you are first learning to use Pricing Analysis, it is strongly recommended that no
Optional Search Filters be used. This is because the true power of Pricing Analysis is its ability to
provide the contextual “framework” necessary to facilitate meaningful property comparisons;
i.e. the subject property’s key attributes can be compared to the market as a whole; or with any
individual properties found within the Target Price Range. Unnecessarily narrow searches
restrict this ability.
In addition, there are several other useful criteria depending on the task at hand. The Time
Period setting is defaulted to 365 days to coincide with a non-seasonal measurement; but other
useful choices are available, e.g. 180 days to align with the standard appraisal time frame. And
if the Pricing Analysis information is going to be used to augment a CMA you have the ability to
input Client Information and/or Property Attributes; these “criteria” are found under the
Optional Search Filters section.
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Once a search is run, the results are displayed “visually” using charts and graphs that convey
the underlying pricing information clearly and concisely. Relationships that were previously
hidden from view come into “focus” allowing you to interpret market conditions in a manner
never before possible. The first chart displays information regarding the distribution of prices
across the market place and where the subject property best “fits” into the market as a whole
(based on the real estate professional’s knowledge of current market conditions). The second
chart shows how the market activity level (# of sold transactions) has changed over consecutive
time periods (has activity increased or decreased?). The third chart indicates how the median
price for the “whole market” has changed (have prices increased or decreased?). The fourth
and fifth charts focus on the target price range and display the competitive “landscape” relative
to properties that are under contract and/or for sale. In addition, it allows you to quantify the
average “outcomes” between the two pricing pathways, i.e. those properties that needed price
reductions to sell; and those that didn’t. When a property enters the price reduction process
there is a high probability that it will “undersell” its market potential (not receive as high a
$/SQFT as non-price reduced properties). The table underneath the SP/OP comparison chart
displays this comparison.
*Figuratively speaking, if the market were a loaf of bread then the Target Price Range would be
the slice that contains the subject property. This slice would also contain the most suitable
comparables to use with a CMA.
Pricing Analysis is not a “black box” where the user can simply input an address, click a
button, and then expect the “correct” price to be spit out. There are simply too many
variables involved in the pricing process and it’s hard to model them all with algorithms. It is
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only by integrating your personal market knowledge into the “equation” that a complete
pricing picture can be seen. Pricing Analysis was designed to facilitate this process.
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An Overview of the Pricing Analysis Tool
The Target Price Range Concept
One of the key concepts involved in the Pricing Analysis tool is the Target Price Range and your
ability to choose it accurately, so a little background information is in order. The Target Price
Range is not a “new” concept per se; we have just given it an “official” name for use with
Pricing Analysis. Conceptually, a “price range” reflects how many real estate professionals
already think about property values and simply provides them with a way to “incorporate and
leverage” this knowledge. When analyzing a property to determine its value most real estate
professionals think in terms of a “price range” rather than a “single” value. Experience has
taught them that no two buyers approach a property, or its value, in quite the same way. Each
buyer will assign it a slightly different value depending on their own needs, wants, and market
perceptions. These different viewpoints will generate a range of values rather than converge
on any particular one. What the real estate professional further understands is that this range
is defined by buyers, not sellers (a fact sellers often ignore to their peril). Single price points are
only necessary for setting an initial list price for the market to respond to; one that expresses
the subject’s “value proposition” (quality-to-price ratio) to the current crop of educated buyers.
This price is strategic in nature and is set to draw offers that will help maximize the seller’s net
proceeds, while at the same time mitigate their risk of having to enter the price reduction
process, where the ability to maximize sales price is greatly diminished.
Real estate professionals become price experts by previewing and tracking the continual stream
of new listings that enter their market service area. This, effectively, engages them in a
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constant property valuation process that provides them with the informational backdrop
needed to understand value across the full spectrum of market prices. Each new piece of
inventory begs the question of how the property’s key attributes (location, functionality, size,
quality, condition) compare with, and fit into, the market as a whole. This process is constant
and ongoing and is simply the nature of the business. In addition, because most working
professionals monitor the MLS Hot Sheet on a daily basis they have the ability to check their
initial assessments against market “reality”, i.e. the factual sales data. This ongoing process of
previewing new listings, and then tracking their sales histories, provides the user with a very
privileged position from which to measure market value and how it is changing over time.
