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5/26/12

The Market Dictates Price - Usually BUT not Always!

Q - Real estate agents say that it is the market that dictates price and not the agent.   Agents simply assess the market situation through a Comparative Market Analysis (CMA).  Is this a valid statement?


A - In most circumstances this statement is valid.  However, there are situations where the real estate agent can play a more significant role in suggesting a list price. 


For example, in a closed community such as a condo building, townhouse complex or mobile home park, a well-established real estate agent in such a community can affect pricing.  By pricing the property too low in anticipation of a quick sale,  that sale becomes a barometer for other listings and sales.  As a result, if the agent continues such a process, over time property values can go down in that closed community even though elsewhere that may not be the case.

Often when a different agent enters the closed community and sees an abnormally low sale price, the agent makes some inquiries to determine the reason for such a low price.  It could be a distress sale or there may be some other valid reason for the quick sale and, under these circumstances, it is not a legitimate property to include in a CMA because it was not affected by market conditions.  If there are no unusual circumstances attributable to the low sale price, then the agent and the seller should be suspicious as to why the sale price was unusually low and possibly discount this information in establishing a listing price for the seller's property.

Ultimately, an agent who is solely representing the seller, has a responsibility to work on behalf of the seller and obtain the best possible price for his client.  In a closed community (condo and town house complexes as well as mobile home parks),  the seller should be extra vigilant in reviewing the market information to ensure proper pricing.  In fact, the seller should request more complete information and, where possible, also review the market information from other similar closed communities.

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