The Property Pricing Pyramid
Allows For Both Seller & Buyers To Better Understand Expectations of Pricing For A Particular Home
When it comes to selling a home, setting the right price is crucial. Pricing a home too high can lead to it sitting on the market for an extended period of time while pricing it too low can result in leaving money on the table. Understanding the real estate property pricing pyramid can help sellers make informed decisions about how to price their home(s).
The real estate property pricing pyramid is a visual representation of how the number of potential buyers decreases as the price of a property increases. At the top of the pyramid are properties with the lowest prices, which attract the most potential buyers. As the price of a property increases, the number of potential buyers decreases. The bottom of the pyramid represents properties with the highest prices, which attract the fewest potential buyers.
For example, your Realtor® generates a thorough research CMA for your property to sell (under NORMAL supply & demand conditions), and you both agree to price it at $500,000. But let us see what happens when we deviate from our example CMA, and there are 1000 potential interested buyers.
- Priced at $425,000 > 900 Potential buyers will be interested.
- Priced at $450,000 > 750 Potential buyers will be interested.
- Priced at $500,000 > 600 Potential buyers will be interested.
- Priced at $550,000 > 300 Potential buyers will be interested.
- Priced at $575,000 > 100 Potential buyers will be interested.
There are several factors that contribute to the shape of the real estate property pricing pyramid. One of the main factors is the local housing market. In a seller’s market, where demand for housing is high, and supply is low, the pyramid will be more narrow at the top and wider at the base. This means that even properties at the higher end of the price range will still have a relatively large pool of potential buyers. In a buyer’s market, where demand is low and supply is high, the pyramid will be wider at the top and more narrow at the bottom. This means that even properties at the lower end of the price range will have fewer potential buyers.
Another factor that affects the shape of the real estate property pricing pyramid is the type of property being sold. For example, properties in highly desirable locations, such as beachfront properties or properties in sought-after neighborhoods, will generally have a wider pyramid with a smaller number of potential buyers at the higher end of the price range. On the other hand, properties in less desirable locations will generally have a narrow pyramid with a larger number of potential buyers at the lower end of the price range.
The real estate property pricing pyramid can also be affected by external factors, such as changes in the economy or shifts in consumer preferences. For example, during times of economic downturn, the pyramid may become wider at the top and more narrow at the bottom as potential buyers become more price-sensitive. Similarly, shifts in consumer preferences, such as increased demand for energy-efficient homes, can also affect the shape of the pyramid.
So, how does the real estate property pricing pyramid affect the number of people who will look at a property? Essentially, the wider the pyramid is at the top, the more people will be interested in looking at a property. This is because there are more potential buyers in that price range, so the property is more likely to receive a more significant number of inquiries and showings. On the other hand, if the pyramid is more narrow at the bottom, there will be fewer potential buyers in that price range, so the property is less likely to receive as many inquiries and showings.
For sellers, understanding the real estate property pricing pyramid can be a valuable tool in determining the right price for their property. By considering the shape of the pyramid in their local housing market, the type of property being sold, and any external factors that may be affecting the market, sellers can make informed decisions about how to price their home to attract the maximum number of potential buyers.
In summary, the real estate property pricing pyramid is a visual representation of how the number of potential buyers decreases as the price of a property increases from the publically expected price.
Understanding the shape of the pyramid in a particular housing market can help sellers make informed decisions about how to price their property to attract the maximum number of potential customers while at the same time having a better understanding of what their expectations can be in pricing their home.
Allowing sellers to keep in mind supply & demand conditions within three key conditions; normal conditions, a sellers' market, and finally, a buyer market. Make for a better outcome for everyone involved.
If you’d like to preview homes in Spring Hill, TN,
please feel free to reach out to me:
M:931–548–6076
E: paul@paulperryrealestate.comI’d also be happy to show you homes in Williamson County,
and the greater Middle Tennessee area.