Thus, a real estate professionals pricing expertise, which allows them to set fair-market prices
with a high degree of accuracy is a function of their accumulated market “knowledge” built up
by previewing properties and then tracking what happens to them. There is simply no
substitute for this acquired knowledge when it comes to pricing properties accurately; and it is
this knowledge that lets you pick a good Target Price Range!
What is the Pricing Analysis Method?
Pricing Analysis is a simple process that begins with a basic search that defines the subject
property and then produces market wide pricing information, in a highly visual manner, that
sheds light on where any given property naturally “fits” into the market. Only two criteria are
needed to “define” the subject, i.e. the MLS property type and geography. The Target Price
Range discussed above is then added by you to bracket the most likely “fair market range” for
the subject property; this is totally based on your market knowledge and opinion of value.
Using just these three pieces of information Pricing Analysis will display five very important,
real-time views of current market conditions as they relate to price. Recognizing and
understanding the information contained in these views is critical to using Pricing Analysis
effectively.
Step #1 – Building the Appropriate Search
As mentioned above the Pricing Analysis search was designed to return all properties that
matched the subject’s basic profile (same property type and geography) so that underlying
economic forces that are impacting the market as a whole would be more apparent, e.g. supply
and demand relationships for any price segment. It is important to realize that any individual
property does not stand “alone” in its market. It is really embedded in the overall market of
similar properties and subject to the same market (economic) forces that are affecting the
whole; it is just the matter of degree, i.e. downward pricing pressure typically affects all
properties but the degree of “movement” is dependent on location, condition, etc. Because it’s
harder to see patterns when only a few data points are involved (there are just not enough dots
to connect!), the basic search criteria were designed to return the totality of similar properties
to provide the necessary background and context for analysis. The Target Price Range
component of the search was designed to provide the user with the ability to visually “peg” the
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subject’s location within the existing market and to facilitate meaningful (fair market value*)
comparisons with other properties located there.
*Fair market value transactions are those sales that are arm’s-length between non-related
parties; conducted in an open and competitive market; between motivated buyers and sellers
who are conversant with market conditions, well advised, and acting in their own best interests
free of any duress.
Pricing Analysis then processes the data and displays it for you in chart form so that the
important underlying market and property relationships are easy to “see” and comprehend as
the user moves from a global vantage point (the whole market views) to a local one (the Target
Price Range views). Each chart was designed to present its information in a straightforward,
logical and intelligible way. This visual depiction of real time market information is the focal
point of the Pricing Analysis system. Information that had previously been hidden from view is
now revealed and brought into clear focus. This information sheds light on current market
conditions and helps point the pricing “compass needle” in the right direction. There are five
important views (charts) that provide the market backdrop.
Step #2 – Reviewing the charts to better understand market conditions
The Price Distribution Chart & Data (grid)
The price distribution view provides a global perspective of price and transaction activity levels
across the entire spectrum of market prices; the Target Price Range is highlighted in dark green
so that it’s easy to see where you believe the subject property “fits” into this mix. This
information is displayed using a frequency histogram, which is simply a bar chart that slices the
market into a series of equally sized price segments (think of our loaf of bread analogy again)
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with the height of each bar indicating the activity level (frequency) within that segment. In
Pricing Analysis the width of each bar is always the Target Price Range increment as chosen by
you the user in your search criteria. In addition, Currently For Sale and Currently Under
Contract properties can be overlaid on the chart to give an instantaneous “snapshot” of supply
& demand conditions within any given price segment. That is, where are the buyers currently
“buying”; and what does the competitive landscape look like from an “inventory” perspective.
