Pricing a Home: An Art or Science?
Over the years, we have noticed something about real estate agents. Take our friend, Pete (fictional character), as an example. He became a licensed agent and the minute he did so, he had a lot of pressure on his shoulder because he felt that just because he was licensed, he would need to have all of the answers.
He feared that if he did not have the answer, he would look incompetent like he would somehow become undeserving of his license.
We have spoken to a lot of attorneys and the one thing e have noticed is that even though they went through years of school, even they do not have the answer to everything. This is why paralegals have to take time to research everything they need to know.
The funny part is that when you talk to them, they will give you an answer with confidence and seem like they know everything. This may come out of the blue, but is pricing a home an art, or is it a science?
The Problem of Pricing
When you’re pricing a home, there are a couple of things you will need to keep in mind. First, as a professional, you need to have confidence in anything you say. This doesn’t mean you have to be right all the time, but you do have to speak with confidence.
Second, getting too scientific with a Comparative Market Analysis or feeling that you have to give a perfect answer and this can land you straight into hot water.
Is pricing a home an art or a science? Well, pricing a home is certainly not a science, we believe it is an art form.
Look at it this way – pricing a home is like being a baker versus being a chef. Within the industry, regular chefs and pastry chefs have always had their own battle. They are highly creative and inventive, and every dish they make is a little different from the last dish.
As a pastry chef, you need to be scientific and precise. If you have butter, egg, and flower and you put the egg in before the butter, the result is going to be completely different thank if you reversed the order, you added each ingredient.
Then, if you use regular butter instead of melted butter, the cookie is going to become crispier. If you would like to make whipped cream, the bowl should be room temperature, but if you’re making a meringue, the bowl should be chilled.
The takeaway is this – when it comes to a CM, do not be a pastry chef. It isn’t scientific by any meant, but it is rather instinctive. The more you work in your market and do business, the better of a chef you will become. Naturally, you will develop that instinct.
As you see, pricing a home is more of an art than science and that is something Pete has learned to understand. He has learned that when he’s talking to a homeowner, he gives his opinion and never makes assertions.
Instead of answering a question with a fact, he says something along the lines of “here’s my honest professional opinion. This is based on my experience; we should put the property on market at this price. We can try it at this number and see where that gets us and to get a feel for the market. After a couple of weeks, we will start to make an adjustment if we need.” Pete can talk with confidence, without boxing himself in.