Thus, with just a glance, the user can see how all sold transactions are distributed across the
full range of market prices and easily identify areas of high activity versus low activity. In
addition, price distribution data has a distinctive, recurring bell curve type “shape” that is
recognizable and facilitates analysis. Once you have a grasp of this data “shape”; key
information can be identified, measured and comprehended quickly.
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1. Supply and Demand – first look at the Target Price Range (TPR). How many closed sales
are there over the time period chosen? Are buyers currently writing offers, i.e. how
many properties are currently under contract? What does the competitive landscape
look like, i.e. how many properties are currently for sale? Now look at the price
segments on either side of the TPR and compare what’s happening there.
2. Subject Property “Price” – where is the Target Price Range located within the market as
a whole? Is it located somewhere within the mainstream of market sales or is it an
outlier standing alone at the edge of market?
3. Subject Property “Conformity” – how does the subject property’s basic attributes
compare with the majority of sold comparables? The grid view supplies this information
quickly and easily. There are some important chart controls that help with navigation
that you should familiarize yourself with, they are:
Chart – Data (toggle) - This control allows the user to easily move between the chart and data
views
Thumbnail – Full View (toggle) – this control allows the user to easily move between the
thumbnail and full chart views
Competitive Data Checkboxes – this control allows the user to display any combination of For
Sale, Under Contract, or Sold properties (Sold is the default)
Report Options – this control allows the user to “jump” between any of the Full Size views
The Price Distribution grid (with just sold properties invoked) displays property information
relative to basic functionality (BD, BA) and size (improvement SQFT and lot size SQFT/Acres)
attributes to facilitate meaningful comparisons between the subject property and those within
the Target Price Range. The summary line tallies the most frequent occurrence of each
attribute across the whole market to help determine how the Target Price Range (and hence
the subject) conform to this “standard”. When viewing a Price Distribution chart and its
companion data grid look for the following information:
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Invoking the Currently Under Contract properties shows where buyer activity is taking place.
Invoking the Currently For Sale properties shows the competitive landscape. Does the
landscape for these properties “align” well with the sold property histogram or are they shifted
towards higher or lower prices? If so, what does this tell you about current market conditions?
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Place your mouse pointer on any bar to display the property information it contains. When the
red arrow is illuminated it is an indication that there are properties that are outside of view;
place your mouse pointer on this arrow to display the property information that is out of your
view.
When the For Sale and Under Contract property statuses are invoked the Price Distribution grid
will change its display to include a number count of each; and then convert the UC/Sold and
FS/Sold ratios to percentages. This will allow you to quickly understand the level of buyer
activity that is taking place; and what the competitive landscape looks like. Both are useful
indicators, especially when analyzing the current “buyer dynamics” in the Target Price Range.
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The Market Size Chart & Data (grid)
This view provides a comparison of (sold) transaction activity levels between contiguous time
periods. Thus, the user can easily “see” if activity has increased or decreased over time. The
size difference between the two time period histograms gives a visual sense of how activity has
changed. The table below the chart displays the exact values and calculates the unit difference
and what percentage increase or decrease is involved.
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Controls, located right above the chart, allow you to navigate between the various views
Chart – Data (toggle) - this control allows you to easily move between the Full Size chart and
data grid views
Thumbnail – Full View (toggle) – this control allows you to easily move between the thumbnail
and full chart views
Number of Sold Property Checkboxes – this control allows you to display the sold property
information from either one or both of the time periods (Last and Previous shown together is
the default mode)
Report Options – this control allows the user to “jump” between any of the Full Size views
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The Market Size grid provides a lookup table for changes in activity between the two time
periods for each price range increment. It facilitates a comparison of what comprised the main
property profile during each period, i.e. bedroom and bathroom count, SQFT, and Lot Size. The
question to ask is always, “Has the property profile changed over time in this segment, i.e. will I
get more or less for my money? How do SQFT, Lot Size and $/SQFT compare over the two time
periods. This is very important information to inform you of the dynamic within the price
segment.
In the above example, the Target Price Range is $350 to $400K. The (average) SQFT figures for
properties have changed between the time periods, i.e. the square footages averaged 1622 in
the previous time period, and 1718 in the current (last) time period. Because these two sets of
properties are trading in the same price range it is a strong indication that property values have
decreased because the “same” amount of money now buys you a “bigger” house. It is
important that you look for “differences” in the basic value attributes between time frames so
that you can recognize and appreciate any value shifts that have taken place.
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Market Pricing
This view overlays (vertical) median price lines against the Market Size backdrop so that it’s
easy to see which direction market forces have been pushing prices. Each median line is color
coordinated to “match” the histogram that it is associated with. The default time frame for this
measurement is the Last 365 days vs. the Previous 365 days. Thus, there is no seasonality
involved in the measurement. Shorter time frames are available for “moving” markets. When
using these shorter time frames make sure you appreciate which months are included in each
and if any “seasonality” might be involved, etc.
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The Market Pricing grid is the same one used for Market Size. It provides a lookup table for
changes in activity between the two time periods for each price range increment. It facilitates a
comparison of what comprised the main property profile during each period, i.e. bedroom and
bathroom count, SQFT, and Lot Size. The question to ask is always, “Has the property profile
changed over time in this segment, i.e. will I get more or less for my money? How do SQFT, Lot
Size and $/SQFT compare over the two time periods. This is very important information to
inform you of the dynamic within the price segment.
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Target Price Range (View #1)
Provides a zoomed-in micro view of how properties in the Target Price Range are distributed
relative to price, property attributes and time on market. This view was designed to facilitate
individual property comparisons so the best market comparables could be chosen for closer
examination. A simple scatter chart is used to display the individual properties within the
Target Price Range in a manner analogous to pushpins on a “graphical” map. The scatter chart
functions as a Price vs. DOM coordinate system so that a property’s “symbol” location on the
map reflects meaningful market information, i.e. its horizontal position indicates its current
price point, its vertical height signifies time on market, and its symbol color reflects price
history information. The table immediately below the chart contains important summary
information relative to the properties displayed on the chart. This information includes: #
properties, # with price changes, SP/OP, $/SQFT and the most frequently occurring property
attributes within the property set.
There are three different symbols (pushpins) used to represent the competitive data on the
scatter chart; each has a distinctive shape and color. A green circle represents Sold properties, a
blue triangle signifies currently Under Contract properties, and a red square indicates currently
For Sale properties. Symbols with no fill color represent properties that have had No Price
Changes; while symbols with fill color represent properties that have had 1+ Price Changes (one
or more).
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Controls, located right above the chart, allow the user to focus on just the data necessary for
the task at hand, i.e.
Competitive Data – this control allows you to display any combination of properties by status,
i.e. Sold (closed escrow), Under Contract (contingent or pending), For Sale (current inventory).
Sold is the default selection.
Sold Time Frame – this control allows you to choose the most appropriate date range for sold
properties (Last 365 Days is the default)
Price Changes – this control allows you to display property price change histories, i.e. those
properties with no price changes versus those with one or more. The All Properties “blend” is
the default.
Suggested Price – this control allows you to visually display your recommended price point and
how it relates to other properties within the Target Price Range.
Vertical Slider – this control allows you to stretch the chart background to facilitate viewing low
DOM properties that have been pushed to the bottom portion of the chart by the presence of
one or more properties with very high DOM’s.
Avg DOM – this control allows you to display the difference in average marketing times
between properties with no price changes versus those with one or more. It provides a visual
depiction of the efficacy of pricing according to prevailing market conditions rather than setting
an unrealistically high price and “hoping” the market will comply. The Value portion of this
control allows you to display each DOM figure for ease of reference.
Tool Tips – these provide you useful information regarding any property displayed on the chart
without having to toggle to the grid
The chart and table information can be used together to visually present a picture of the sales
outcomes of properties that were priced too high for market conditions compared with those
that were well priced and in alignment with current conditions. This can be a very useful
depiction of reality when the dangers of entering the market at too high a price need to be
discussed; because it visually depicts the most likely outcomes resulting from each course of
action. It is usually shows that overpricing has a negative effect on the final sales price and
creates much longer marketing times.
The companion grid provides useful “lookup-table” capabilities that facilitate individual
property comparisons relative to: Original Price, Sold Price, Sold Date, # Price Changes, DOM,
SP/OP, BD, BA, SQFT, $/SQFT, Lot Size, and Year Built. In addition, the user has the ability to
check or uncheck any property for inclusion in their analysis; if unchecked the row font will
change to the italicized mode, and its color will change from black to gray. If the default All
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Properties view is invoked then the unchecked properties will be visible on the chart (grayed
out) and on the grid, albeit, in the italicized mode. If the Checked Properties view is invoked
then the unchecked properties will not be displayed on either the chart or the grid. Whatever
mode is invoked will be reflected on the printed report.
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Target Price Range - SP/OP Comparison (View #2)
This view expands on the basic Target Price Range concept to facilitate comparing the two
pricing “pathways” that occur in the real estate sales process, i.e. properties either need price
reductions to sell or they didn’t, there is no in between. We call these two pathways: No Price
Changes; and 1+ Price Changes to give them a convenient label.
A comparison of the average outcomes of these two pathways shows that in most instances
properties that had to enter the price reduction process did not fare as well as those that
didn’t. In most cases they “undersold” the market, i.e. their average sold prices were generally
no better than those that didn’t have to price reduce; and their properties (improvement SQFT)
were often bigger! The table below the chart lines up the two pathways for easy comparison.
And who said, “There is no risk to overpricing because I can always come down”.
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The companion grid provides useful “lookup-table” capabilities that facilitate individual
property comparisons relative to: Original Price, Sold Price, Sold Date, # Price Changes, DOM,
SP/OP, BD, BA, SQFT, $/SQFT, Lot Size, and Year Built. In addition, the user has the ability to
check or uncheck any property for inclusion in their analysis; if unchecked the row font will
change to the italicized mode, and its color will change from black to gray. If the default All
Properties view is invoked then the unchecked properties will be visible on the chart (grayed
out) and on the grid, albeit, in the italicized mode. If the Checked Properties view is invoked
then the unchecked properties will not be displayed on either the chart or the grid. Whatever
mode is invoked will be reflected on the printed report.
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#5 – Property Attributes comparison
This view facilitates a comparison of the subject property’s attributes (not in the MLS) with
those properties located in the Target Price Range. In addition, it provides a comparison of the
outcomes between the two pricing pathways found there.
There are important additional value metrics that can be used for declarative or comparison
“comments” about the subject property; and then a free-form comments section that can be
used to describe any “critical” issues not addressed in the additional value metrics, etc.
Clients armed with information from these five views can then answer the following questions
allowing them to make informed, well reasoned, pricing decisions; ones that are in alignment
with current market conditions and should lead to successful sales outcomes.
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1. From a price perspective where does my property (best) fit within the current market?
Does it conform to the widest swath of the market (mainstream) or is it an outlier to the
data?
1. Are there sufficient (sold) market comparables in “my” price range (Target Price Range)
to support an appraisal?
2. Are there any pending sales and, if so, how do they relate to my property?
3. Which properties currently on the market will be my toughest competition?
4. What pricing pressure exists in the market and how is it likely to affect my price
segment, i.e. in a positive, negative, or neutral way? And as I choose smaller and
smaller sold time frame increments how does the market “hold up”; are there still a
good number of sales or are they shrinking faster than expected or disappearing
altogether?
5. From a strategic price perspective, at what price point should my property enter the
market? That is, what price point will signal to the market that I’m a knowledgeable
seller, who has offered my property for sale at a realistic market price?
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A Useful Price Distribution Exercise
Choose a property of interest, define its market parameters and then run the search.
Look at the price distribution data from the following perspectives:
1. Notice the overall shape of the price distribution chart (data) because this basic “shape” will
appear over and over again when analyzing properties; this is due to the fact that real
estate prices usually mirror the shape of the buyer income distribution for any geography.
Experiment with various Target Price Range increments to see how this basic shape can
change “form” depending on the increment size selected.
2. Find the tallest bar on the chart, where the most activity has taken place, and then look at
its neighbors to determine the following information:
a. How many bars are needed, moving out in either direction from the tallest bar, to cover
the majority of sold transactions in the market (65 to 70 percent is a usually a good
figure to use)? With a little practice, it’s easy to get good at this. And then picking out
the mainstream (high demand) swath of any given market becomes easy.
b. What is the total price range covered by these bars? That is, how wide a price range is
needed to cover the swath of mainstream properties?
c. This mainstream swath of high demand properties helps define market conformance
which is the foundation of Fair Market Value in any geography?
*The principle of conformity states that value is created and preserved when a property’s
characteristics “conform” to the demands of the market. Thus, properties found within this
mainstream price range are well anchored from a value perspective. Properties that lie
outside the mainstream will be impacted (to one degree or another) by their nonconforming status. This is known as the principle of progression/regression and depends
on whether the property in question is inferior or superior to the surrounding properties.
3. The next obvious question to ask is, “Where is the Target Price Range located relative to the
mainstream of sold transactions?”
a. If the Target Price Range is located inside the mainstream, then the subject property has
market conformity and can be analyzed in a straight forward manner using the most
appropriate comparables in the Target Price Range.
b. If the Target Price Range is located outside this range then the subject property will be
impacted by the fact that it does not conform as well to the mainstream market. When
a property does not conform to surrounding properties it is called a misplaced
improvement and its value will be influenced by the nature of its surroundings. If it is
superior to surrounding properties its value will be “pulled down” somewhat because of
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its proximity to lesser valued properties; and if it is inferior to surrounding properties its
value will be “pulled up” somewhat because of its proximity to higher valued properties.
4. Has the price range for “conforming” properties shifted? If so, has the price range
increased or decreased over time?
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5. Further examination of the Target Price Range will provide more useful insights into market
conditions there. This information will help provide context for making the most important
strategic pricing decision in any property’s “listing life” – the initial l price point for entering
the market. The question becomes, “What initial list price will best convey the subject
property’s value proposition to the market, i.e. its quality-to-price ratio relative to current
market conditions?”
a. Is the Target Price Range located within the majority of sold transactions?
i. If so, how active is the segment?
ii. Are there enough sold comparables to support an appraisal?
iii. Are there any current transactions (under contract properties) that might be
important and meaningful?
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iv. What does the competitive landscape look like and how will this affect my initial
list price?
b. If the Target Price Range is not inside the majority group, how far outside is it?
i. Is it right next to the majority group or is it an extreme “outlier” standing on its
own?
ii. If it is an “outlier”, are there sufficient sold properties in the Target Price Range
or segments nearby that can form the basis of a market? Or is it a true
misplaced improvement standing on its own?
iii. Are there enough sold comparables to support an appraisal?
iv. Are there any current transactions (under contract properties) that might be
important and meaningful?
v. What does the competitive landscape look like and how will this affect my initial
list price?
c. What is the main profile of the Target Price Range properties and how does the subject
property compare with them?
6. Looking at the price distribution grid, and focusing on the target price range row, can shed
light on how the subjects property’s basic attributes compare with the other properties in
the Target Price Range.
a. Does the subject’s functionality attributes (BD, BA) align favorably with the most
common profile in the Target Price Range; or are they bigger/smaller?
b. Does the subject’s size attributes (SQFT, Lot Size) align well with the most common
profile in the Target Price Range; or are they bigger/smaller?
The answers to these questions will provide useful information for all subsequent pricing
discussions with your clients; especially when it’s time to set the most advantageous list price
and provide them with realistic sales and marketing expectations.
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A Useful Target Price Range Exercise
Choose a property of interest, define its market parameters and run the search. Look at the
Price Distribution charts (see example above) and when you have familiarized yourself with that
information click on the Target Price Range tab and view this information from the following
perspectives:
Controls, located right above the chart, allow the user to focus on just the data necessary for
the task at hand, i.e.
Competitive Data – this control allows you to display any combination of properties by status,
i.e. Sold (closed escrow), Under Contract (contingent or pending), For Sale (current inventory).
Sold is the default selection.
Sold Time Frame – this control allows you to choose the most appropriate date range for sold
properties (Last 365 Days is the default)
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Price Changes – this control allows you to display property price change histories, i.e. those
properties with no price changes versus those with one or more. The All Properties “blend” is
the default.
Suggested Price – this control allows you to visually display your recommended price point and
how it relates to other properties within the Target Price Range.
Vertical Slider – this control allows you to stretch the chart background to facilitate viewing low
DOM properties that have been pushed to the bottom portion of the chart by the presence of
one or more properties with very high DOM’s.
Avg DOM – this control allows you to display the difference in average marketing times
between properties with no price changes versus those with one or more. It provides a visual
depiction of the efficacy of pricing according to prevailing market conditions rather than setting
an unrealistically high price and “hoping” the market will comply. The Value portion of this
control allows you to display each DOM figure for ease of reference.
Tool Tips – these provide you useful information regarding any property displayed on the chart
without having to toggle to the grid
1. With just the sold status invoked, turn on (check) the Avg DOM control.
a. What is the difference in average marketing time between properties with no price
changes and those that have had one or more price changes?
b. Use the Price Changes pick list to choose the No Price Change selection; what is the
average price, average DOM, and average SP/OP of these properties?
c. Use the Price Changes pick list to choose the 1+ Price Change selection; what is the
average price, average DOM, and average SP/OP of these properties?
d. What degree of difference is there between these two cases? Are the differences
significant?
2. Use the Chart-Data toggle buttons to select the grid view and then uncheck a couple of
individual properties.
a. How does each property’s row information change?
b. With All Properties selected can you still see the unchecked property on both the row
and chart? If so, what color is the chart symbol?
c. With Checked Properties selected can you still see the unchecked property’s row or
chart symbol?
d. Toggle between these two choices, with a number of properties unchecked, so you can
see and understand the presentation differences.
• Does the Chart summary table reflect the changes you expect?
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•
Did you notice that in the All Properties mode, the summary calculation is not
dependent on the property being “checked or unchecked”; if it is visible to the user
it is included in the summary calculation? The Checked Properties mode is just the
opposite; the summary calculation only includes the checked properties that are
visible to the user.
e. Use the Print Preview control to see what this means from a printing perspective, i.e.
which properties will be included and under what circumstances (think WYSIWYG –
“What You See Is What You Get”).
f. Use the Suggested Price control to display/visualize where your initial list price will fall
relative to market comparables and the competition.
If Over-Pricing is so harmful; why is it so popular!?”
Let’s briefly discuss why Sellers have a tendency to overprice their properties under almost any
set of market conditions. There are three general reasons why many sellers pick prices that are
above, and sometimes way above, fair market value.
1. Lack of good information – they just don’t have a good grasp on prevailing market
conditions and/or comparable market data; thus, their information tends to be
anecdotal in nature.
2. Seller’s Syndrome – an affliction that causes many sellers to “irrationally” believe that
their property is “special” and holds some kind of exalted position in the market relative
to comparable properties; and it is immune to any negative market forces or conditions.
3. Mistrustful of Sales People – the seller viewpoint expressed below is quite common but
is rarely expressed in words…
“(Seller) “I know that you (agent) probably have a better understanding of my property’s
market value than I do. I also know that you are a sales person ’first and foremost’ so
you will have a tendency to pick prices at the low-end of the fair market range (close to
liquidity) where a quick sale is much more likely. A quick sale guarantees you a
commission and the ability to move on to ‘new’ business, time is money and all.
However, from my perspective, I have to pay the bank the same amount of money (my
loan) so that any money ‘left on the table’ comes right out of my pocket! Thus, once you
suggest a price (which I’m assuming will be at the low end of the fair market range) I’m
simply going to raise it. I believe this will still leave my property well positioned for a
sale; but at a price point that is much more beneficial to me! And if for some reason it
doesn’t sell, I can always lower my price with the knowledge that I didn’t leave any
money on the table!”
Most sellers are afflicted by some combination of all three of these conditions, so the ability to
explain current market value, and where to strategically price, becomes of paramount concern.
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There are some oft-repeated phrases that indicate these conditions are “in play”, but only your
own personal knowledge of the situation will determine to what degree.
“I want to start high because I can always come down in price, but I can’t go up…” or
“I want to start high so I have ample room to negotiate, because I don’t want to leave any
money on the table…” or
“I want to start high, and then if someone really likes the property, they can make me an
offer; I’ll negotiate with them…” or
“It only takes one buyer…” or
“My property is “better” than anything you have shown me…” or
“I know so-and-so and everyone said their property was overpriced; but it sold and they
got what they wanted…” or
“If you want this listing you will take it at my price or I’ll get someone who will…”or
Let’s try my price for a while and then we can move to your price if it doesn’t sell…” or
“I’ve got plenty of time and I don’t need to sell…”
… And the list goes on and on and on...
Every working professional has heard these sentiments expressed many times and in a variety
of different ways. History, however, has shown that “over-pricing” (picking a list price too high
for market conditions) is a terrible strategy for maximizing the selling price and that it is
anything but risk free!
When real estate professionals have pricing discussions with their clients they are, in effect,
trying to communicate (current) fair market value using “price” as the measuring stick. Because
working professionals have built up a body of pricing information over time they can quickly
“picture” where any given property “fits” into the market as a whole.
What real estate professionals have not had is a tool that helps them convey this (pricing)
knowledge in a visually compelling manner, so that it is hard to refute from any kind of logical
and/or factual basis. The tool itself must be capable of processing large amounts of market
data and then collating it into meaningful pricing information that is readily comprehensible to
the layman. The presentation materials need to provide working professionals with a vehicle to
communicate this information in a straight forward and meaningful way, so they can be
perceived for what they are, a professional real estate consultant rather than just a “sales
person”. This will allow them to keep pricing discussions focused on market reality and
probable outcomes, rather than have them drift towards the realm of “let’s price high and hope
for the best…”
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The Pricing Analysis tool was designed to help fill this void.
Using Pricing Analysis to View Markets
Think of the geographies that define your market service area and then choose the most
predominate type of property (it’s usually SFD). Pick a Target Price Range that is in the middle
range of values (you might have to run an initial test search to quickly see the overall
distribution); choose the 365 day time frame, and then run your search. Using the example
below as a guide, ask yourself the following questions:
1. What is the shape of your market?
2. What price range defines the mainstream?
3. Is the Target Price Range located in the mainstream?
4. Is the Target Price in the “middle”, high-end, or low-end of the market?
5. Will properties in the Target Price Range “conform” to the market as a whole?
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Now revise your search and “change” the Sold Time Frame to the Last 180 Days:
1. Is the “shape” of the chart still the same?
2. Has the distribution of properties on either side of the target price range changed in any
fundamental way?
3. Does the market appear to be shifting towards lower or higher price points, or not
changing at all?
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Now revise your search and “change” the Sold Time Frame to the Last 90 Days:
1. Is the “shape” of the chart still the same?
2. Is the TPR still the tallest histogram bar?
3. Has the distribution of properties on either side of the target price range changed in any
fundamental way?
4. Does the market appear to be shifting towards lower or higher price points, or not
changing at all?
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Select the Currently Under Contract checkbox to see where buyers are most active.
1. Does current buyer activity align well with what has been closing; or has it shifted in one
direction or the other?
2. In any given segment is there a reasonable balance between the number of properties
going under contract and the number that are closing? Which segments are performing
the best?
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Check the (Currently) For Sale checkbox to add the existing inventory to the mix, i.e. the
competitive landscape.
1. What does this information tell you?
2. How is the inventory of available properties distributed?
3. Does it align well with what buyers are “buying” or not?
4. Are Seller “expectations” currently in alignment with market “reality”?
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Note: If you check Under Contract or For Sale individually you can see a fully “colorized”
histogram.
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